2015 (8) TMI 1130 - HC - VAT and Sales Tax

Exercise of Revisional powers Validity Petitioner seeking to quash proceedings, assessment order issued in pursuant to said proceedings and notice of demand Petitioner contended that there was limitation in exercising powers under section 6(5) and reopening assessment by invoking section 8(1) of Act suo moto by revisional authority Whether there is any period of limitation for exercising suo moto power of revision Held that - not in dispute that section 8(1) does not provide any specific period of limitation for exercising suo motu revisional power However assessment and reassessment can be made only by assessing authority who has to exercise its powers under section 6 of Act Assessment under normal circumstance becomes final after period specified under section 6(5) of Act Since case relates to assessment year 2002-2003, assessment can be reopened only on or before March 31, 2008 Apparently, proceedings were issued only on May 30, 2009 Hence writ appeal deserves to be allowed quashing section all further proceedings pursuant to it Decided in favour of Assesse. Luxury Services Taxability Appellant seeking declaration that certain services rendered outside hotel were not liable to be taxed under Kerala Tax on Luxuries Act, 1976 Held that - It was not case of petitioner that their customers were availing services of outside agencies by themselves luxury that customers of appellant received from various other agencies outside hotel were admittedly billed by appellant Therefore, it was luxury which was provided by appellant to its customers, though it was outside premises of hotel Therefore while interpreting section 2(ee), 2(f) and 4(1), in the hotel as appearing in said provision has to be read as by the hotel as well Incidence of luxury tax was for luxury that was provided by hotel and limiting levy of tax to services provided inside hotel will be giving very narrow meaning to language used in statute Appeal dismissed.

Summary

Issues Involved:
1. Limitation period for exercising suo motu revision under section 8(1) of the Kerala Tax on Luxuries Act, 1976.
2. Taxability of services rendered outside the hotel premises under the Kerala Tax on Luxuries Act, 1976.

Issue-Wise Detailed Analysis:

1. Limitation Period for Exercising Suo Motu Revision:

The primary contention in W.A. No. 4 of 2013 was whether the limitation period under section 6(5) of the Kerala Tax on Luxuries Act, 1976, applies to suo motu revision by the revisional authority under section 8(1) of the Act. The appellant argued that the reassessment for the year 2002-2003, initiated suo motu by the revisional authority, was beyond the permissible period of limitation. The learned single judge had previously opined that section 6(5), which provides a five-year limitation for reassessment by the assessing officer, does not apply to suo motu revisions under section 8(1), as no specific time-frame is prescribed for such revisions.

The appellant relied on the judgment in Suppan Chettiar v. CAIT [1958] KHC 374, where it was held that the revisional authority cannot exercise suo motu powers beyond the period of limitation prescribed for reassessment. The court in Suppan Chettiar's case concluded that if the assessing officer is bound by a statutory limitation, the revisional authority cannot bypass this limitation.

The Special Government Pleader, however, argued that section 8(1) allows the revisional authority to direct reopening of assessments at any time, without reference to the limitation period specified in section 6(5).

Upon examining the provisions and the precedent, the court held that the revisional authority cannot exercise suo motu powers beyond the period of limitation prescribed for reassessment. Since the assessment year in question was 2002-2003, the reassessment should have been initiated by March 31, 2008. Exhibit P2, issued on May 30, 2009, and the notice issued on December 10, 2008, were thus beyond the permissible period. Consequently, the court allowed the appeal, quashing Exhibit P2 and all subsequent proceedings.

2. Taxability of Services Rendered Outside the Hotel Premises:

In W.A. No. 520 of 2013, the issue was whether services rendered outside the hotel premises, such as trekking, boat riding, and sightseeing, are liable to luxury tax under the Kerala Tax on Luxuries Act, 1976. The appellant contended that luxury tax should only apply to services provided inside the hotel premises.

The Tribunal and the learned single judge had relied on the judgment in Casino Hotel v. State of Kerala [2008] 14 VST 122 (Ker), which held that services provided outside the hotel premises also attract luxury tax. The Special Government Pleader argued that the issue was covered by the judgment in Brunton Boatyard v. State of Kerala [2013] 66 VST 533 (Ker), which supported the taxability of such services.

The court examined the definitions of "luxury" and "luxury provided in a hotel" under sections 2(ee) and 2(f) of the Act, and the charging section 4(1). It concluded that the term "luxury provided in a hotel" includes all amenities and services provided by the hotel, irrespective of whether they are rendered inside or outside the hotel premises. The court noted that the appellant billed its customers for these services, thereby providing luxury to its customers, which falls under the purview of the Act.

The court also considered the subsequent amendment to the Act, which excluded certain services rendered outside the hotel premises from luxury tax. However, it held that this amendment did not apply retroactively and was not a clarification of the existing law.

Thus, the court dismissed the appeal, upholding the taxability of services rendered outside the hotel premises.

Judgment Summary:
- W.A. No. 4 of 2013: Allowed, quashing Exhibit P2 and all subsequent proceedings.
- W.A. No. 520 of 2013: Dismissed, upholding the taxability of services rendered outside the hotel premises.