M/S.KAIRALI AYURVEDIC HEALTH RESORT PVT.LTD V. THE COMMERCIAL TAX OFFICER (LUXURY TAX)

OP(C)/4452/2012

AI Insights

The case revolves around the classification of M/S Kairali Ayurvedic Health Resort Pvt. Ltd. under the Kerala Tax on Luxuries Act, 1986. The petitioner argued that their establishment is an Ayurvedic hospital, not a hotel, and should not be subjected to luxury tax. However, the Tribunal and the High Court found that the primary activities and facilities offered by the resort align more closely with those of a hotel, including luxury accommodations and a range of amenities for leisure rather than medical treatment. The court's decision was based on a detailed examination of the services provided, the nature of the clientele, and the overall business model of the resort.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 727038 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 05-02-2013
• Assessment Year: misc
• Other Referred Cases: M/S.Kairali Ayurvedic Health Resort Pvt.Ltd. v. Commercial Tax Officer (2013 (1) KLT, 99), Shalini Shyam Shetty and Another v. Rajendra Shankar Patil (2010 (8) SCC 329)
• Laws Referred To: Kerala Tax on Luxuries Act, 1986
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SEBASTIAN CHAMBAPPILLY
• Assessee Lawyers: C C THOMAS; V P NARAYANAN; BOBY SEKHAR; DIVYA RAVINDRAN
• Keywords: Assessment Order; Ayurvedic Hospital; Hotel Definition; Luxury tax; Superintendence
• Section: 6(6); 4(2); 2(f); 2(e); 2(ee)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC TUESDAY, THE 5TH DAY OF FEBRUARY 2013/16TH MAGHA 1934 OP(C).No. 4452 of 2012 (O) -------------------------------------- AGAINST THE ORDER/JUDGMENT IN TA.9/2011 OF SALES TAX APPELLATE TRIBUNAL,ADDL.BENCH,PALAKKAD DATED 18-10-2012. ......... PETITIONER(S): ------------------------ M/S.KAIRALI AYURVEDIC HEALTH RESORT PVT.LTD OLASSERY P.O., KODUMBU, PALAKKAD DISTRICT REPRESENTED BY ITS MANAGING DIRECTOR SRI.K.V.RAMESH. BY ADVS.SRI.C.C.THOMAS (SR.) SRI.V.P.NARAYANAN SMT.BOBY M.SEKHAR 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. 3. THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, PALAKKAD. R1 TO R3 BY GOVT. PLEADER DR.SEBASTIAN CHAMBAPPPILLI THIS OP (CIVIL) HAVING BEEN FINALLY HEARD ON 05-02-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss OP(C) NO.4452/2012 APPENDIX PETITIONER(S) EXHIBITS EXT.P-1:- COPY OF CERTIFICATE OF REGISTRATION DATED 16.3.2009 ISSUED BY THE COMMERCIAL TAX OFFICER (LUXURY TAX),PALAKKAD - 678 001. EXT.P-2:- COPY OF THE COMMON ASSESSMENT ORDER DATED 3.6.2009 COVERING THE PERIOD 2003-04 TO 2007-08 PASSED BY THE FIRST RESPONDENT. EXT.P-3;- COPY OF THE COMMON ORDER OF THE APPELLATE TRIBUNAL DATED 29.2.2012 IN TA NOS.9 TO 18/2011. EXT.P-4:- COPY OF JUDGEMENT DATED 14.8.2012 IN OPC NO.1928/2012 OF THIS HON'BLE COURT. EXT.P-5:- COPY OF THE COMMON ORDER IN TA NOS.9 TO 18/2011 DATED 18.10.2012 OF THE APPELLATE TRIBUNAL. EXT.P5(a):- COPY OF JUDGEMENT DATED 15.10.2012 IN WPC NO.1390/09 PASSED BY THIS HON'BLE COURT. EXT.P-6:- COPY OF MODIFIED ORDER DATED 30.11.2012 PASSED BY THE ASSESSING OFFICER. EXT.P-7:- COPY OF APPLICATION FOR RECTIFICATION DATED 7.12.2012 FOR THE ASSESSMENT YEAR 2003-04. EXT.P7(a):- COPY OF -DO- FOR THE YEAR 2004-05. EXT.P7(b):- COPY OF -DO- FOR THE YEAR 2005-06. EXT.P7(c):- COPY OF -DO- FOR THE YEAR 2006-07. EXT.P7(d):- COPY OF -DO- FOR THE YEAR 2007-08. EXT.P-8:- COPY OF COPY OF THE LETTER DATED 7.12.2012 SUBMITTED BEFORE THE FRIST RESPONDENT BY THE PETITIONER. EXT.P-9:- COPY OF LETTER DATED 10.12.2012 ISSUED BY THE FIRST RESPONDENT. EXT.P-10:- COPY OF THE NOTICE DATED 14.12.2012 IN FORM NO.1 AND 25 ISSUED BY THE 3RD RESPONDENT. EXT.P11:- COPY OF CERTIFICATE DTD. 11.2.2009 ISSUED BY THE DEPARTMENT OF TOURISM. RESPONDENTS' EXHIBITS NIL //TRUE COPY// P.A. TO JUDGE tss ANTONY DOMINIC, J ........................................ O.P.(C).4452/2012 .............................................. Dated this the 5th day of February, 2013 JUDGMENT In this Original Petition filed under Article 227 of the Constitution of India, petitioner challenges Ext.P5 order passed by the Tribunal and seeks a declaration that the petitioner's establishment is an Ayurvedic hospital providing traditional Ayurvedic treatment and that it is liable to pay luxury tax under the Kerala Tax on Luxuries Act, 1986, (hereinafter referred to as 'the Act' for short), only w.e.f 1.4.2008. 2. Heard the learned senior counsel appearing for the petitioner and also the special Government Pleader appearing for the respondents. 3. Ext.P2 is an order of assessment passed against the petitioner under the Act for the assessment years 2003-04 to 2007-08 treating the petitioner's establishment as a Hotel as defined under Section 2(e) of the said Act. The appeals filed against Ext.P2 order were disposed of with modifications. Aggrieved by the order, petitioner and the revenue filed appeals O.P.