STATE OF KERALA v. M/S HOTEL DIANA, SOUTH MALABAR TRADING CO., VADAKKANCHERY

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **FRIDAY, THE 21ST DAY OF OCTOBER 2016/29TH ASWINA, 1938** **WP(C).No. 25005 of 2012 (A) ----------------------------** **PETITIONER:** **-----------** **STATE OF KERALA, REP.BY DEPUTY COMMISSION(LAW), COMMERCIAL TAXES, ERNAKULAM** **BY SENIOR GOVT. PLEADER SRI.P.RAVINDRANATH** **RESPONDENT:** ## **-----------** **M/S.HOTEL DIANA, SOUTH MALABAR TRADING CO., VADAKKANCHERY.** **R1 BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-10-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **mbr/** ## **WP(C).No. 25005 of 2012 (A) ---------------------------** **APPENDIX** ## **PETITIONER(S) EXHIBITS:** |**EXT.P1:**|**A TRUE COPY OF THE ORDER NO.LT.65/04-05 & 05-06**| |---|---| ||**DATED 20-04-2009.**| |**EXT.P2:**|**A TRUE COPY OF THE APPELLATE ORDER IN LTA.16/07 AND**| ||**17/09 DATED 21-1-2011.**| |**EXT.P3:**|**A TRUE COPY OF THE ORDER NO.LT.65/04-05 & 05-06(1)**| ||**DATED 20-04-2009.**| |**EXT.P4:**|**A TRUE COPY OF THE APPELLATE ORDER IN LTA.14/09 AND**| ||**15/09 DATED 21-1-2011.**| |**EXT.P5:**|**A TRUE COPY OF THE COMMON ORDER IN**| ||**TA NOS.30/2011,31/2011,32/2011 AND 33/2011 PASSED BY**| ||**THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX**| ||**APPELLATE TRIBUNAL, ADDITIONAL BENCH, PALAKKAD,**| ||**DATED 26-1-2011.**| |**RESPONDENTS' EXHIBITS**<br>**:**|**RESPONDENTS' EXHIBITS**<br>**:**|**NIL**|| |---|---|---|---| ||||**//TRUE COPY//**| ||||**P.S. TO JUDGE**| **mbr/** ## **A.M. SHAFFIQUE, J.** **-------------------------------------** W.P.(C) No. 25005 of 2012 -------------------------------------Dated this the 21[st] day of October, 2016 ## **JUDGMENT** State is the petitioner in this writ petition, wherein the challenge is to order passed by the Tribunal setting aside the assessment as well as the penalty order issued against the respondent herein. 2. The short facts involved in the writ petition would disclose that the respondent herein is conducting a bar attached hotel. In terms with provisions of the Kerala Tax on Luxuries Act, 1976, the respondent is also under obligation to pay luxury tax levied in terms of Section 4 of the Act. The proceedings were taken by the assessing officer alleging escapement of turnover of service tax on the ground that during the period 2004-05 and 2005-06, certain service charges were collected, but tax was not paid. Service charges were collected from customers who were provided the facility to consume liquor in the rooms of the hotel. Accordingly, the W.P.(C) No. 25005 of 2012 -2- assessment orders were passed as Ext.P1. Separate appeals were filed before the Deputy Commissioner who confirmed the demand. On the very same basis, the penalty proceedings were taken against the petitioner under Section 17A of the Act and an order of penalty had been passed imposing on the petitioner to pay double the amount of tax that had been levied. In the appeal filed against the penalty order, the appellate authority reduced the penalty to half of the amount, viz; the tax payable. All the appellate orders were under challenge before the Tribunal and the Tribunal had passed a common order as Ext.P5 setting aside the assessment order as well as penalty order. 3. Learned Special Government Pleader appearing on behalf of the petitioner submits that the only ground on which the Tribunal had set aside the assessment order as well as the penalty order is by stating that there is no provision in the Act to demand service charges when the customer is served liquor from a hotel room. The main argument raised by the learned Special Government Pleader is that the very levy of luxury tax W.P.(C) No. 25005 of 2012 -3- clarifies the above point. Section 4 (1) as it then existed reads as under: “Section 4. Levy and collection of Luxury Tax:- (1) Subject to the provisions of this Act, there shall be levied and collected a tax in respect of any luxury provided in a [hotel, house boat, hall, auditorium or kalyanamandapam or including those attached to hotels, clubs, kalyananmandapam and places of the like nature which, are rented for accommodation for residence or used for conducting functions, whether public or private,] [exhibition and cable operators]. (hereinafter called the “luxury tax”). Sub Section 2 (a) reads as under:- [(2) Luxury Tax shall be levided and collected, (a) in respect of a hotel, for charges of accommodation for residence and other amenities and services provided in the hotel, excluding food and liquor,- Reference is also made to the definition of words 'hotel' and 'luxury' under Section 2(e) which reads as under: 2 (e) “hotel” means a building or part o of a building where residential accommodation is by way W.P.(C) No. 25005 of 2012 -4- of business provided for a monetary consideration and includes a lodging house.” 2(ee) ““luxury” means a commodity or service that ministers comfort or pleasure.” 4. A bare reading of Section 4 (2) clarifies the above point. In respect of hotel, there is clear indication that luxury tax shall be levied for the charges for accommodation and residence and other amenities and services provided in the hotel excluding food and liquor. In other words, all services in a hotel is made liable for luxury tax and when food and liquor alone are specifically excluded, all other charges definitely comes under the purview of luxury tax. This position has been held so in a judgment of this Court in **Casino Hotel v. State of Kerala [2007 (15) KTR 485** , which has been relied upon in **M/s. Windsor Castle v. Commercial Tax Officer (Works Contract) and another [2012 (20) KTR 321 (Ker)]** . 5. On the other hand, the learned counsel appearing for the respondent submits that there is no basis for luxury tax being charged on the services allegedly given in a room. In W.P.(C) No. 25005 of 2012 -5- fact the rooms were permitted to be used by persons who were served with liquor. However, the documents would show that the certain amount is being collected under the head 'services'. 6. Learned counsel submits that when the charges for of food and liquor is exempted, the hotel had proceeded on the basis that all connected charges relating to the consumption of food and liquor requires to be exempted and therefore, even assuming that the respondent is liable to pay tax, there is no deliberate attempt to evade the tax and therefore there is justification on the part of the Tribunal to have set aside the order of penalty. 7. Having heard the learned counsel on either side and having perused the records, I am of the view that the issue is well covered on a bare reading of the provision itself, which gives a clearly indication that luxury tax can be levied on the services as stated by the assessing officer in Ext.P1 order. It is clear that other than the charges for food and liquor, all other services are liable to be taxed. That apart, the assessee in the bills had clearly indicated that they have collected W.P.(C) No. 25005 of 2012 -6- service charges in addition to the charges for liquor. In the said circumstances, the order passed by the Tribunal is clearly erroneous and liable to be set aside. 8. However, having regard to the fact that there is no deliberate attempt on the part of the respondent in not paying the tax and it had occurred only on account of mistake of the factual circumstances involved in the matter, I am of the view that there is no necessity to impose the penalty on the respondent. Accordingly, this writ petition is disposed of as under: Ext.P5 is set aside in part. The order setting aside the assessment/appellate orders passed by the authorities stands set aside and Exts.P1 and P2 are upheld. However, Tribunal's order against Exts.P3 and P4 orders shall stand confirmed on account of reason stated above. **Sd/A.M. SHAFFIQUE JUDGE** Scl/21.10.2016