M/S. Kairali Ayurvedic Health Resort Pvt. Ltd. v. The Commercial Tax Officer (Luxury Tax), Department of Commercial Taxes and The Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE MR.JUSTICE ANTONY DOMINIC THURSDAY, THE 20TH DAY OF DECEMBER 2012/29TH AGRAHAYANA 1934 WP(C).No. 29774 of 2012 (V) --------------------------- PETITIONER(S): ------------- M/S.KAIRALI AYURVEDIC HEALTH RESORT PVT.LTD OLASSERY P.O KODUMBU PALAKKAD DISTRICT REPRESENTED BY ITS MANAGING DIRECTOR SHRI K.V RAMESH BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.DIVYA RAVINDRAN RESPONDENT(S): -------------- 1. THE COMMERCIAL TAX OFFICER(LUXURY TAX) DEPARTMENT OF COMMERCIAL TAXES OFFICE OF THE DEPUTY COMMISSIONER PALAKKAD 678 001 2. THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH NEAR SARADHA SHANKARA KALYANA MANDAPAM NURANI P.O PALAKKAD REPRESENTED BY ITS ASSISTANT SECRETARY BY GOVERNMENT PLEADER SRI. SOBHA ANNAMMA EAPEN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 1312-2012, THE COURT ON 20.12.2012 DELIVERED THE FOLLOWING: WP(c).NO.29774/2012 ## APPENDIX - EXT.P1. TRUE COPY OF CERTIFICATE OF REGISTRATION DATED 16.3.2009 ISSUED BY THE COMMERCIAL TAX OFFICER (LUXURY TAX) PALAKKAD. - EXT.P2. TRE COPY OF THE COMMON ASSESSMENT ORDER DATED 3.6.2009 COVERING THE PERIOD 2003-04 TO 2007-08 PASSED BY THE IST RESPONDENT. - EXT.P3. TRUE COPY OF THE COMMON ORDER OF THE APPELLATE TRIBUNAL DATED 29.2.2012 IN TA.NOS.9 TO 18/2011 - EXT.P4. TRUE COPY OF JUDGMENT DATED 14.8.2012 IN OP(C).NO.1928/2012 OF THIS HON'BLE COURT. - EXT.P5. TRUE COPY OF THE COMMON ORDER IN TA NOS.9 TO 18/2011 DATED 18.10.2012 OF THE APPELLATE TRIBUNAL. - EXT.P6. TRUE COPY OF MODIFIED ORDER DATED 30.11.2012 PASSED BY THE ASSESSING OFFICER. - EXT.P7. TRUE COPY OF APPLICATION FOR RECTIFICATION DATED 7.12.2012 FOR THE ASSESSMENT YEAR 2003-04 - EXT.P7(a) TRUE COPY OF THE -DO - for the YEAR 2004-05 - EXT.P7(b) TRUE COPY OF THE -DO - for the YEAR 2005-06 - EXT.P7(c) TRUE COPY OF THE -DO - for the YEAR 2006-07 - EXT.P7(d) TRUE COPY OF THE -DO - for the YEAR 2007-08 - ExT.P8. TRUE COPY OF THE LETTER DATED 7.12.2012 SUBMITTED BEFORE THE IST RESPONDENT BY THE PETITIONER. // TRUE COPY // P.S. TO JUDGE. ## **ANTONY DOMINIC, J.** ## **====================** ## **W.P.(C) NO. 29774 OF 2012-V ====================** ## **Dated this the 20[th] day of December, 2012** ## **J U D G M E N T** The question that arises for consideration is whether the rectification applications filed by the petitioner under section 6(6) of the Kerala Tax on Luxuries Act (hereinafter referred to as the Act for short) are maintainable, justifying an order for its consideration? 2. Petitioner contends that it has established an Ayurvedic Hospital, which has obtained registration under the Act, the certificate of which is Ext.P1. Treating the establishment as a hotel, the 1[st] respondent passed Ext.P2 order of assessment for the assessment years 2003-04 to 2007-08. The 1[st] appellate authority modified the assessments, but on further appeals, the Appellate Tribunal passed Ext.P3 order, allowing the appeals filed by the petitioner and dismissing the appeals filed by the State against the modification ordered by the Appellate Authority. Department challenged the Tribunal's order by filing O.P(c) No.1928/12 before this Court. The case was disposed of by Ext.P4 judgment. In this judgment, this Court held thus; **WPC.No.29774/12** **:2 :** _“The question, however, to be considered is whether the establishment of respondent was essentially a hospital or it was essentially a tourist resort where extensive facilities for ayurvedic treatment and massage are also provided.”_ 3. Accordingly the Original Petition was allowed and setting aside the order of the Tribunal, the appeals were restored to the file of the Tribunal for reconsideration of the matter as directed in the judgment. Tribunal considered the matter afresh and by Et.P5 common order dismissed the appeals filed by the petitioner and allowed the appeals filed by the State. In this order, the Tribunal upheld the finding of the assessing authority thus; _“Reading of the definitions of hotel, luxury and luxury provided in a hotel in sections 2(e), 2(ee) and 2(f) together and applying them to the facts and circumstances of the present case with particular reference to the records produced before us, we find that the assessing authority is justified in treating the institution of the assessee as a 'hotel'. Hence we uphold the findings of the lower authorities in this point.”_ ## 4. As far as the Ayurvedic treatment and other services ## provided in the hotel are concerned, the Tribunal held thus; _“It is clear from the impugned orders that Ayurvedic treatment and laundry services, though optional are provided by the hotel to the customers. These are certainly in the nature of services rendered by the hotel to the customers and therefore are squarely covered by the definition clause of “luxury provided in a hotel”.”