(C).4452/12 2 to the 2nd respondent Tribunal. By Ext.P3 common order, Tribunal allowed the appeals filed by the petitioner accepting the contention that its establishment is a Hospital and dismissed the appeals filed by the Revenue. 4. The Revenue challenged Ext.P3 order of the Tribunal in O.P. (C).1928/12. That Original Petition was disposed of by a Division Bench of this Court by Ext.P4 judgment. In that judgment, this Court allowed the Original Petition by setting aside the order of the Tribunal and the appeals were restored to the file of the Tribunal for considering the matter on merits after hearing the parties. It was directed that if the establishment is found to be a Hotel, the same should not stand in the way of the Tribunal sustaining the assessment as a Hotel and that if it is found to be essentially a Hospital, the levy will be only after the amendment to the Act in 2008. 5. The reasoning adopted by the Division Bench of this Court is reflected in paragraph 3 and 4 of the judgment which reads thus:- O.P.(C).4452/12 3 “The Tribunal does not appear to be aware of health tourism which attracts lot of foreign and Indian tourists to Hotels and Ayurvedic Resorts in Kerala, where one of the services rendered is body massage done by experts using ayurvedic herbs and oils. In fact, invariably every star hotel in Kerala has got a massage centre providing service of Ayurveda Doctors and assistant for massage and allied health care services. So much so, what is required to be considered is whether the industry is a tourism Hotel where ayurvedic treatment is also provided to guests. In fact, the Tribunal failed to understand that massage which is the main ayurvedic treatment provided in tourist-resorts need not be for any specific disease but is for general improvement of health and for rejuvenation. The Government Pleader has referred to and what we have found is that the department has collected entire material about the respondent-Resort which are published in their website wherein it is projected as an Ayurvedic Resort and not as a Hospital. Further, it is seen from records that guests residing in respondent-Resort are taken to nearby tourist spots namely, the famous Nelliampathy Hills and the Malampuzha Dam. One crucial test the Tribunal should have applied is whether the charges collected is essentially for treatment or whether it is only one of the services availed by the guests staying in the Resort. Further, if it is a Hospital, massage and other treatment would be provided to out patients also. In fact, the O.P.(C).4452/12 4 department has collected entire data from the accounts which according to the Government Pleader shows that the real charges collected for treatment for disease is insignificant when compared to the massive amount collected towards rent in the 30 A/c cottages and also for food and other services provided in the hotel. It may be noticed that “hotel” under Section 2 (e) has a wide definition and under the Explanation even guest rooms attached to companies are covered by the definition of “hotel”. Further, the orientation in the definition clause is that when rooms are let out as a business, it attracts luxury tax as hotel. The Tribunal has not even looked at the scope of the wide meaning given to “hotel” in the Act. However, we find force in the contention of Senior counsel appearing for the respondent that A/C cottages or luxury rooms provided in the hospital does not go against it's identity as a hospital, if it is engaged in treatment only. 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. We do not find anything in the Tribunal's order that they have considered the facts to identify the nature of operations in the respondent-resort. In fact, what the Tribunal should have done was to identify the nature of services with reference to the charges collected from the accounts made available O.P.(C).4452/12 5 by the department and based on this, the identity and activity of the resort should have been found out. It is thereafter the Tribunal should consider application of statutory provisions, particularly definitions and charging sections of the Luxury Tax Act.” 6. This judgment has become final. Accordingly, appeals were heard afresh and the Tribunal disposed of the appeals by Ext.P5 common order. In this order Tribunal held that the petitioner's establishment is a Hotel as defined under the Act. On that basis, the Tribunal upheld the levy of luxury tax on the charges collected by the petitioner against the accommodation, amenities and services provided to their customers excluding the charges collected for medicines and food. However, the Tribunal held that the addition of 30% ordered by the assessing authority was unwarranted and directed the assessing authority to accept the book figure and recompute the taxable income. 