High Court of KeralaSingle Judge2008-12-17Writ petition disposed of; no costs; CMP dismis...

Holy Family Hospital, Bishop Vayalil Medical Centre and Morning Star Medical Centre v. Intelligence Officer (IB), Department of Commercial Taxes, Idukki

Case / Petition Number:O.P. No. 31064/2000 (W)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: T. R. Ramachandran Nair
Judgment Date: 2008-12-17
Court Decision / Holding: Writ petition disposed of; Exts. P5, P9, P10 set aside; respondent to consider objections afresh and pass final orders within two months; petitioners to prove non-collection of tax; CMP disposed of; no costs.
Final Disposition: Writ petition disposed of; no costs; CMP dismissed.

Parties to the Case

Appellants / Petitioners

Holy Family Hospital, Muthalakkodam, Thodupuzha, Idukki District
Bishop Vayalil Medical Centre, Moolamattom P.O., Idukki District
Morning Star Medical Centre, Adimali P.O., Idukki District

Respondents

Intelligence Officer (IB), Department of Commercial Taxes, Idukki, Kattappana P.O.
Government Pleader Sri. George Vadakkel

Legal Representation & Advocates

Counsels for Petitioners

• Sri. V.M. Kurian
• Sri. A.V. Thomas
• Sri. Mathew B. Kurian
• Sri. K.T. Thomas

Counsels for Respondents

• Sri. George Vadakkel

Case Synopsis & Summary

This Original Petition (O.P. No. 31064/2000) challenges Exts. P5 and P9 against petitioners 1 and 2 and Ext. P10 against the third petitioner, all issued under the Kerala General Sales Tax Act by the Department of Commercial Taxes. The petitioners are three hospitals—Holy Family Hospital, Muthalakkodam (Thodupuzha), Bishop Vayalil Medical Centre, Moolamattom, and Morning Star Medical Centre, Adimali—established and managed by charitable trusts of religious congregations. They contend that, despite purchasing medicines, there is no sale of medicines within the hospital and thus they cannot be classified as dealers under KGST; the hospitals function on a charitable basis without profit motive, and medicines are used for treatment of their patients by doctors. The Government Pleader counters that the issue is settled against them by this Court’s decision in P.R.S Hospital v. State of Kerala (2003) (1 KLT 133), which held that hospitals can be treated as dealers under the Act. The petitioners seek an opportunity to rebut the factual/legal position, request stay or setting aside of the orders, and, if necessary, registration as dealers with fresh consideration. The court disposed of the petition, setting aside Exts. P5, P9, and P10, directing the respondent to consider objections afresh and pass final orders within two months, with the petitioners required to prove non-collection of tax; no costs.

Provisions of Law Cited

Kerala General Sales Tax Act, Section 45A

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contend they are charitable hospitals run by religious congregations, operating without any profit motive, and that no sale of medicines occurs within the hospital; medicines are procured and used by doctors for treatment of patients, thus not falling within the dealer definition under KGST. They seek to set aside Exts. P5, P9, and P10 and request an opportunity to rebut the respondent’s objections, including the possibility of registration as dealers and a fresh consideration of their status. They emphasize they did not collect tax in past years and seek relief consistent with findings in P.R.S Hospital’s judgment, urging reconsideration in light of paragraph 11 of that decision.

