High Court of KeralaSingle Judge2020-12-04Writ petition allowed; penalty orders quashed.

Jubilee Mission Medical College Hospital v. Agricultural Income Tax and State Tax Officer, State Goods and Services Tax Department, Thrissur; Deputy Commissioner (Appeals), State Goods and Services Tax Department, Thrissur

Case / Petition Number:WP(C).No.23194 OF 2020(Y)

Neutral Citation:/

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Amit Rawal
Judgment Date: 2020-12-04
Court Decision / Holding: Penalty orders quashed; writ petition allowed.
Final Disposition: Writ petition allowed; penalty orders quashed.

Parties to the Case

Appellants / Petitioners

Jubilee Mission Medical College Hospital

Respondents

The Agricultural Income Tax and State Tax Officer, State Goods and Services Tax Department, Thrissur - 680004
The Deputy Commissioner (Appeals), State Goods and Services Tax Department, Thrissur - 680004

Legal Representation & Advocates

Counsels for Petitioners

• S. Anil Kumar (Trivandrum)
• Shri Rahul A.
• Smt. Aparna Anil

Counsels for Respondents

• Sri C. K. Govind

Case Synopsis & Summary

Jubilee Mission Medical College Hospital, a charitable institution running a medical college and multi-speciality hospital, challenged penalty notices under the Kerala Value Added Tax Act (KVAT, 2003) for consignments of liquid medical oxygen detained at checkposts on the ground of evasion and non-registration of the consignee. The petitioner argued that oxygen supplied to indoor patients during medical treatment forms part of life-saving care and is not exigible to tax; the supply is bundled with medicines and medical services, and cannot be severed for taxation. It relied on a series of decisions: the Punjab and Haryana High Court in Fortis Healthcare Ltd. and M/s Hometrail Estate Pvt. Ltd., and the Kerala High Court Full Bench in San Jose Parish Hospital v. Commercial Tax Officer, which held that such consignments provided to indoor patients are not taxable under KVAT. The petitioner also cites WP(C).4150/20 and related orders as supportive. The government contends that the issue requires adherence to the existing KVAT provisions and that the Full Bench order is not interimly stayed; however, the court notes the unchallenged certificate under Section 12AA of the Income Tax Act and emphasizes that the cited judgments compel a non-taxable treatment of the oxygen supplies. The court concludes that the penalty orders lack validity and quashes them, allowing the petition.

Provisions of Law Cited

Section 12AA of the Income Tax Act, 1961Section 18C of the Kerala Value Added Tax Act, 2003Section 47(2) KVAT Act, 2003Section 47(5 KVAT Act, 2003)

Legal Doctrines & Maxims

doctrine of severance
sine qua non

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that consignments of liquid medical oxygen supplied to indoor patients during treatment and purchased from dealers fall outside the tax net under KVAT. It relies on decisions in Fortis Healthcare Ltd. and M/s Hometrail Estate Pvt. Ltd., and on the Kerala High Court’s San Jose Parish Hospital decision, which held oxygen for indoor patient care is not taxable. The argument emphasizes that the oxygen is an essential component of medical care, packaged with medicines and not segregable for taxation; the 12AA certificate for the relevant assessment year is not disputed, and the penalty acts in contravention of the established principles in these authorities. The petitioner seeks quashing of the penalty orders under KVAT Act, contending misapplication of Section 47(2)/(5).

Contentions of Respondents

The respondents submit that pending an interim order, the requirements of the KVAT Act and the potential for evasion justify penalty actions. They argue the doctrine of severance cannot be mechanically applied and that the statutory scheme and the Department’s orders (Exts. P1–P1(j)) were rightly issued, with finality on certain KVAT orders challenged in the petition. They rely on statutory provisions and the need to enforce correct tax collection while awaiting outcomes of related SLPs.

