Partly allowed

M/S St. Mary'S Hotels Pvt. Ltd. v. the Secretary to Government

Kerala HC9 Aug 2016WA/1383/2016

Case brief

AI extract

What is this about?

This writ appeal challenges a penalty order under Section 17A of the Kerala Tax on Luxuries Act. The Court holds it cannot function as a fact-finding agency and declines interference, directing the appellant to file a valid appeal with the appellate authority by granting a two-week extension.

What did the court decide?

Permission granted to file appeal within two weeks of receipt of judgment; limitation on time extended.

M/S St. Mary'S Hotels Pvt. Ltd. Vs the Secretary to… — Writ and Judicial Review | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN

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TUESDAY, THE 9TH DAY OF AUGUST 2016/18TH SRAVANA, 1938

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WA.No. 1383 of 2016 () IN WP(C).20426/2016

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APPELLANT(S)/PETITIONER:

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M/S ST. MARY'S HOTELS PVT. LTD THE WINDSOR CASTLE, KODIMATHA, KOTTAYAM, REPRESENTED BY ITS MANAGING DIRECTOR, T.O. ABRAHAM. BY ADVS.SRI.P.G.JAYASHANKAR SMT.P.SREELAKSHMI SRI.V.SREEJAYAN

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RESPONDENT(S)/RESPONDENTS:

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THE SECRETARY TO GOVERNMENT TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001. 2. INTELLIGENCE OFFICER, INTELLIGENCE SQUAD NO. 4, COMMERCIAL TAXES DEPARTMENT, KOTTAYAM - 686 001. BY GOVERNMENT PLEADER SRI. C. K. GOVINDAN

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THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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P.R. RAMACHANDRA MENON

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ANIL K. NARENDRAN, JJ.

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Dated, this the 9^th day of August, 2016

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JUDGMENT

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Ramachandra Menon, J.

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Challenge is against Ext. P7 order imposing penalty under Section 17A of the Kerala Tax on Luxuries Act upon the appellant to an extent of Rs.8,69,520/- because of the incriminating circumstances brought to light, pursuant to the shop inspection conducted on 25.03.2015.

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The appellant, a company registered under the relevant provisions of the Companies Act, is running a Hotel by name 'The Windsor Castle'. Various amenities are provided in the hotel, which includes an 'Ayurvedic hospital' and a Swimming pool. On getting information as to the non-compliance of the statutory requirements and satisfaction of tax under the said Statute, a spot inspection was conducted by the competent authority on 25.03.2015, leading to Ext.P1 shop inspection report. The materials collected were subjected to scrutiny, leading to issuance of Ext.P3 notice to the petitioner,

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seeking for explanation. It is stated that the appellant submitted Ext.P4 statement of objections. After considering the same, the books of accounts were called for and the matter was got adjourned on several occasions. It was finally, that Ext. P7 order came to be passed by the second respondent, mulcting a liability of Rs.8,69,520/upon the shoulders of the petitioner/appellant, which was sought to be challenged by filing writ petition before this Court raising various grounds.

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It was contended that there was absolutely no rhyme or reason for the second respondent to have passed Ext. P7 order and that the activities being pursued by the appellant/petitioner were not liable to be penalized under any circumstances. The writ petitioner contended that all the transactions in the hotel were accounted; but the second respondent did not bother much to verify the factual particulars in this regard. Ext. P5 is stated as a ledger account in respect of the Swimming pool receipts whereas Ext. P6 bills are similar ledger accounts in respect of Ayurvedic treatment offered in the hotel. Besides contending that there was violation of principles of natural justice, in so far as no effective opportunity was given to the writ petitioner to contest the matter, it was also contended that major

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receipts obtained by the writ petitioner from the Swimming pool and also from the Ayurvedic hospital were the revenue from outsiders, which were clearly accounted in the books of accounts. A sum of more than Rs.19 lakhs is stated as the revenue generated from the Swimming pool; whereas collection from the Ayurvedic treatment centre was to the tune of Rs.15.85 lakhs. Taking note of the nature of contentions raised before the learned single Judge, particularly as to the alleged violation of the principles of natural justice, the learned Judge found it appropriate to call for the records. It was accordingly, that the relevant files were produced by the Government Pleader, which revealed the issuance of notice and the authorization given by the Managing Director of the company to the person concerned to represent the company in the proceedings. The observation made by the learned single Judge in paragraph 2 of the judgment would be worthwhile to be noted and hence the same is extracted below :

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“2. This Court having gone through the order and orders read in Ext. P7, did find a notice on 26.04.2016 issued to the petitioner. However, on the specific contention raised by the petitioner, this Court called for the files, which has been produced by the learned Government Pleader across the Bar. The notice dated 26.04.2016 posted the case to 12.05.2016. On 12.05.2016 the petitioner had applied before