Contentions of Respondents

The respondent contends the petitioners fall within the definition of dealer under KGST; reliance is placed on this Court’s decision in P.R.S Hospital v. State of Kerala (2003) (1 KLT 133), which held hospitals can be dealers and be subject to KGST disciplines. Thus the penalties and notices issued (Exts. P5, P9, P10) are consistent with law, and the petition should be resolved with the same framework after due reconsideration.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
P.R.S Hospital v. State of Kerala	2003 (1) KLT 133	Positive	Court places reliance on this decision to hold that hospitals can be dealers under the KGST, guiding the approach to the petition.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR** **WEDNESDAY, THE 17TH DECEMBER 2008 / 26TH AGRAHAYANA 1930** **OP.No. 31064 of 2000(W)** **---------------------------------------** ## **PETITIONER(S):** **-------------------------** **1. HOLY FAMILY HOSPITAL, MUTHALAKKODAM, THODUPUZHA, IDUKKI DISTRICT, REPRESENTED BY ITS ADMINISTRATOR.** **2. BISHOP VAYALIL MEDICAL CENTRE, MOOLAMATTOM P.O., IDUKKI DISTRICT, REPRESENTED BY ITS ADMINISTRATOR.** **3. MORNING STAR MEDICAL CENTRE, ADIMALI P.O., IDUKKI DISTRICT, REPRESENTED BY ITS DIRECTOR.** - **BY ADV. SRI.V.M.KURIAN SRI.A.V.THOMAS SRI.MATHEW B. KURIAN SRI.K.T.THOMAS** ## **RESPONDENT(S):** **---------------------------** **THE INTELLIGENCE OFFICER (IB), DEPARTMENT OF COMMERCIAL TAXES, IDUKKI, KATTAPPANA P.O.** **GOVERNMENT PLEADER SRI.GEORGE VADAKKEL** **THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 17/12/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** _Kss_ ## **O.P.NO.31064/2000 W** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE INTERIM ORDER DTD. 24/03/1998 PASSED IN CMP.NO.19356/97 IN O.P.NO.10923/1997. EXT.P2: COPY OF THE EXPLANATION DTD. 27/04/2000 FILED BY 1ST PETITIONER BEFORE THE RESPONDENT. EXT.P3: COPY OF THE OBJECTION DTD. 28/07/2000 FILED BY 1ST PETITIONER BEFORE THE RESPONDENT. EXT.P4: COPY OF THE NOTICE UNDER SECTION 45A OF THE KGST ACT DTD. 05/09/2000 ISSUED BY RESPONDENT TO 1ST PETITIONER. EXT.P5: COPY OF THE ORDER NO.135/1/2000 DTD. 30/09/2000 ISSUED BY THE RESPONDENT TO THE 1ST PETITIONER LEVYING PENALTY ON THE 1ST PETITIONER. EXT.P6: COPY OF THE NOTICE DTD. 14/07/2000 SENT BY THE RESPONDENT TO THE 2ND PETITIONER. EXT.P7: COPY OF THE REPLY DTD. 26/07/2000 SUBMITTED BY THE 2ND PETITIONER TO THE RESPONDENT. EXT.P8: COPY OF THE NOTICE DTD. 05/09/2000 ISSUED BY THE RESPONDENT TO THE 2ND PETITIONER UNDER SECTION 45(A). EXT.P9: COPY OF THE ORDER DTD. 30/09/2000 ISSUED BY THE RESPONDENT IMPOSING PENALTY ON THE 2ND PETITIONER UNDER SECTION 45A. EXT.P10: COPY OF NOTICE DTD. 14/07/2000 ISSUED BY THE RESPONDENT TO THE 3RD PETITIONER. EXT.P11: COPY OF THE REPLY DT. 27/07/2000 SUBMITTED BY THE 3RD PETITIONER BEFORE THE RESPONDENT. EXT.P12: COPY OF THE REPRESENTATION DTD. 28/10/2000 SUBMITTED BY THE 3RD PETITIONER TO THE RESPONDENT. EXT.P13: COPY OF THE CERTIFICATE OF REGISTRATION NO.ER 64/77 DTD. 16/03/1977 ISSUED BY THE SOCIETY REGISTRAR TO THE 1ST PETITIONER.** _Kss_ **...2/-** **...2.....** ## **O.P.NO.31064/2000 W** **EXT.P14: COPY OF THE CERTIFICATE NO.E1.60634/89 DTD. 02/01/1990 ISSUED BY THE DEPUTY COLLECTOR (GENERAL), IDUKKI TO THE 1ST PETITIONER. EXT.P15: COPY OF THE CERTIFICATE C.NO.10(22A)/TECH.20/90-91 DTD. 30/06/1992 ISSUED TO THE 1ST PETITIONER BY THE ASST.COMMISSIONER OF INCOME TAX, COCHIN. EXT.P16: COPY OF THE TRUST DEED NO.499 OF 1983 DTD.10/10/1983. EXT.P17: COPY OF THE CERTIFICATE NO.10(22A) TECH/17/90-91 ISSUED TO THE 2ND PETITIONER BY THE ASST.COMMISSIONER OF INCOME TAX DTD. 30/06/1992.** **EXT.P18: COPY OF THE CERTIFICATE OF REGISTRATION NO.E.R.167/85 DTD. 17/04/1985 ISSUED BY THE SOCIETY REGISTRAR TO THE 2ND PETITIONER.