9911796707
TMI Blog2012 (5) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment orders. It is also contended in some of the writ petitions that the above provision i.e., Section 6(5), having been brought about only as per the Act 41 of 2005 w.e.f. 28/08/2005, the same could not have been pressed into service for revising the assessments already passed, referring to the 'escaped turnover' in respect of the assessment periods/years of much prior to the said date. 2. In WP (C) No. 22357 of 2004, the petitioner was served with Exts. P1 and P2 assessment orders under Section 6(2) of the Act on best judgment basis, in respect of the assessment years 2001-02 and 2002-03, also reckoning the turnover in respect of the Ayurveda treatment and Laundry charges as well, besides effecting some additions to the turnover returned. On challenging the same by way of appeal, Ext. P3 Common appellate order was passed by the Appellate Authority deleting the additions made, however sustaining levy of luxury tax on the charges collected for Ayurveda treatment and Laundry charges. Pursuant to Ext. P3, revised assessment orders have been passed as borne by Exts. P4 and P5, also issuing demand notices for the balance amount with interest. The petitioner is aggrieved of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this was stated as supplemented by Ext. P4 dated 22/09/2006, also asking for an opportunity of hearing. However, the proceedings were finalised by the assessing authority as per Exts. P5 to P8 orders dated 18/09/2006, re-fixing the tax liability under Section 6(5) and the differential amount was demanded with interest as per Exts. P9 to P12 notices, which are under challenge. With reference to Ext. P13 copy of the Act 41 of 2005 published in the Gazette dated 28/08/2005, it is contended that, since sub-section (5) of Section 6 was introduced only with effect from that date, there was no question of any 'escaped turnover' or assessment of any such turnover, (which was actually dealt with by the assessing authority while passing Ext. P1 original assessment order) in respect of the assessment years prior to the date of introduction of the provision. It is also contended that, by virtue of the 'explanation' given in Ext. P13 (the amendment Act), the liability to pay tax or other amount shall arise only from the date specified in the revised notice and hence there is no room for charging any interest as well. It is further pointed out that the entire Turnover was duly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in respect of the 'escaped turnover' are also sought to be sustained, for the reasons stated therein. 9. Dr. K.B. Muhammed Kutty, the learned Senior Counsel appearing for the petitioners in all the cases submits that the nature of business being transacted by the petitioners while providing Hotel accommodation to the residents, providing some facilities like Ayurveda treatment, Laundry facility, Boating, Travel arrangements, Trekking etc., by engaging outside agencies, is not liable to be taxed under the 'KTL Act' primarily for the reason that it is not a service rendered by the petitioners in the hotel but by somebody else, elsewhere, for which the petitioners are collecting only a 'commission'. It is also stated that the business of like nature, being pursued by independent agencies outside the Hotel is not being taxed at their hands; which when made available through the petitioners, strangely becomes taxable, where the instance of discrimination is evident. The learned Sr. Counsel submits that the terms 'amenities and services' are not defined under the Statute, which gives unbridled power to the assessing authority and hence the Statute is bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey Phillips India Ltd. and Another v. State of U.P. and Others 2005 KHC 419 : 2005 13 KTR 89 (SC) : 2005 (2) SCC 515 : AIR 2005 SC 1103 : 2005 (139) STC 537 : 2005 All LJ 559 by virtue of which, the view expressed by the Apex Court earlier in Express Hotels Pvt. Ltd. v. State of Gujarat 1989 KHC 958 : 1989 (74) STC 157 : 1989 (3) SCC 677 : AIR 1989 SC 1949 : 1989 (178) ITR 151 is stated as no longer good law. The learned Counsel also submits that the 'proviso' to Section 4(2) having been introduced only as per the Finance Act, 2007, the declaration of law by this Court in Casino Hotels v. State of Kerala, 2007 (15) KTR 485 (Ker.) : 2007 KHC 3812 : 2007 (1) KLJ 530 and Kovalam Ashok Beach Resort Hotel v. Sales Tax Officer (Reserve) and Another 2006 (14) KTR 417 (Ker.) declaring the constitutional validity of Statute requires a re-look. 12. Mr. Sojan James, the learned Spl. Government Pleader (Taxes) submits that the issue is actually covered by the decisions rendered by the Supreme Court and also by this Court especially with regard to the validity of the Statute, more particularly, the power of the State to give rise to the enactment, with reference to the power under Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch entry decades back as bad in law. 14. It is profitable to make a reference to the decision rendered by the Constitution Bench of the Supreme Court in Federation of Hotel Restaurant Association of India and Others v. Union of India and Others 1989 KHC 957 : 1989 (178) ITR 97 : 1989 (3) SCC 634 : AIR 1990 SC 1637 : 1989 (74) STC 102. Three different batches of cases