Cited Precedents (5)

Case Name	Citation	Treatment	Explanation
M/s Fortis Healthcare Limited And v. State of Punjab And Others	—	Positive	Court adopts reasoning from Fortis that the medical services/inventory with oxygen cannot be severed for VAT taxation and supports non-taxable treatment.
M/s Hometrail Estate Pvt.Ltd v. The State of Punjab & Anr	—	Positive	Supports non-taxability of oxygen/medical supplies in similar contexts, reinforcing the petition.
Sanjose Parish Hospital v. Commercial Tax Officer	2019 (1) KLT 336	Positive	Full Bench holding non-taxable treatment of oxygen supplied for indoor treatment under KVAT.
WP(C).4150/20 and connected case	—	Positive	Court’s earlier decision cited in support of similar relief and reasoning.
SLP Nos.21097/2019 and 21102/2019 (against Sanjose Parish Hospital)	—	Mentioned Only	Supreme Court petitions are pending; referenced but not decided in the present judgment.

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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 AMIT RAWAL** **FRIDAY, THE 04TH DAY OF DECEMBER 2020 / 13TH AGRAHAYANA, 1942** ## **WP(C).No.23194 OF 2020(Y)** ## **PETITIONER:** **JUBILEE MISSION MEDICAL COLLEGE HOSPITAL BISHOP ALPATT ROAD, PB NO. 737, THRISSUR - 680005, REPRESENTED BY ITS DIRECTOR, FR. FRANCIS PALLIKUNNATH.** **BY ADVS.** **SRI.S.ANIL KUMAR (TRIVANDRUM) SHRI.RAHUL A. SMT.APARNA ANIL** ## **RESPONDENTS:** **1 THE AGRICULTURAL INCOME TAX AND STATE TAX OFFICER STATE GOODS AND SERVICE TAX DEPARTMENT, POOTHOLE, THRISSUR - 680004, 2 THE DEPUTY COMMISSIONER (APPEALS) STATE GOODS AND SERVICES TAX DEPARTMENT, POOTHOLE, THRISSUR, PIN - 680004,** ## **SR GP SRI C K GOVIND** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04.12.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.23194 OF 2020(Y)** **2** ## **JUDGMENT** **Dated this the 4th day of December 2020** Petitioner, a charitable institution is running a Medical College and a Multi – Specialty Hospital, registered under Section 12AA of the Income Tax Act, 1961 and also under Section 18C of the Kerala Value Added Tax Act, 2003. The petitioner has been purchasing medicines required for the hospital only from dealers who are paying tax at compounded rate on the MRP, in accordance with the provisions of Section 8 of the Act. Similarly, in the case of other consumer goods which are available in the State, only from the dealers after paying tax. But for use in the operation theater as well as in the intensive care units, liquid medical oxygen has to be supplied in order to protect the life of affected patients. In this manner the petitioner had been transporting liquid medical oxygen supplied by the dealers out side State duly supported by invoices issued by the suppliers. During the aforementioned process certain consignments of liquid medical oxygen were detained at the check post under the provisions of Section 47(2) of the KVAT Act, 2003 alleging **WP(C).No.23194 OF 2020(Y)** **3** attempt for evasion of tax or on the ground that the consignee was not a registered dealer. 2. Sri.Anil Kumar, learned counsel appearing on behalf of the petitioner submits that respondent conducted an enquiry under Section 47(5) and imposed the penalty as evidenced from series of documents Exts.P1 to P1(j). Petitioner preferred an appeal before the 2[nd] respondent which has been dismissed vide order Ext.P4. The controversy in the issue involved is already covered by the Division Bench judgment of Punjab-Hariyana High Courts in _**M/s Fortis Healthcare Limited And v. State of Punjab And Others**_ on 23.01.2015 and _**M/s Hometrail Estate Pvt.Ltd v. The State of Punjab & Anr on 27.08.2018**_ and Full Bench of this Court in _**Sanjose Parish Hospital v. Commercial Tax Officer**_ [2019 (1) KLT 336]. Even the Full Bench of this Court has also held that such consignments providing liquid medical oxygen to the indoor patients during the course of treatment and purchase of the same from a dealer is not exigible under the KVAT Act. In support of the contention, relies upon the judgment of this Court in W.P(C).4150/20 and connected case, **WP(C).No.23194 OF 2020(Y)** **4** setting aside the penalty orders by relying upon the judgment referred to above. 