** **EXT.P19: COPY OF THE CERTIFICATE DTD. 12/01/93 ISSUED TO THE 3RD PETITIONER BY ASST.COMMISSIONER OF INCOME TAX, COCHIN.** ## **RESPONDENT'S EXHIBITS: N I L** ## **/TRUE COPY/** **P.A.TO JUDGE** _Kss_ ## **T.R. Ramachandran Nair, J.** ## **~~~~~~~~~~~~~~~~~~~~~~~~~~~** ## **O.P. No.31064/2000-W** ## **~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dated this the 17[th] day of December, 2008.** ## **J U D G M E N T** The challenge made by the petitioners in this writ petition is against Exts.P5 and P9 orders in respect of petitioners 1 and 2 and Ext.P10 in respect of the third petitioner. These three petitioners are hospitals, established and managed by charitable trusts under religious congregations. According to the petitioners, they cannot be termed as dealers under the Kerala General Sales Tax Act as there is no sale of medicine in the hospital concernd. The objections raised by the petitioners mainly are that the hospitals are run on a charitable basis without any profit motive. Even though, they are purchasing medicines from dealers they are not sold to the people outside who are not their patients and the medicines are used by the doctors only for the treatment of their patients. 2. The learned Government Pleader submitted that the issue is covered against the petitioners as per the decision of this Court in **P.R.S Hospital v. State of Kerala [2003 (1) KLT 133]** . Therein it was held that the hospital can be treated as a dealer to subject it to all the disciplines provided under the Act and Rules. O.P. No.31064/2000 -:2:- 3. The learned counsel for the petitioner submitted that the question whether the charitable hospitals like the petitioners come within the definition of dealer, has not been examined therein and the factual and legal situation, as far as the petitioners are concerned, are different from the cases considered therein. Therefore, the learned counsel seeks for an opportunity to sustain the objection raised in Ext.P2 and the like objections filed by the other petitioners. Alternatively, it is contended by the petitioners that they are prepared to take out registration as required under the provisions of the Act, as directed by this Court in the above quoted judgment in paragraph (11). Pending consideration of their objections by the respondent herein, the petitioners are free to adopt such a procedure. To enable the respondent to consider the objections as regards the charitable nature of the institutions, proceedings Exts.P5, P9 and P10 will stand set aside. The respondent will consider the matter afresh. Final orders shall be passed within a period of two months from the date of receipt of the copy of this judgment. Only after final orders are passed, further action, if any, will be taken. In view of the fact that the proceedings were stayed by this Court, even if they are liable to be registered as dealers and since they have not collected tax, according to petitioners as far as the past years are concerned, it is upto the respondent to pass appropriate orders keeping in mind the findings in O.P. No.31064/2000 ## -:3:- paragraph (11) of the judgment cited above. In that event, the petitioners will have to prove that they have not collected any tax. The writ petition is disposed of as above. No costs. **(T.R. Ramachandran Nair, Judge.)** ms O.P. No.31064/2000 -:4:- ## **ORDER ON C.M.P.NO.52760/2000 IN O.P No.31064/2000** DISMISSED. **SD/-T.R.RAMACHANDRAN NAIR, JUDGE** 17/12/2008 \\TRUE COPY// P.A TO JUDGE O.P. No.31064/2000 -:5:- **T.R. Ramachandran Nair, J. ~~~~~~~~~~~~~~~~~~~~~~~~~~~ O.P. No.31064/2000-W ~~~~~~~~~~~~~~~~~~~~~~~~~~~** ## **J U D G M E N T** 1 7[t][h] D e c e m b e r , 2 0 0 8 .