7. In pursuance to Ext.P5 order passed by the Tribunal, the assessing authority issued Ext.P6 modified assessment order. As per this order, for the assessment years 2003-04 to 2007-08, Rs.92,89,564/- is due towards tax and towards interest O.P.(C).4452/12 6 Rs.45,26,033/- is due. There upon the petitioner filed Exts.P7 to P7(d) before the Tribunal and Ext.P8 before the 1st respondent invoking their power of rectification under Section 6(6) of the Act and seeking to rectify Exts.P5 and P6 orders respectively. At that stage, they were issued Ext.P10 notices under the provisions of the Revenue Recovery Act. It was there upon, this Original Petition was filed. 8. Insofar as Exts.P7 and P8 applications filed by the petitioner under Section 6(6) of the Act seeking rectification of Ext.P5 and P6 are concerned, seeking a direction to the Tribunal and the Assessing Officer to pass orders thereon, petitioner had filed W.P. (C).29774/12 before this Court. In the judgment in M/S.Kairali Ayurvedic Health Resort Pvt.Ltd. v. Commercial Tax Officer (2013 (1) KLT, 99), this Court held that the contention raised by the petitioner in Exts.P7 and P8 do not reflect any error as contemplated in Section 6(6) and that therefore, the applications were not maintainable. On that basis, relief was declined. 9. Now what remains to be considered is the legality of Ext.P5, O.P.(C).4452/12 7 the order passed by the Tribunal. As already noticed, this is a petition filed invoking the power of superintendence conferred on this Court under Article 227 of the Constitution of India. The principles governing the exercise of the High Court's jurisdiction under Article 227 of the Constitution have been formulated by the Apex Court in Shalini Shyam Shetty and Another v. Rajendra Shankar Patil (2010 (8) SCC 329) where it has been held thus:- “On an analysis of the aforesaid decisions of this Court, the following principles on the exercise of High Court's jurisdiction under Article 227 of the Constitution may be formulated: (a). A petition under Article 226 of the Constitution is different from a petition under Article 227. The mode of exercise of power by the High Court under these two articles is also different. (b). In any event, a petition under Article 227 cannot be called a writ petition. The history of the conferment of writ jurisdiction on High Courts, is substantially different from the history of conferment of the power of superintendence on the High Courts under Article 227 and have been discussed above. (c). High Courts cannot at the drop of a hat, in exercise of its power of superintendence under Article 227 of the Constitution, interfere with the O.P.(C).4452/12 8 orders of tribunals or courts inferior to it. Nor can it, in exercise of this power, act as a court of appeal over the orders of the court or tribunal subordinate to it. In cases where an alternative statutory mode of redressal has been provided that would also operate as a restrain on the exercise of this power by the High Court. (d). The parameters of interference by High Courts in exercise of their power of superintendence have been repeatedly laid down by this Court. In this regard the High Court must be guided by the principles laid down by the Constitution Bench of this Court in Waryam Singh and the principles in Waryam Singh have been repeatedly followed by subsequent Constitution Benches and various other decisions of this Court. (e). According to the ratio in Waryam Singh, followed in subsequent cases, the High Court in exercise of its jurisdiction of superintendence can interfere in order only to keep the tribunals and courts subordinate to it, “within the bounds of their authority”. (f). In order to ensure that law is followed by such tribunals and courts by exercising jurisdiction which is vested in them and by not declining to exercise the jurisdiction which is vested in them. (g). Apart from the situation pointed in (e) and (f), High Court can interfere in exercise of its power of superintendence when there has been a patent perversity in the orders of the tribunals and courts O.P.(C).4452/12 9 subordinate to it or where there has been a gross and manifest failure of justice or the basic principles of natural justice have been flouted. (h). In exercise of its power of superintendence High Court cannot interfere to correct mere errors of law or fact or just because another view than the one taken by the tribunals or courts subordinate to it, is a possible view. In other words, the jurisdiction has to be very sparingly exercised. (i). The High Court's power of superintendence under Article 227 cannot be curtailed by any statute. It has been declared a part of the basic structure of the Constitution by the Constitution Bench of this Court in L.Chandra Kumar v. Union of India and therefore abridgment by a constitution amendment is also very doubtful. (j). It may be true that a statutory amendment of a rather cognate provision, like Section 115 of the Civil Procedure Code by the Civil Procedure Code (Amendment) Act, 1999 does not and cannot cut down the ambit of High Court's power under Article 227. At the same time, it must be remembered that such statutory amendment does not correspondingly expand the High Court's jurisdiction of superintendence under Article 227. (k). The power is discretionary and has to be exercised on equitable principle. In an appropriate case, the power can be exercised suo motu. (l). On a proper appreciation of the wide and unfettered power of the High Court under Article O.P.