_ ## 5. Based on the directions of the Tribunal to accept the ## book figure and to recompute the taxable income, the assessing **WPC.No.29774/12** **:3 :** authority passed Ext.P6 assessment order levying tax and also quantified the interest payable as on November 2012. On receipt of the assessments order, the petitioner filed Ext.P7 series of applications before the Tribunal seeking rectification of Ext.P5 order. In paragraph 8 of Ext.P7 application, it is stated thus; _“8. U/s 4(2) of the Act,luxury tax shall be levied and collected in respect of a Hotel for charges of accommodation for residence and other amenities and services provided in the Hotel, excluding food and liquor. What is includible as per the charging section is “charges for accommodation for residence” and “charges for other amenities and services” provided in the Hotel. Treatment charges cannot be considered as charges for amenities and services provided in the Hotel, because the treatment charges and medicine go together and relates to the collection from the Ayurvedic Hospital run by our establishment. It is an undisputed fact that the petitioner establishment is running the Ayurvedic Hospital in a full-fledged manner by employing qualified Ayurvedic Doctors and paramedical staff. The dominant activity is running Traditional Ayurvedic treatment centre which provides traditional ayurvedic treatment, consisting of Dhara, Pizhichil, Uzhichil and other forms of Punchakarma treatment. The existence of these facilities and services are the attributes of Ayurvedic Hospital and treatment centre. Going by the charging provision, only charges for accommodation and amenities and services normally provided in a Hotel, would come within the purview of luxury tax so far as a Hotel is concerned. Moreover, the Hon'ble Appellate Tribunal has also found that the books of accounts should be accepted as there was no omission or suppression detected in the accounts. Just as in the case of a Hotel, food and medicine are directed to be excluded. Collection from medicine is excluded, because sale of the medicines is not a feature or an amenity or a service provided in a Hotel. “Treatment charges” also fall in the same category on a parity of reasoning, the receipt from sale of medicine and receipt from treatment are not includible in the taxable income. Therefore, lack of clarity or the ambiguity in the order of this Hon'ble Tribunal in the regard is taken advantage of by the Assessing Officer, while giving effect to the Appellate Order as per_ **WPC.No.29774/12** **:4 :** _proceedings dated 30/11/12, which has resulted in a huge demand of Rs.1,38,15,597/-. Over and above the amount of Rs.30 lakhs already paid by the petitioner to the extent of not giving a specific direction for excluding the treatment charges from the levy of luxury tax, there is a mistake apparent from record which is rectifiable. As otherwise, it would cause serious and irreparable hardship, financial burden and injury to the petitioner.”_ ## 6. They also filed Ext.P8 series of applications before the assessing authority seeking rectification of Ext.P6 assessment order. In this application, they stated thus; _**“** Secondly, it is seen that interest is levied from April, 2004 to March, 2009 on the gross demand for the Assessment year 2003-04. This is against the statutory provision as well as the decision of the Hon'ble High Court of Kerala in the case of M/s Windsor Castle Vs. Commercial Tax Officer and another ((2012) 3 KHC 301). The above judgment was rendered with reference to levy of luxury tax. In paragraph-34 of the judgment, the question considered related to interest payable. The Hon'ble High court of Kerala has taken the same view in the decision in Casino Hotel Vs. State of Kerala reported in 15 KTR 485. This decision may kindly be followed. By virtue of explanation to Sub Sec.(6) of Sec.6, it is very clearly stipulated that the liability to pay tax or other amount, shall arise only from the date specified in the demand notice. In other words, liability to pay interest arose only from the due date for payment of the demand. There should be non-payment of demand for attracting levy of interest. In our case, luxury tax was first assessed as per order dated 3.6.2009. That order was served on 29.6.2009. The demand was payable only in the month of July, 2009. Therefore, the interest is leviable only from August, 2009, whereas in the present order, it is levied from April, 2004 for the year 2003-04 and from April onwards for the following years. This is illegal and requires to be rectified._ _The adjustment of tax already paid towards interest is not sustainable under the provisions of the Act. Whatever amount is remitted should be set off against the demand and from the date of payment, interest leviable only on the balance amount. The levy of interest requires to be reconsidered.”_ **WPC.No.29774/12** **:5 :** 7. Pleadings show that Exts.P7 and P8 applications are pending before the concerned authorities and while so this writ petition has been filed seeking to quash Ext.P5 and to direct consideration of Exts.P7 and P8 applications. They also pray that pending consideration of Exts.P7 and P8, recovery pursuant to Ext.P6 should be stayed. 