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TMI Blog2014 (9) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... Intelligence Bureau had forwarded the file along with the enquiry report to the first respondent for taking necessary steps for the assessment proceedings under the Act. It is added in paragraph 5 of the counter-affidavit that the petitioner has not produced any bills for verification before the second respondent at any point of time even though notice was issued to produce all the documents as part of the enquiry. The above specific averments have not been rebutted by the petitioner by filing any reply affidavit. case projected by the petitioner that the petitioner is not liable to effect any tax under the Kerala Tax on Luxuries Act, 1976 and that section 4(2)(c)(i) of the Act is ultra vires to the Constitution, is devoid of any merit. Whether the petitioner is entitled to have the benefit of the proviso to section 4(1), which says that the instance of levy under sub-section (1) of section 4 shall not apply to halls and auditorium located within the premises of "place of worship" owned by religious institutions - Held that:- property was lying as a continuous and contiguous block earlier and that the Chittur Road cutting through the property was surrendered by the petitioner, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned authority. Though the finding as to the liability to take out registration and to satisfy the tax is beyond challenge, the penalty can be justified only on the basis of a "finding" as to the violation/evasion, which is conspicuously absent. question of penalty requires to be re-considered by the first respondent - Decided partly in favour of assessee. - W.P. (C) No. 16857 of 2009 - - - Dated:- 4-4-2012 - RAMACHANDRA MENON P.R., J. For the Appellant : Dr. K.B. Muhamed Kutty (Sr.) and K.M. Firoz For the Respondents : Smt. K. T. Lilly, Government Pleader, P.R. RAMACHANDRA MENON J. Penalty imposed under section 17A of the Kerala Tax on Luxuries Act, 1976 (hereinafter referred to as, the Act ), in respect of the assessment years 2005-06 to 2007-08 as per exhibits P12 to P14 orders, followed by exhibits P15 to P17 demand notices, are under challenge in this writ petition. That apart, the petitioner also seeks to declare section 4(2)(c)(i) of the Act and exhibit P18 circular as ultra vires to the Constitution. The petitioner has got a further case that the petitioner is entitled for the benefit of the proviso to section 4(1) of the above Act. 2. The petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation, seeking to sustain the stand that no tax is attracted by virtue of the exemption provided under section 4(1). It is stated that site plan of the premises was also produced to prove that the auditorium was situated within the premises of the temple. According to the petitioner, as explained in paragraph 10 of the writ petition, the temple is on the western side of the Chittur road, while the auditorium is situated on the eastern side of the road. It is contended that the entire property was lying as continuous and contiguous block, which belonged to the petitioner and the general public was making use of the right of way across the property . On surrendering the necessary extent, the road was formed as Chittur road, which however cannot deface the identity of the premises and the buildings situated thereon. 6. It is however conceded in paragraph 11 that, since the first respondent insisted registration and payment of tax from 2005 onwards, while exhibit P4 notice insisted registration only from April 1, 2008. The petitioner in fact took registration for the years 2005-06 to 2008-09, by paying registration fee and compounding fee for late payment, at the rate of ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner was letting out the auditorium owned by it on daily rent, which led to issuance of notice to produce the books of accounts. The enquiry conducted by the Department revealed that the petitioner was collecting a daily rent of ₹ 8,500 for the auditorium, excluding the dining hall, which , if to be attached, was to be paid a sum of ₹ 6,000 as well. It is asserted in paragraph 5 of the counter-affidavit that the petitioner has not produced any bills before the second respondent at any point of time, though notice was issued in this regard to produce the bills and book of accounts. Reference is also made to the term luxury as given under section 2(ee) of the Act to the effect that it means a commodity or service that ministers comfort or pleasure. The respondents have asserted in paragraph 7 and elsewhere of the counter-affidavit that the auditorium in the instant case is not located within the premises of place of worship and it is situated far away from the temple premises. The auditorium is actually situated on the northern side of Ayyappankavu East Extension Road, which branches off from the Chittur Road, towards the eastern side. Referring to the