(C).4452/12 10 227, it transpires that the main object of this article is to keep strict administrative and judicial control by the High Court on the administration of justice within its territory. (m). The object of superintendence, both administrative and judicial is to maintain efficiency, smooth and orderly functioning of the entire machinery of justice in such a way as it does not bring it into any disrepute. The power of interference under this article is to be kept to the minimum to ensure that the wheel of justice does not come to a halt and the fountain of justice remains pure and unpolluted in order to maintain public confidence in the functioning of the tribunal and courts subordinate to the High Court. (n). This reserve and exceptional power of judicial intervention is not to be exercised just for grant of relief in individual cases but should be directed for promotion of public confidence in the administration of justice in the larger public interest whereas Article 226 is meant for protection of individual grievance. Therefore, the power under Article 227 may be unfettered but its exercise is subject to high degree of judicial discipline pointed out above. (o). An improper and a frequent exercise of this power will be counterproductive and will divest this extraordinary power of its strength and vitality.” 10. In the light of the aforesaid principles laid down by the Apex O.P.(C).4452/12 11 Court, this Court should examine whether any one of the aforesaid grounds exist in this case to interfere with Ext.P5 order of the Tribunal. Ext.P5 order shows that the Tribunal mainly examined the question whether the petitioner's establishment is a Hotel or a Hospital, as defined in the Act. In concluding that it is a Hotel, the Tribunal has considered the contention of the petitioner that their dominant activity is running an Ayurvedic Hospital. It has also made reference to the certificate issued by the Village Officer that the institution is engaged in Ayurvedic treatment, the certificates issued by the President and Secretary of the Panchayat that the establishment is an Ayurvedic Hospital and reference is also made to Ext.P1, the registration certificate obtained by the petitioner under the Act as a Hospital, w.e.f 1.4.2008, 11. Tribunal went into the facilities provided by the petitioner and has found that the following facilities are provided: (a). 30 luxurious air conditioned villas with satellite TV, direct dial phones, refrigerators, attached bathrooms with bath tubs. (These villas are classified as Deluxe, O.P.(C).4452/12 12 Classic, Royal and Maharaja according to the facilities provided in each villa) (b). Swimming pool, Tennis and badminton courts, Indoor recreation and card room. (c). Internet and personal laundry services. (d). Billiards room and facilities for pedicure and manicure. (e). Exotic herbs and vegetable garden. (f). Yoga and mediation centre. (g). Variety of sightseeing and cultural programmes. (h). Fully equipped conference hall, board room and art gallery. (i). workshop and training on panchakarma and Ayurveda. (j). Services of astrologer and palmist. 12. After referring to the aforesaid facilities provided, Tribunal has answered the petitioner's case that the aforesaid facilities are provided to solve the health problems of the present day population, thus:- “But satellite TV and direct dial phones, refrigerators, swimming pool, tennis court, O.P.(C).4452/12 13 badminton courts, card rooms, billiard rooms, conference hall, art gallery, services of astrologer and palmist, pedicure and manicure facilities, cultural programmes and sightseeing tours etc, are special features associated with the amenities and services provided in a hotel and health resorts rather than that of a hospital. It is seen that these facilities amenities and services were provided by the assessee to satisfy the customers who are coming for rest and to bring back freshness or to revitalize the body and soul, along with luxury.” 13. Tribunal made reference to the guest registration card details and connected documents kept at the petitioner's office and found that the majority of the guests have filled up the concerned column by stating that the purpose of visit as “holiday, vacation, pleasure, leisure, sight seeing etc.,”. On this basis Tribunal concluded that the guests had arrived at the petitioner's establishment with no intention for treatment for any disease but to enjoy holidays. 