Tissan J.Thachankary Vs. the State of Kerala - Court Judgment

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE26H DAY OF FEBRUARY20147TH PHALGUNA, 1935 WA.No. 4 of 2013 ------------------------- AGAINST THE JUDGMENT

DATED2803-2012 IN WP(C).NO. 33392/2009. ...... APPELLANT/PETITIONER: -------------------------------------- TISSAN J.THACHANKARY, CHAIRMAN, FORT MUNNAR HOTEL, CHINNAKANAL, IDUKKI. BY ADVS.SRI.LAL K.JOSEPH, SRI.A.A.ZIYAD RAHMAN, SRI.V.S.SHIRAZ BAVA. RESPONDENTS/RESPONDENTS: ------------------------------------------------ 1. THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO COMMERCIAL TAXES DEPARTMENT, THIRUVANANTHAPURAM-695 101.

2. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM-695 101.

3. THE DEPUTY COMMISSIONER (APPEAL), COMMERCIAL TAXES DEPARTMENT, ERNAKULAM-682 018.

4. THE COMMERCIAL TAX OFFICER (WC & LT), COMMERCIAL TAX DEPARTMENT, IDUKKI, KATTAPPANA-685 508.

5. THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES DEPARTMENT, KATTAPPANA SOUTH P.O., IDUKKI DISTRICT-685 515. BY GOVT. PLEADER MR.BOBBY JOHN PULICKAPARAMBIL. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON0312/2013, ALONG WITH W.A. NO. 520 OF2013 THE COURT ON2602/2014 DELIVERED THE FOLLOWING: rs. MANJULA CHELLUR, C.J.

& A.M.SHAFFIQUE, J.

---------------------------------------------------- W.A. Nos. 4 of 2013 & 520 of 2013 --------------------------------------------------- Dated this the 26th February, 2014

JUDGMENT

Shaffique, J.

Since the appellant is common in both cases and the issue involved is similar, with reference to different assessment years they are decided together.

2. In W.A. No. 4/2013 the petitioner in the writ petition is the appellant. The writ petition is filed seeking to quash Exts. P2, P3 and P5 and for a declaration that the services rendered out side the hotel building are not liable to be taxed under the provisions of the Kerala Tax on Luxuries Act, 1976 (hereinafter referred as 'the Act').

3. Ext.P2 is the proceedings of the Commissioner of Commercial Taxes by which suo motu revision was taken under S. 8(1) of the Act. Ext.P3 is the assessment order W.A. Nos. 4 of 2013 & 520 of 2013 2 issued pursuant to Ext.P2 and Ext. P5 is the notice of demand for an amount of Rs. 4,09,876/-. This relates to assessment year 2002-2003.

4. The main contention urged by the learned counsel for petitioner was regarding limitation in exercising power under S. 6(5) of the Act. It was contended that the assessment in respect of the assessment year 2002-2003 was reopened by invoking S. 8(1) of the Act suo motu by the revisional authority and the re-assessment is made. The learned Single Judge formed an opinion that since there is no provision or time-frame to suo motu revise the order of assessment by the revisional authority under S. 8(1) of the Act, S. 6(5) which provides for limitation will not apply to such proceedings. However it was observed that since an appeal was pending before the appellate authority, the petitioner could avail of the statutory remedy. W.A. Nos. 4 of 2013 & 520 of 2013 3 5. It is submitted by the learned counsel for appellant that the appeal has been decided against the appellant. But it is argued that if the question of limitation is decided in favour of the appellant, and if it is found that the very invocation of suo motu revision by the revisional authority was beyond the period of limitation, the order passed by the appellate authority under the Act, during the pendency of appeal will be subject to the decision taken in this case.

6. It is contended that though no specific period of limitation is prescribed under S. 8(1) of the Act, when the period of limitation is specified for re-assessment by the assessing officer under S. 6(5) of the Act, the limitation applicable for re-assessment shall automatically apply for exercising the power of suo motu revision. The learned counsel also placed reliance on the judgment of a Division Bench of this court in Suppan Chettiar v. CAIT (1958 KHC374. In that case, the question to be considered W.A. Nos. 4 of 2013 & 520 of 2013 4 was whether the revisional authority under S. 34 of the Agricultural Income Act, 1950 (TC) can exercise the power of revision beyond the period of limitation specified for reopening an assessment as provided under S.35 of the Act. It was held that though no specific period of limitation was prescribed for exercising the suo motu power of revision under S. 34 of the Act, and when an assessment becomes final within a specified period, the revisional authority cannot direct the assessing officer to do anything which the latter is not competent to do so on account of the statutory limitation provided under the Act.