were being considered by the Apex Court and one such series involved a challenge against the Expenditure Tax Act, 1987. The said Act envisaged a tax at 10 per cent ad valorem on 'chargeable expenditure' incurred in the class of Hotels wherein room-charges for any unit of residential accommodation were Rs. 400/- per day per individual. The 'chargeable-expenditure' as defined in Section 5 of the Act includes expenditure incurred in or payments made in such class of Hotels in connection with the provision of any accommodation, residential or otherwise, food or drink whether at or outside the Hotel; or for any accommodation in such Hotel on hire or lease; or any other services envisaged in that Section. However, any expenditure incurred in or paid for, in foreign exchange or by persons who enjoy certain di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (WP 5321 of 1985). Reference was also made to similar enactments made by the State of Uttar Pradesh, Maharashtra and Kerala as given below: (a) Uttar Pradesh Taxation and Land Revenue Laws Act, (No. 8) of 1975; (b) Maharashtra Tax on Luxuries (Hotels and Lodging Houses) Act (XLI of) 1987; and (c) Kerala Tax on Luxuries in Hotels and Lodging Houses Act (No. 32 of) 1976 repealing Kerala Ordinance No. 5 of 1976. The enactment of the above State laws, based on the power conferred under Article 246(3) of the Constitution, read with Entry 62 of List II of the Seventh Schedule to the Constitution of India, was discussed in detail. Referring to the decision rendered in A.B. Abdul Kadir v. State of Kerala 1976 KHC 482 : AIR 1976 SC 182 : 1976 (3) SCC 219 : 1976 Tax LR 1293 and other relevant aspects, it was held that the learned Judge was in full agreement to have the validity of the enactment made by the Gujarat State upheld and it was made equally applicable to the other impugned State enactments as well, which were upheld and the decision of the Bench was pronounced accordingly. 17. When OP No. 34635 of 2002 came up for consideration before a learned Judge of this Court, along with WP (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Kovalam Ashok Beach Resort Hotel v. Sales Tax Officer (Reserve) and Another 2006 (14) KTR 417 (Ker.) that 'laundry charges' would attract luxury tax. However, referring to the decision of the Karnataka High Court in Piem Hotels v. State of Karnataka 129 STC 373, it was contended in Casino Hotel v. State of Kerala 2007 (15) KTR 485 (Ker.) that no liability could be fixed upon the petitioner, particularly with regard to the charges collected for Ayurvedic treatment, Laundry services and for Boating arranged by the Hotel. The learned Judge observed that the decision of the Karnataka High Court in Piem Hotels v. State of Karnataka 129 STC 373 could not be followed, because the provisions of both the Statutes were not similar. It was observed that, under the Kerala Act, tax is payable for rent and charges collected for every service and amenity provided in a Hotel except on charges for food, drink and telephone charges, while the Karnataka Act enumerated the specific items of services that actually attract luxury tax. Accordingly, decision was rendered re-confirming the earlier decision in Kovalam Ashok Beach Resort Hotel v. Sales Tax Officer (Reserve) and Another 2006 (14) K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out earlier, the Kerala Tax on Luxuries Act, 1976, right from the date of inception, thought it fit to include everything within the tax net, except the charges for food, drinks and telephone charges. This is a vital distinction from the position available under the Karnataka Statute, wherein the instances of luxuries are specified, which are taxable under the said Statute. 22. 'Luxury' is a relative concept and what is 'luxury' is to be defined by the concerned State, based on its legislative wisdom and as a matter of policy. So long as the power of the State to tax the luxury under Entry 62 of State List stands, it is for the State to prescribe the various instances and the extent/measure of taxation. True, by virtue of the Finance Act, 2007, a 'proviso' was added to Section 4(2), whereby something more was mentioned to be taken outside its purview, (i.e., over and above the exemption already given in respect of charges for food, drinks and telephone), i.e., the charges received in respect of the service rendered outside the Hotel premises, such as Vehicle hire, Boat hire and Trekking were newly added. The extent of exclusion was made clear, with speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessing authority can very well cause the escaped turnover to be reckoned and taxed, so as to protect the Revenue in the manner specified therein, if the earlier order passed by the said authority was defective in this regard. 