8. Heard the learned senior counsel for the petitioner and the learned Government Pleader appearing for the respondents. Submission made by the Senior Counsel for the petitioner was that since the petitioner's establishment includes a hospital, inclusion of treatment expenses in the taxable turnover of hotel is erroneous. According to him, the dominant activity is that of a hospital and not a hotel. He also contended that in the assessment order passed, interest has been levied from the end of the concerned financial years. Both these, according to the counsel, are erroneous and are to be rectified under section 6(6) of the Act. Per contra, learned Government Pleader contended that there are no errors in the assessment order or appellate order to be rectified under section 6 (6) of the Act. **WPC.No.29774/12** **:6 :** 9. The power to rectify errors in the orders passed has been conferred on both the assessing authority and the appellate authority as per section 6(6) of the Act and section 6(6)(a) alone being relevant, reads thus; “ _6(6)(a) An assessing authority or an appellate or revising authority may on application or otherwise at any time within three years from the date of any order passed by it, rectify any error apparent on the face of records.”_ 10. This provision shows that the power to rectify its order has been conferred on the assessing authority and appellate authority with the legislative mandate that the exercise of power under this Section shall be only for the purpose of “ _rectifying errors apparent on the face of the records_ .” Error is a mistake or deviation from accuracy or correctness. In view of the language of Section 6(6) of the Act, such a deviation must be one which is apparent on the face of the records itself. In _**Satyanarayan v. Mallikarjun**_ (AIR 1960 SC 137), the Apex Court has held that where two views are possible as regards the error complained of, it cannot be said to be an error apparent on the face of the record. Further, it is trite that the errors complained of must be self evident, that is to say, it should be evident without any elaborate examination of the merits and are **WPC.No.29774/12** **:7 :** not those which can be discovered only after an elaborate argument. In other words, if the error is so apparent that without further investigation or enquiry, only one conclusion can be drawn in favour of the applicant, such an error is one apparent on the face of the record. This court has examined the scope of the power of rectification provided under section 43 of the KGST Act in the judgment in _**R.K. Latex Private Ltd. v. State of Kerala**_ ( **ILR 2007(4) Kerala 365** ) and it was held that only mistakes apparent on the face of record can be corrected and that a wrong decision taken by the Tribunal can be corrected only by the High Court in its revisional jurisdiction. Therefore, an illegal order cannot be corrected by rectification under section 6(6) of the Act and in the guise of rectification under section 6(6) of the Act, one cannot seek a rehearing by the assessing authority or the appellate authority. 11. Having thus seen the contours of power under section 6 (6) of the Act, it should be examined whether the petitioner has succeeded in establishing that there are errors apparent on the face of Exts.P5 and P6, in which case alone Exts.P7 and P8 applications made by the petitioner are maintainable for its consideration on merits. In so far as Ext.P5 is concerned, what was **WPC.No.29774/12** **:8 :** contended was that the petitioner's establishment is a hospital and not a hotel as found by the Tribunal and that the inclusion of treatment expenses in the taxable turnover of hotel is illegal. Similarly, the contention regarding Ext.P6 order was that levy of interest from the assessment year concerned is illegal. 12. Thus it is the illegality of the orders that are canvased and acceptance of the contention that the establishment is a hotel, requires reversal of the factual finding of the appellate tribunal. The order reveals that, the appellate tribunal has referred to statutory provisions and has given reasons for its conclusion that it is a hotel. Similarly, after discussion, the tribunal held that ayurvedic treatment given to the guests in the hotel is a service. As far as levy of interest is concerned, contention was that assessment was completed only when order was passed in compliance with Tribunal's order and therefore levy of interest from the assessment year concerned is illegal. 13. Irrespective of the tenability of these contentions, the question I am concerned is whether these contentions indicate that there are errors in the orders warranting its rectification under section 6(6) of the Act. Having considered the contentions, I am of **:9 :** ## **WPC.No.29774/12** the view that at best the petitioner can only say that the orders are illegal and not vitiated by errors apparent on the face of it. Therefore, the answer to the question should be in the negative. It may be true that these conclusions are illegal and in this writ petition, this Court is not called upon to decide that question. Therefore, if aggrieved, it is for the petitioner to work out their remedies against these orders in accordance with law. For the aforesaid reasons, this writ petition is dismissed. ## **ANTONY DOMINIC, JUDGE** Rp