3. The learned Government Pleader do not deny the factum of judgment rendered by me as well as the Full Bench of this Court and the Punjab-Hariyana High Court. He submits that against the Full Bench, an SLP is pending but there is no interim order. 4. I have heard the learned counsel for the parties. I am of the view that the controversy is squarely covered by the judgments aforementioned, particularly when the issuance of certificate under Section 12AA of the Income Tax for the relevant assessment year issued by the department is not in dispute. In _**M/s Fortis Healthcare Limited**_ (supra), the Division Bench of Punjab and Hariyana High Courts after noticing the provisions of Punjab Value Added Tax Act and as well as Power to Impose Sales Tax and VAT clause flowing from entry 54 of list to schedule 7 and Article 366 (29-A) of the Constitution of India did not accept the contention of the state for the applicability of doctrine of severance with regard to the services provided to the indoor **WP(C).No.23194 OF 2020(Y)** **5** patients involving medicines supply of surgical items, stents, implants valves with or without medical procedure or medical treatment. During all the aforementioned procedure supply of oxygen is also a _sine qua non_ . All these services are in a packaged form and have to be consumed and cannot be segregated during the course of the treatment. Thus for all intends and purpose is rightly so held to be not exegible to tax. No doubt the SLP Nos.21097/2019 and 21102/2019 against the Full Bench of the Kerala High court in _Sanjose Parish Hospital_ is pending adjudication, but there is no interim order. Revenue collecting authorities consisting of Assessing Officers, interception staffs who are assigned to deal with the penalty proceedings cannot be permitted to adopt a pick and choose policy. The judgments referred to above, have to apply in letter and spirit and not wishfully. The KVATA Orders Nos.40/20 to 50/20, whereby the demands raised by the Assessing Officer have been concededly affirmed in appeal obtained finality in the absence of any further challenge. The cumulative reading of the reasoning assigned herein **WP(C).No.23194 OF 2020(Y)** **6** above would leave an irresistible conclusion that the penalty orders do not stand touchstone of reasonability or any deviation from the provisions of Section 18C of the Kerala Value Added Tax Act 2003, particularly when as per the proviso the petitioner-the charitable hospital is not required to obtain registration. Therefore, the penalty notice/order is quashed and this writ petition is allowed. **Sd/-** **AMIT RAWAL JUDGE** nak **7** ## **WP(C).No.23194 OF 2020(Y)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1** **COPY OF ORDER NO.R10(E) 151/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** **EXHIBIT P1(a) COPY OF ORDER NO.R10(E) 152/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(b) COPY OF ORDER NO.R10(E) 153/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(c) COPY OF ORDER NO.R10(E) 154/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(d) COPY OF ORDER NO.R10(E) 155/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(e) COPY OF ORDER NO.R10(E) 156/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(f) COPY OF ORDER NO.R10(E) 157/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(g) COPY OF ORDER NO.R10(E) 158/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P1(h) COPY OF ORDER NO.R10(E) 159/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** **EXHIBIT P1(i) COPY OF ORDER NO.R10(E) 160/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST RESPONDENT.** **EXHIBIT P1(j)** **COPY OF ORDER NO.R10(E) 161/2017-18 DATED 16.09.2019 ISSUED BY THE 1ST** **WP(C).No.23194 OF 2020(Y)** **8** ## **RESPONDENT.** **EXHIBIT P2 COPY OF HEARING NOTE OF VIDEO CONFERENCE.** **EXHIBIT P3 COPY OF THE JUDGMENT DATED 09.03.2020 OF THIS HON'BLE COURT IN WP(C) NO.4150 OF 2020 AND WP(C) NO. 4998 OF 2020.** **EXHIBIT P4 COPY OF THE COMMON ORDER DATED 16.07.2020 OF THE 2ND RESPONDENT IN THE APPEAL.**