relevant entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ten thousand per day; (ii) at the rate of fifteen per cent where the gross charges of accommodation and other amenities and services provided is above rupees ten thousand and up to rupees twenty thousand per day; (iii) at the rate of twenty per cent where the gross charges of accommodation and other amenities and services provided is above rupees twenty thousand per day. 11. Two grounds are mainly raised by the petitioner in this regard. The first one is, only nominal rent is being charged for the auditorium in question, which in fact is made use of by the people belonging to the poor strata of the society and hence it can never be regarded as luxury as defined under section 2(ee) of the Act, but it is a matter of necessity. The other contention is that the Tax on Luxuries Act has been enacted with reference to entry 62 of the State List (List II of the Seventh Schedule), which becomes an alien field for the State by virtue of introduction of entry No. 92C in the Union List (List I of the Seventh Schedule). 12. Mr. Mohammed Kutty, the learned senior counsel for the petitioner, submits that, this is not a case where the power is vested both on the Union of Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estricted to luxuries alone, giving an inclusive definition, so as to take in entertainments, amusements, betting and gambling. To put it more clear, all services need not be luxuries and only when the instance turns to be a luxury as defined under section 2(ee) of the Kerala Tax on Luxuries Act or such other types of luxuries in the specified circumstances as separately defined under section 2(f) or 2(fb) or 2(fc) or 2(fd) alone will it attract tax liability under the State enactment. 16. Referring to the decision rendered by the apex court in Godfrey Phillips India Ltd. v. State of U.P. [2005] 139 STC 537 (SC); [2005] 13 KTR 89, the learned senior counsel for the petitioner submits that the words coming after the general term luxuries are crucial to understand the actual meaning of the term luxury as contemplated in the constitutional entry, which relates to some activity. It is contended that there is no activity leading to any luxury in letting out the auditorium to the public. The crux of the decision in Godfrey's case [2005] 139 STC 537 (SC); [2005] 13 KTR 89 is to the effect that the commodity cannot be taxed, as it does not mean any luxury, which has to be othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry report to the first respondent for taking necessary steps for the assessment proceedings under the Act. It is added in paragraph 5 of the counter-affidavit that the petitioner has not produced any bills for verification before the second respondent at any point of time even though notice was issued to produce all the documents as part of the enquiry. The above specific averments have not been rebutted by the petitioner by filing any reply affidavit. 19. In the above circumstance, this court finds that the case projected by the petitioner that the petitioner is not liable to effect any tax under the Kerala Tax on Luxuries Act, 1976 and that section 4(2)(c)(i) of the Act is ultra vires to the Constitution, is devoid of any merit and is turned down. 20. The next question is whether the petitioner is entitled to have the benefit of the proviso to section 4(1), which says that the instance of levy under sub-section (1) of section 4 shall not apply to halls and auditorium located within the premises of place of worship owned by religious institutions. The contention of the petitioner is that the auditorium is within the premises of the place of worship. The materials on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the obvious reason that exemption provided under the proviso to section 4(1) is only in respect of such halls and auditorium within the premises of the place of worship owned by such institutions and in no other cases. It is settled law that fiscal statutes have to be construed strictly, more so when the benefit sought for is with reference to exemption . Unless and until a given case comes squarely within the four walls of the terms of exemption, it cannot be taken outside the liability which otherwise is cast under the statute. The factual position as revealed from the records also does not come to the rescue of the petitioner and the claim for benefit of the proviso to section 4(1) of the Act is thoroughly wrong and misconceived. 22. The petitioner has made an attempt to find support from the judgment dated April 2, 2009 Shree Thirumandhamkunnu Bhagavathy v. Government of Kerala) rendered by a Division Bench of this court in W.A. No. 812 of 2009, stating that the issue is covered by the said decision. This court finds it difficult to accept the said version. 