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the authority, i.e., that is the Intelligence Officer Squad No. 4, Commercial Taxes Department, Kottayam, by a letter signed by one T.O. Abraham, Managing Director seeking three weeks time and the matter was adjourned. On 12.05.2016 adjournment was granted and a further notice was issued granting time up to 22.05.2016 which was accepted by the petitioner's representative, one Prasanna Chandran, personally, who affixed the seal of the petitioner signed in the notice. Again the Managing Director through the representative, letter dated 23.05.2016 authorized Sri Prasanna Chandran to appear before the officer. On 27.5.2016 the Intelligence Officer has issued another notice which has been acknowledged by the said Prasanna Chandran and the seal also affixed of M/s Windsor Castle. The said notice was under Section 17A based on the inspection under the Kerala Tax on Luxuries Act, 1976 and referred also to the reply dated 24.05.2016. Obviously the representative of the petitioner was heard on Ext. P7 as is indicated in Ext. P7 on 30.05.2016.”

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The learned counsel for the appellant points out that the basic contention of the appellant, that the swimming pool concerned was being utilized by outsiders, and that there were two separate pools for the inmates; by virtue of which the income generated from the former pool was not at all liable to be reckoned by the assessing

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authority; was not properly appreciated by the learned single Judge. The proceedings were finalized by the second respondent without any regard to the contentions raised and the position reflected from the books of accounts. Since all the receipts have been properly accounted, the appellant is entitled to have the benefit of the verdict passed by the Apex Court in Sree Krishna Electricals Vs. State of Tamil Nadu and another [(2009) 11 SCC 687 (paragraph 7) ] and under such circumstances, no penalty could have been mulcted on the appellant, submits the learned counsel for the appellant.

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The learned senior Government Pleader appearing on behalf of the Department submits that many an opportunity was given to the appellant to substantiate the facts and figures, which was not properly availed of. The proceedings were finalized by the second respondent based on the materials collected from the premises of the appellant. Despite granting several opportunities, the books of accounts were not produced in support of the contentions raised. It was accordingly, that the matter was finalized by the second respondent, leading to Ext. P7 order, which does not suffer from any infirmity, legal or factual, submits the learned Government Pleader.

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After hearing both the sides, this Court finds that the

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appellant cannot contend that the verdict passed by the learned single Judge has caused any prejudice to him, in so far as the question of assessment or imposition of penalty under the relevant provisions of the Statute is taken care of by the Statute itself; providing appropriate remedy by way of appeal before the appropriate authority. Going by the vary nature of the contentions, the truth can be unearthed only after going through the relevant documents and this exercise has necessarily to be pursued by the statutory authority. This Court cannot function as a 'fact finding agency' in this regard. If the appellant had produced the relevant books of accounts and if they were not looked into by the second respondent, it is always open for the appellant to challenge it by availing statutory remedy before the appellate authority. Same is the position, with regard to the question of law, if any, as well. In the above circumstances, this Court finds that interference declined by the learned single Judge, relegating the appellant to move the appellate authority, does not warrant any interference.

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We have noted the contentions raised by the appellant in the appeal, especially with regard to the applicability of the provisions and the instance to satisfy penalty with reference to use of pool and other

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amenities by outsiders and the income generated, which is sought to be treated as distinct from the revenue generated by providing such luxury to the inmates. We consciously avoid to express any opinion in this regard, as it may adversely affect the rights and interest of the parties concerned. When the appellant already stands relegated to move the appellate authority, it is always open for the appellant to raise all the contentions, both on the question of facts as well as law in the due course.

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Considering the persuasive submissions made by the learned counsel for the appellant to permit him to produce all the relevant records and to have an opportunity of hearing to substantiate the facts before the appellate authority, we find it appropriate to grant such permission. It is for the appellant to produce all the records/books of accounts before the appellate authority, if any such appeal is filed against Ext. P7 order. We find that Ext. P7 order was passed on 31.05.2016, but the fact remains that the appellant had approached this Court by filing writ petition before expiry of the statutory period for filing the appeal. As such, though the statutory period for appeal is now over, we find it appropriate to grant two weeks' time from the date of receipt of a copy of this judgment to the

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appellant for filing the appeal. On such event, the appeal shall be considered by the appellante authority as valid appeal, if it is otherwise in order. The proceedings shall be finalized by passing a speaking order on merits, after considering all the contentions, both on facts and in law, of course, after affording an opportunity to the appellant to produce books of accounts and hearing, to substantiate his case with regard to the issue involved.

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The Writ Appeal stands disposed of.

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sd/-

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P. R. RAMACHANDRA MENON, JUDGE

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sd/-

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ANIL K. NARENDRAN, JUDGE

kmd

/True copy/

P.A. to Judge

W.A. No. 1383 of 2016

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M/S St. Mary'S Hotels Pvt. Ltd. v. the Secretary to Government

Case brief

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M/S St. Mary'S Hotels Pvt. Ltd. v. the Secretary to Government

Case brief

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