7. On the other hand, the learned Special Government Pleader relies upon S. 8(1) of the Act to indicate that when there is no statutory period of limitation prescribed for exercising the suo motu power of revision, the revisional authority can at any point of time direct re- opening of the assessment and the re-assessment can W.A. Nos. 4 of 2013 & 520 of 2013 5 be made without reference to the period specified under S.6(5) of the Act.

8. Having heard the learned counsel for appellant, Sri.Ziyad Rahman and the Special Government Pleader Dr.Sebastian Chempapillil, the short issue to be considered in this appeal is whether there is any period of limitation for exercising the suo motu power of revision.

9. Section 8(1) and S.6(5) of the Act reads as under: "8. Revision.- (1) The Board of Revenue may, either suo motu or on application, call ofor and examine the record and proceedings of any order made by the assessing authority and pass such order thereon as it thinks just and proper". xx xx xx "6(5) Where for any reason, the whole or any part of the business of a hotel/house boat has escaped assessment to tax in any year or has been under- assessed at a lower rate than the rate at which it is assessable or any deduction has been wrongly made therefrom, the assessing authority may at W.A. Nos. 4 of 2013 & 520 of 2013 6 any time within a period of five years from the expiry of the year to which the tax relates,proceed to determine to the best of its judgment, the turnover which has escaped assessment to tax or has been under-assessed or has been assessed at a lower rate than the rate at which it is accessable and assess the tax payable on such turnover, after issuing a notice to the proprietor and after making such enquiry as it may deem fit:" 10. Paragraph 31 of the Suppan Chettiar's case (supra) reads as under:

31. It follows from the above discussion that: "(i) When a particular assessment which has become final is sought to be reopened and re- assessment is sought to be made on the assessee, any income which was not included in the original assessment and which was also not taken into consideration in making that assessment has to be held to be income which has escaped assessment, within the meaning of S.35 of the Travancore Cochin Agricultural W.A. Nos. 4 of 2013 & 520 of 2013 7 Income Tax, so far as that assessee is concerned, and no reassessment can be made on the assessee except under S.35 and in accordance with the provisions thereof; (ii) in exercise of his revisional powers under S.34 of the Travancore Cochin Agricultural Income Tax Act the Commissioner cannot in such a case reopen the assessment and make a re-assessment including the 'escaped income' and can only give a direction to the Agricultural Income Tax Officer to take steps under S.35; and (iii) since the Commissioner cannot direct the Agricultural Income Tax Officer to do anything which the latter is not competent to do and since the Agricultural Income Tax Officer is competent to reopen an assessment and make a re-assessment under S.35 only after issuing the notice under that section, which has to be issued within three years of the financial year for which the concerned assessment had been made, the Commissioner is not competent to exercise his W.A. Nos. 4 of 2013 & 520 of 2013 8 revisional power for giving a direction to the Agricultural Income Tax Officer to reopen an assessment and make a re-assessment after the lapse of the period prescribed for issuing the notice under that section".

11. Having gone through Suppan Chettiar's case, we are of the view that almost similar provisions like that of S. 6(5) and S.8 has been considered with reference to the Agricultural Income Tax Act, 1950. The Division Bench opined that if the assessing officer cannot make a reassessment beyond the period of limitation prescribed thereunder, the revisional authority cannot exercise the suo motu revisional power beyond the said period, in the absence of any period of limitation prescribed for exercising such a power.

12. It is not in dispute that S. 8 (1) does not provide any specific period of limitation for exercising suo motu revisional power. But as held by the Division Bench in W.A. Nos. 4 of 2013 & 520 of 2013 9 Suppan Chettiar's case, the revisional authority cannot make the re-assessment. The assessment and re-assessment can be made only by the assessing authority who has to exercise its powers under S. 6 of the Act. An assessment under normal circumstance becomes final after the period specified under S. 6(5) of the Act which is five years from the end of the assessment year. Since the case relates to the assessment year 2002-2003, the assessment can be re- opened only on or before 31.3.2008. Apparently, Ext. P2 is issued only on 30.5.2009 and notice was issued to exercise the power under S.8(1) only on 10.12.2008. Hence the writ appeal deserves to be allowed quashing Ext.P2 and all further proceedings pursuant to it.

