2013 (2) TMI 776 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of the petitioner's establishment as a Hotel or Hospital.
2. Legality of the Tribunal's order (Ext.P5) and subsequent assessment order (Ext.P6).
3. Application of luxury tax under the Kerala Tax on Luxuries Act, 1986.

Summary:

1. Classification of the Petitioner's Establishment:

In this Original Petition filed u/s Article 227 of the Constitution of India, the 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 liable to pay luxury tax only w.e.f 1.4.2008.

Ext.P2 is an order of assessment treating the petitioner's establishment as a Hotel u/s 2(e) of the Kerala Tax on Luxuries Act, 1986. The Tribunal initially accepted the petitioner's contention that it is a Hospital but upon remand by the Division Bench, re-evaluated and concluded that the establishment is a Hotel.

The Tribunal examined the facilities provided by the petitioner, including luxurious air-conditioned villas, swimming pool, tennis and badminton courts, internet services, and sightseeing programs. It found these amenities more characteristic of a hotel or health resort rather than a hospital. The Tribunal noted that the majority of guests visited for holidays, leisure, and recreation, not for treatment of any disease.

Further, the Tribunal observed that different tariffs for accommodation, pre-fixed charges for Ayurvedic packages based on accommodation type, and commissions to middlemen and tour operators are practices inconsistent with a hospital. The Tribunal concluded that the establishment is essentially a tourist resort with Ayurvedic treatment facilities, not a hospital.

2. Legality of Tribunal's Order (Ext.P5) and Subsequent Assessment Order (Ext.P6):

The Tribunal upheld the levy of luxury tax on the charges collected for accommodation, amenities, and services provided to customers, excluding charges for medicines and food. It directed the assessing authority to accept the book figure and recompute the taxable income, rejecting the addition of 30% ordered by the assessing authority.

In pursuance of Ext.P5, the assessing authority issued Ext.P6 modified assessment order, determining tax and interest dues for the assessment years 2003-04 to 2007-08. The petitioner filed applications u/s 6(6) of the Act seeking rectification of Ext.P5 and P6, which were dismissed by the Court as not reflecting any error as contemplated in Section 6(6).

3. Application of Luxury Tax:

The Tribunal found that the petitioner's establishment fits the definition of 'hotel' u/s 2(e) of the Act and that the accommodation, amenities, and services provided meet the definition of "luxury provided in a hotel" u/s 2(f). Such hotels are liable to be taxed u/s 4(2) of the Act.

The Court, applying the principles laid down by the Apex Court in Shalini Shyam Shetty and Another v. Rajendra Shankar Patil (2010 (8) SCC 329), concluded that the Tribunal's findings are based on available materials and supported by the provisions of the Act. No grounds for interference under Article 227 of the Constitution were found.

Conclusion:

Hence, the Original Petition merits only dismissal and it is ordered accordingly.