23. In the said case, reference was made to exhibit P8 statement filed by the petitioner/devaswom, as per which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exhibits P12 to P17 orders imposing penalty. As mentioned already, the purpose/issuance of said circular was in a different context, mainly with intent to strengthen the procedure for assessment and collection of tax. It was in the said circumstance, that violation/non-compliance was required to be dealt with seriously, by imposing penalty. Imposition of penalty is not an alien concept and it is well within the statutory prescription, which may vary from case to case, depending upon the facts and circumstances. The stipulation in exhibit P18 circular is only to the effect that the assessing authority should take appropriate measures where they come across any instance of violation of law and nothing more. This has been explained in categoric terms in paragraph 12 of the counter-affidavit filed by the respondents 1 and 2 and in paragraph 5 of the counter-affidavit filed by the other respondents, making it clear that the direction issued to the assessing authority to take proceedings in all suitable cases will not affect the discretion vested with the said authority. That apart, no reference is made to the said circular anywhere in the impugned orders (exhibits P12 to P17) and as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08, as per the demand, on completion of assessment. There cannot be any dispute with regard to the factual aspect that the petitioner was collecting rent of more than ₹ 3,000 per day in respect of the auditorium, as discernible from exhibit P2 series receipts bearing Nos. 10146 dated April 18, 2005 and 11167 dated March 14, 2006. The case of the petitioner is that no tax was leviable for the auditorium, as it was within the place of worship and even the registration was unwarranted, while it is contended in paragraph 7 of exhibit P11 statement of objections filed in response to exhibits P8 to P10 notices proposing penalty, that there was no wilful omission or deliberate attempt to evade tax. The petitioner adds in the last paragraph of the Statement of Objections that there was no guilty intention and that the devaswom believed and acted upon the legal advice received. 29. The sequence of events is revealed from the impugned orders and the conscious act on the part of the petitioner, raising some or other contentions without getting registration and satisfying the liability, is discernible from the course and events, particularly the proceedings of the respondents, pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision rendered by the High Court of Karnataka while considering the validity of the Karnataka Taxes on Luxuries Act, 1979. As per the decisions rendered in Sri Ramaseva Mandali Trust (R) v. Assistant Commissioner of Commercial Taxes [2003] 133 STC 574 (Karn) and in Magaji Mhavarsa Kamakshi Bai v. Assistant Commissioner of Commercial Taxes, District Circle-1, Mysore [2006] 146 STC 473 (Karn), the validity of the statute has been upheld and it has been held that marriage halls or mandapams are exigible to luxury tax. That apart, in Tamil Nadu Kalyana Mandapam Assn. v. Union of India [2005] 1 VST 180 (SC); [2004] 135 STC 480 (SC); [2004] 267 ITR 9 (SC); AIR 2004 SC 3757, it has been made clear by the apex court that the tax on luxury and service tax govern two different fields and are not overlapping each other. This being the position, the challenge raised by the petitioner against section 4(2)(c)(i) of the Act is devoid of any merit or bona fides. 33. Coming to the question of imposition of penalty under section 17A of the Act for the offences committed in the case of tax under the statute, some element of mens rea is also insisted, to see whether there was any consc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out registration and pay luxury tax under the Act, violation of which warrants penal action under section 17A of the Act for the circumstance, the following orders are passed: Order No. LTWC. 11/08-09/05-06/dated April 30, 2009 In exercise of the powers conferred on me under section 17A of the Act, penalty of ₹ 15,400 (rupees fifteen thousand four hundred only) is imposed on M/s. Sree Narayana Auditorium owned by Sree Narayana Dharma Samajam, Ayyappankavu, Cochin 682 018 for the year 2005-06. Going by the contents of the above order, it cannot but be found that there is absolutely no discussion as to why, the penalty as proposed in exhibits P8 to P10 notices was liable to be imposed or as to why the explanation given in exhibit P11 was not acceptable to the concerned authority. Though the finding as to the liability to take out registration and to satisfy the tax is beyond challenge, the penalty can be justified only on the basis of a finding as to the violation/evasion, which is conspicuously absent. 36. What should be the quantum of penalty and how the figure is obtained, is also not discernible. Reference is made by the petitioner to exhibit P4 notice, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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