13. In W.A. No. 520/2013, the writ petitioner is the appellant. The writ petition is filed seeking a declaration that certain services rendered outside the hotel are not liable to be taxed under the Kerala Tax on Luxuries Act, W.A. Nos. 4 of 2013 & 520 of 2013 10 1976. Petitioner also sought for quashing Exts.P4 and P7. Ext. P4 is an order passed by the Dy. Commissioner (Appeals) with reference to the assessment year 2003-2004 and 2004-2005 dismissing the appeal filed by the petitioner confirming the order passed by the assessing authority revising the assessment on the ground that certain amenities and services provided in the hotel were not included in the return. Ext.P7 is the confirmation of the findings of the appellate authority by the Sales Tax Appellate Tribunal, in the appeals filed by the petitioner.

14. The issue involved in the above writ petition was whether the services rendered outside the premises of the hotel can be termed as luxury for which tax can be levied. According to the petitioner/appellant, in addition to running a tourist resort and providing various services to its customers in the premises of the hotel, they also provide other services like trekking, boat riding, sight seeing and W.A. Nos. 4 of 2013 & 520 of 2013 11 other facilities outside the hotel. Luxury tax is payable only for services rendered inside the hotel and not for the services rendered outside the hotel. The Tribunal as well as the learned Single Judge, relied upon the judgment of the Division Bench of this Court in Casino Hotel v. State of Kerala (2007) 15 KTR485 and held that such services though outside the hotel attracts luxury tax.

15. It is contended by the learned Special Government Pleader that the issue in the present case is covered by the judgment in Brunton Boatyard v. State of Kerala (2013 (4) KLT37, whereas the learned counsel for the appellant would submit that the Division Bench did not exactly consider the issue involved in the matter and therefore the said judgment cannot be an authority for the proposition suggested by the petitioner.

16. The main argument of the learned counsel for the appellant is that when the incidence of tax is on the W.A. Nos. 4 of 2013 & 520 of 2013 12 luxury provided "in the hotel" and the 'luxury' enjoyed by the tourists by way of boat-riding, trekking, sight-seeing etc. are outside the hotel, the Division Bench while deciding Brunton Boatyard's case did not have occasion to consider the incidence of tax. Therefore it is contended that when the tax is levied on the luxury provided, in so far as the hotel does not provide the luxuries which the tourists availed outside the hotel limits or premises, the levy of luxury tax does not arise and such tax is to be levied only on such luxury provided by service providers outside the hotel premises.

17. Having heard the learned counsel for petitioner and the Special Government Pleader, we are of the view that the issue is substantially covered by the judgment in Brunton Boatyard's case and paragraph 4 of the judgment reads as under: "Section 2(ee) defines "luxury" to mean a commodity or service that ministers comfort W.A. Nos. 4 of 2013 & 520 of 2013 13 for pleasure. Sub-section (2) of Section 4 provides for levy of luxury tax at rates classified on the rates of charges for accommodation for residence and other amenities and services excepting those which are excluded. This, however, is put at rate applicable per day per room. The definition of "luxury provided in a hotel"in section 2(f) means accommodation for residence and other amenities and services provided in a hotel. When these terms are taken together, the mere prescription that the rate would be per- day per room cannot be held to mean that luxury tax is leviable only the rate of charges for accommodation for residence and other amenities and services attached to that room. This will give a restrictive construction for the term 'other amenities and services' and would pin down the luxury tax levy to be confined to the charges for accommodation and amenities and services which would be offered for enjoyment irrespective of the requirement of the customer concerned. In our W.A. Nos. 4 of 2013 & 520 of 2013 14 view that is not the manner in which the said provision stand. The rate of charges for accommodation for residence is one of the components while other amenities and services enjoyed by the customer would also be luxury provided in a hotel though that may vary from room to room, depending upon customer's volition and requirement. While that event would not be certain but would be dependent upon the consumption and enjoyment of the luxuries as may be made available, that is not a ground to exclude any particular amenity or service from the purview of the terms "luxury" and "luxury provided in a hotel" as defined in the Act. No such exclusion is possible merely on the plea that it is not part of the accommodation for residence and is not such amenity or service as is intricately connected with the accommodation for residence. The statutory provision in hand do not attempt any such restrictive construction. The term "luxury provided in a hotel" is defined to mean W.A. Nos. 4 of 2013 & 520 of 2013 15 accommodation for residence and other amenities and services provided in a hotel excluding items mentioned in Section 2 (f). The use of the conjunction 'and' after the phrase "accommodation for residence" clearly spells out the legislative intent that the amenities which fall into the net of that provision are not those merely confined to providing attendant services in connection with the requirement of an occupant of the hotel for residence. Again, the use of the contention 'and' between the words 'amenities and services' amplifies to bring within its ambit all commodities or services that minister comfort or pleasure. Therefore, all amenities and services provided in a hotel as well as accommodation for residence amount to luxury for the purpose of S.2(ee) and would fall within the term 'luxury provided in a hotel' as defined in S.2(f) of the Act".

