2020 (9) TMI 217 - HC - VAT and Sales Tax

Levy of penalty u/s 47(b) of the erstwhile Kerala Value Added Tax Act, 2003 - registration of Charitable Hospitals - Deferment of assessment proceedings under Section 25 of the 2003 Act, before finalisation of the proceedings under Section 47(b) of the Act - HELD THAT - It is a fit case where the penalty order Ext.P6 to P16 are not sustainable. In M/s Fortis Healthcare Limited 2015 (2) TMI 1014 - PUNJAB HARYANA HIGH COURT , the Division Bench of Punjab and Hariyana High Courts after noticing the provisions of Punjab Value Added Tax Act and as well as Power to Impose Sales Tax and VAT clause flowing from entry 54 of list to schedule 7 and Article 366 (29-A) of the Constitution of India did not accept the contention of the state for the applicability of doctrine of severance with regard to the services provided to the indoor patients involving medicines supply of surgical items, stents, implants valves with or without medical procedure or medical treatment. During all the aforementioned procedure supply of oxygen is also a sine qua non. All these services are in a packaged form and have to be consumed and cannot be segregated during the course of the treatment - Thus for all intends and purpose is rightly so held to be not exegible to tax. The cumulative reading of the reasoning assigned herein above would leave a irresistible conclusion that the penalty orders do not stand touchstone of reasonability or any deviation from the provisions of Section 18C of the Kerala Value Added Tax Act 2003, particularly when as per the proviso the petitioner-the charitable hospital is not required to obtain registration. Penalty Order quashed - petition allowed.

Summary

Issues:
1. Quashing of penalty orders under Section 47 of the Kerala Value Added Tax Act, 2003.
2. Mandamus for deferring assessment proceedings under Section 25 of the 2003 Act.

Issue 1: Quashing of Penalty Orders under Section 47 of the Kerala Value Added Tax Act, 2003:

The judgment involved two writ petitions, one seeking the quashing of penalty orders under Section 47 of the Kerala Value Added Tax Act, 2003, and the other claiming mandamus for deferring assessment proceedings under Section 25 of the same Act. The petitioner, a Charitable Society running a cancer hospital, faced penalty proceedings for transporting Liquid Medical Oxygen without requisite documents. The petitioner argued that penalty proceedings were impermissible due to exemptions under Section 18(C) of the Act, supported by relevant judgments. The petitioner contended that the exemption certificates held weight, and interception of consignments post-exemption was unjustified. The court noted that the penalty orders were unsustainable due to the charitable hospital's exemption status and quashed the penalty orders, citing relevant case laws and the absence of evasion of tax.

Issue 2: Mandamus for Deferring Assessment Proceedings under Section 25 of the 2003 Act:

The second writ petition aimed to defer assessment proceedings until the finalization of penalty proceedings under Section 47. Despite an interim injunction, penalty orders were passed but not communicated to the petitioner. The court found that the cause of action for challenging the penalty orders in this petition no longer existed, rendering the petition infructuous. The court emphasized that the penalty orders being quashed in the first petition impacted the relief sought in the second petition. Therefore, the court dismissed the second petition as it no longer had any legal basis following the quashing of the penalty orders in the first petition.

In conclusion, the High Court of Kerala, through the judgment delivered by Mr. Justice Amit Rawal, disposed of the two writ petitions by quashing the penalty orders under Section 47 of the Kerala Value Added Tax Act, 2003, due to the charitable hospital's exemption status and lack of tax evasion. The court also dismissed the mandamus petition for deferring assessment proceedings as it became infructuous post the quashing of penalty orders. The judgment extensively analyzed legal provisions, exemption certificates, and relevant case laws to arrive at the decision, ensuring justice and adherence to the law.