14. The impugned order shows that the Tribunal has accepted the fact that Ayrvedic treatment is also provided in the establishment. However, Tribunal found that the Hospital is a place intended to cure the patients and a patient is a person O.P.(C).4452/12 14 suffering from a disease or disorder. Tribunal further found that as per the records in the establishment, guests or customers frequented the place for holidays, leisure and recreation. 15. Insofar as the licence obtained by the petitioner from the Panchayat is concerned, Tribunal held that these licenses entitled the petitioner to run a canteen, hospital and to store and sell Ayurvedic medicines in the buildings specified therein. After recognizing this, Tribunal found that it did not mean that in “the entire 50 acres of bush greenery with 30 exclusive villas”, an Ayurvedic Hospital was functioning. Therefore, Tribunal concluded that this is a case where an Ayurvedic Centre is also functioning within a health resort for providing Ayurvedic treatment. 16. Tribunal found that different tariff is fixed for accommodation with single occupancy and double occupancy, which is not the practice in a Hospital. Tribunal also found that the charges for each Ayurvedic package is pre-fixed depending on the type of accommodation opted by the guests, and that in a Hospital, the final bill depended upon the treatment received by O.P.(C).4452/12 15 the patient, cost of medicines, charges for clinical tests etc., and that the period of treatment is decided in each case by the Doctor who treats the patient. On facts the Tribunal found that in this case, the Doctor had no role in fixing the period of treatment or selecting the package required for the guests and that it depended entirely upon the customers' choice. It was also found that the petitioner offered commission to middle men and tour operators, which is not the practice in a Hospital. 17. The Tribunal made reference to the guests registration cards and found that in the 'House Rules' the establishment has been described as a 'Hotel' and the inmates as 'guests'. From the brochures perused, it was found that the petitioner provided trekking and hiking programmes, sightseeing programmes etc., and that there was no condition for accommodation that the inmates should undergo any treatment. Tribunal also found that the conference hall in the petitioner's establishment was let out on rent. Certain bills which were made available to the Tribunal were also perused and the Tribunal found that only in a very few bills, amount has been collected for treatment. On this basis, Tribunal inferred that if the guests were treated for any ailment, O.P.(C).4452/12 16 amount will be collected separately in addition to the charges for the package opted. 18. Tribunal has also gone into the details of Ayurveda packages and leisure packages and found that the charges realized differs depending upon the type of villa, one has opted for. Tribunal has given the details of the charges collected and found that the lion portion of the package is related to the room rent alone. 19 Section 2(e) defines 'hotel' as a building or part of a building where residential accommodation by way of business is provided for monetary consideration and includes a lodging house. The expressing “luxury provided in a hotel” is defined in Section 2(f) of the Act to mean accommodation for residence or use and other amenities and services, provided rupees one hundred and fifty or more, is charged daily, excluding for food and liquor. The expression 'luxury' has been defined in Section 2(ee) of the Act to mean a commodity or service that ministers comfort or pleasure. The factual findings arrived at by the Tribunal show that the petitioner's establishment answers the definition of O.P.(C).4452/12 17 'hotel' as defined in the Act and that the accommodation, amenities and services provided satisfied the definition “luxury provided in a hotel”. Such hotels are liable to be taxed under Section 4(2) of the Act. 20. Petitioner has not produced any material before this Court to conclude that the factual findings arrived at by the Tribunal are erroneous or perverse. In such circumstances, this Court should necessarily conclude that the findings of the Tribunal are based on the materials available in the case and that the legal conclusion of the Tribunal is also supported by the provisions of the Act. Therefore, this is not a case to which any of the grounds indicated by the Apex Court in the judgment in Shalini Shyam Shetty's case (supra) for interference under Article 227 of the Constitution of India are applicable. Hence the Original Petition merits only dismissal and it is ordered accordingly. Sd/- ANTONY DOMINIC, JUDGE mrcs /true copy/ PA To Judge "