24. True, the above provision for assessing the 'escaped turnover' was incorporated in the Statute boo, as per the Act 41 of 2005, which was published in the Gazette dated 28/08/2005 as borne by Ext. P13. But, it has to be borne in mind that the original assessment order (Ext. P1 in WP (C) No. 33681 of 2006) was passed only on 30/10/2005, i.e. after coming into force of Ext. P13 amendment on 28/08/2005. It is also admitted by the petitioner in WP (C) No. 33681 of 2006 that only 1/10th of the charges for such services (such as (a) to (f) in paragraph 1 of the above writ petition) were reckoned for the purpose of taxation, leaving 9/10th untouched. It was on realising the said mistake in having left over 9/10th as above, that the earlier order was necessitated to be revised, so as to assess the escaped turnover by proposing revised assessment, which was finalised accordingly. Same is the position with regard to the assessment year 2004-05 as involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein before, the original orders were passed by the assessing authority only much after the incorporation of the above provision into the Statute book vide Act 41 of 2005, notified as per Ext. P13 Notification dated 28/08/2005. In other, words, at the time of passing the original order itself, the amendment had taken effect and as such, if at all any portion of the reckonable turnover happened to be omitted or escaped the assessment, it is possible for the assessing officer to have the 'escaped turnover' to be assessed by invoking the power under Section 6(5), as aforesaid. It was accordingly, that notice was issued proposing the revised assessment, in conformity with the statutory requirements, finally leading to the revised assessment orders. This Court finds that the contention raised by the petitioners referring to the absence of retrospectivity to sub-section (5) of Section 6, does not hold any water at all; nor is it relevant to the case in hand, since both the original as well as the revised assessment orders have been passed only after the amendment, i.e. after 28/08/2005. 26. With regard to the contention that 'change of opinion' cannot be a reason for pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2004-05 by the assessing authority by name Smt. V.O. Daisy on 17/03/2007 and on noting the escaped turnover, the very same officer took necessary steps to effect the escaped turnover to be assessed by issuing notice, finally leading to Ext. P7 revised assessment order dated 12/05/2008. This being the position, the contention of the petitioner that, it is by virtue of the change of opinion of some officer, in place of another, that the revised assessment orders have been passed, is devoid of any merit or bona fides. 28. There is a case for the petitioners, at least for the petitioner in WP (C) No. 33681 of 2006, that no proper, opportunity of hearing was given before passing the revised assessment order. It is stated that, in response to Ext. P2 notice proposing to revise the assessment for the year 2000-2001 and similar notices for the other assessment years, Ext. P3 and other similar objections were preferred on 30/08/2006 and that it was supplemented by Ext. P4 additional objections dated 22/09/2006. It is stated that when the proceedings were finalised by passing Ext. P5 to P8 orders, the petitioner was not personally heard and hence the impugned orders are liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected from the Books of accounts. The only question to be considered was whether the charges collected in respect of the various Heads, such as Ayurveda treatment, Laundry charges, Boating etc. should have been included as part of the turnover for fixing the tax liability and the dispute was never on the quantum of turnover. These aspects have been considered by the assessing authority, who passed Exts. P5 to P8 revised assessment orders on 18/09/2006, i.e., much prior to the date of Ext. P4. This being the position, the challenge raised by the petitioner, referring to the alleged violation of principles of natural justice is without any basis. 31. The contention raised by the petitioners that the view expressed by the Apex Court in Express Hotels Pvt. Ltd. v. State of Gujarat 1989 KHC 958 : 1989 (74) STC 157 (SC) : 1989 (3) SCC 677 : AIR 1989 SC 1949 : 1989 (178) ITR 151 is no longer good law in view of the decision in Godfrey Phillips India Ltd. and Another v. State of U.P. and Others 2005 KHC 419 : AIR 2005 SC 1103 : 2005 (13) KTR 89 (SC) : 2005 (2) SCC 515 : 2005 (139) STC 537 : 2005 All LJ 559 and in view of introduction of additional entries in List I is rather misconcei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for completing the assessments, even in cases pending as on 31/03/2006, to be completed on or before 31/03/2007. That apart, the wordings in sub-section (5) of Section 6 are also very much specific, that the time limit for invoking the power to have the revised assessment is five years. This being the position, the plea of limitation is not successfully established and hence is rejected. 33. Lastly, coming to the question of 'interest' payable, the learned Sr. Counsel submits that the liability to satisfy the interest is not correct or proper; more so in view of the 'explanation' given in the Act 41 of 2005, whereby sub-section (5) to Section 6 was incorporated as per Ext. P13 Notification dated 28/08/2005. The said 'explanation' reads as follows: Explanation:--The liability to pay tax or other amount shall arise only from the date specified in the revised notice. That apart, when the liability to pay luxury tax in respect of the Ayurvedic treatment, Laundry charges, Boating etc. was upheld in Casino Hotel v. State of Kerala, 2007 (15) KTR 485 (Ker.) : 2007 KHC 3812 : 2007 (1) KLJ 530, it was made clear that interest can be demanded only for the actual perio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