18. Still further coming to the argument of the learned counsel for the appellant that the Division Bench W.A. Nos. 4 of 2013 & 520 of 2013 16 has not considered the incidence of tax, it is relevant to note that the appellant has clearly admitted the fact that they have charged their customers for all the impugned services. Section 2(ee), 2(f) and 4(1) of the Act reads as under: Section 2(ee) "Luxury" means a commodity or service that ministers comfort or pleasure". Section 2(f) ""Luxury provided in a hotel, house boat, hall, auditorium, Kalyanamandapam or place of like nature" means accommodation for residence or use and other amenities and services provided in a hotel or house boat or hall or auditorium or kalyanamandapam or place of like nature (the rate of charges of accommodation for residence and other amenities and services provided excluding charges of food and liquor is one hundred and fifty rupees per day or more". W.A. Nos. 4 of 2013 & 520 of 2013 17 xx xx Section 4(1) 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, kalyanamandapam 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. It is not the case of the petitioner that their customers are availing the services of outside agencies by themselves. The 'luxury' that the customers of the appellant receives from various other agencies outside the hotel are admittedly W.A. Nos. 4 of 2013 & 520 of 2013 18 billed by the appellant. Therefore, it is a luxury which is provided by the appellant to its customers, though it is outside the premises of the hotel. Therefore while interpreting S. 2(ee) and 2(f) and also the charging Section 4(1), we are of the view that the word "in the hotel" as appearing in the said provision has to be read as 'by the hotel' as well.

19. Learned counsel for appellant, however, brought to our notice the subsequent amendment to the Act by incorporating a proviso indicating that certain items have been excluded from luxury tax in the hotel. The proviso reads as under: "Provided that no luxury tax shall be payable, for such charges received in respect of service rendered outside the hotel premises, such as s vehicle hire, boat hire and trekking": W.A. Nos. 4 of 2013 & 520 of 2013 19 It is argued that the said proviso is in the form of a clarification. We do not think so. The proviso had been incorporated to clearly exclude such items from the service that were being provided by the hotel. The incidence of luxury tax is for the luxury that is provided by the hotel and limiting the levy of tax to services provided inside the hotel will be giving a very narrow meaning to the language used in the statute. The scheme of the Act has to be looked into as a whole and when the levy of luxury tax is on the 'luxury' provided in the form of services, necessarily all services rendered by the hotel comes within the definition of 'luxury' which is chargeable under the Act, unless it is specifically excluded, as indicated above by the proviso incorporated by way of amendment. Hence, we do not think that the appellant has made out any good ground for interfering with the judgment of the learned W.A. Nos. 4 of 2013 & 520 of 2013 20 Single Judge.

20. In the result: (i) W.A. No.4/2013 is allowed setting aside the judgment of the learned Single Judge. Ext.P2 and all further proceedings pursuant to the same are hereby quashed. (ii) W.A. No. 520/2013 is dismissed. Sd/- MANJULA CHELLUR, CHIEF JUSTICE Sd/- A.M.SHAFFIQUE, JUDGE rka /true copy/ W.A. Nos. 4 of 2013 & 520 of 2013 21