Quashed

M/S. Manuel Sons Hotels (P) Limited v. the Asssitant Commissioner

Kerala HC20 Jan 2016WP(C)/4001/2013

Case brief

AI extract

What is this about?

This writ petition challenged penalty orders imposed for delayed payment of admitted luxury tax under the Kerala Tax on Luxuries Act while a return was filed. The Court held that Section 6(3) exclusively governs penalty for such defaults, rendering Section 17A inapplicable. Consequently, the Court quashed the penalty orders and directed a fresh hearing.

What did the court decide?

Exts.P1, P2, and P3 orders quashed. First respondent directed to consider the matter afresh under Section 6(3) within three months after hearing the petitioner.

M/S. Manuel Sons Hotels (P) Limited Vs the Asssitant… — Banking and Recovery | 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 A.K.JAYASANKARAN NAMBIAR

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WEDNESDAY, THE 20TH DAY OF JANUARY 2016/30TH POUSHA, 1937

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WP(C).No. 4001 of 2013 (A)

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PETITIONER(S):

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M/S. MANUEL SONS HOTELS (P) LIMITED, G.H. ROAD, CALICUT, REP. BY MANAGING DIRECTOR P.M.ANTONY.

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BY ADVS.SRI.P.RAGHUNATH

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SRI.PREMJIT NAGENDRAN

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RESPONDENT(S):

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1. THE ASSSITANT COMMISSIONER,

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COM. TAXES, SPECIAL CIRCLE I, SALES TAX COMPLEX, ERANCHIPALAM, KOZHIKODE-673 006.

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2. DEPUTY COMMISSIONER (APPEALS),

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COM. TAXES, ERANCHIPALAM, KOZHIKODE-673 006.

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3. KERALA SALES TAX APPELLATE TRIBUNAL (ADDL. BENCH), CHEROOTTY ROAD, KOZHIKODE-673 002.

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BY GOVERNMENT PLEADER SRI.LIJU V. STEPHEN.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20-01-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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rvs.

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WP(C).No. 4001 of 2013 (A)

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APPENDIX

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PETITIONER(S)' EXHIBITS :

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EXT.P1. TRUE COPY OF PENALTY ORDER DATED 25/05/2009 U/S.17A. EXT.P2. TRUE COPY OF ORDER IN STA NO.10/10 DATED 30/03/2012 PASSED BY DEPUTY COMMISSIONER (APPEALS) EXT.P3. TRUE COPY OF ORDER DATED 24/07/2012 IN TA 22/12 PASSED BY KERALA SALES TAX APP. TRIBUNAL.

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RESPONDENT(S)' EXHIBITS:

NIL.

/TRUE COPY/

P.A. TO JUDGE

rvs.

A.K.JAYASANKARAN NAMBIAR, J.

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W.P.(C) No.4001 of 2013

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- - - - Dated this the 20^th day of January 2016

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JUDGMENT

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The challenge in the writ petition is against Ext.P3 order of the 3^rd respondent tribunal, in an appeal preferred against an order of penalty imposed on the petitioner, for the period April 2008 to January 2009, under the Kerala Tax on Luxuries Act, 1976. The facts in the writ petition would indicate that, the petitioner runs a Boarding house and Restaurant, by name, 'Hotel Malabar Palace', at Kozhikode. For the period from April 2008 to January 2009, the petitioner had filed returns under the Kerala Tax on Luxuries Act, wherein, he admitted the liability of Rs.20,37,540/-. Out of the said amount, there was an amount of Rs.6,58,613/-, that had been paid by the petitioner during the course of the year and the balance amount outstanding to be paid to the respondents was, Rs.13,78,927/-. It is not in dispute that along with the returns the petitioner did not pay the said amount, which was the admitted tax due. It is also apparent that when the assessment was complete later on, there was no change or addition made to the returns submitted by the petitioner, and the assessment was completed accepting the returns filed by the petitioner. The respondents

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however initiated penalty proceedings under Section 17A of the Kerala Tax on Luxuries Act, citing the delayed payment of the admitted tax dues by the petitioner. It was noted that the petitioner had not paid the admitted tax at the time of issuance of the notice under Section 17A of the Act. Although the petitioner preferred a detailed reply, explaining the circumstances under which he could not pay the admitted tax within time, the adjudicating authority proceeded to confirm the demand of penalty equal to twice the tax due from the petitioner by Ext.P1 order dated 25.05.2009.

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Against Ext.P1 order, the petitioner preferred an appeal before the first appellate authority. During the pendency of the appeal before the appellate authority, the petitioner paid the admitted tax together with penal interest that was due, which fact is acknowledged by the appellate authority in Ext.P2 order. By Ext.P2 order, the appellate authority took the view that the factual circumstances in the case of the petitioner did not necessitate the imposition of the maximum penalty of Rs.27,57,854/- and consequently, reduced the penalty to a sum equal to the tax that was sought to be evaded namely, Rs.13,78,927/-. The petitioner, thereafter, preferred a further appeal before the 3^rd respondent tribunal. By Ext.P3 order, the appeal of the petitioner was dismissed

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W.P.(c).No.4001 of 2013

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: 3 :

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by the 3^rd respondent tribunal upholding the finding of the first appellate authority. In the writ petition, the petitioner impugns Exts.P1, P2 and P3 orders of the respondents.

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I have heard the learned counsel for the petitioner and the learned Government Pleader for the respondents.

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The learned counsel for the petitioner would submit that the imposition of penalty in the instant case was for a contravention of the provisions of Rule 3(5) of the Kerala Tax on Luxuries Rules, which mandates that every proprietor should, along with his monthly returns, pay the tax due to the Government. According to the learned counsel for the petitioner, a breach of the provisions of Rule 3 would attract the provisions of Section 6(3) of the Kerala Tax on Luxuries Act, which provides for the levy of the penalty, equal to a sum not exceeding the amount of luxury tax payable under the Act, in circumstances, where the luxury tax is not paid within the prescribed period. It is pointed out that, by a proviso to the said provision, no penalty can be levied unless the proprietor has been given a reasonable opportunity of being heard. It is further contended that in view of the express provisions of Section 6(3) of the Act, there was no justification for the respondents to proceed against the petitioner

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W.P.(c).No.4001 of 2013

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under Section 17A of the Kerala Tax on Luxuries Act and in particular clause 'd' thereof, which envisaged the imposition of penalty if the assessing authority was satisfied that any person had acted in contravention of the provisions of the Act or Rules for the contravention of which no express provision or payment of penalty or punishment is made by the Act. It is the stand of the learned counsel for the petitioner that in so far as the situation of belated payment of luxury tax was one, that was contemplated under Section 6(3) of the Act, the same situation could not attract the penal provisions under Section 17A(d), since the latter provision expressly excluded those contraventions, for which an express provision with regard to payment of penalty or punishment had already been made under the Act. Per contra, the learned Government Pleader would submit that Section 6(3) of the Act, and Section 17A(d) of the Act operate in different areas. It is his contention that the obligation of the petitioner to pay tax is traceable to Rule 3 of the Rules and he is obliged to pay tax along with the monthly returns. It is pointed out, therefore, that if there is a willful omission to pay tax along with the return, then the aspect of mens rea in the non-payment of tax is dealt with only under Section 17A and not under Section 6(3) of the Act. He therefore, justifies Ext.P1 to P3 orders on the said contention. It is also contended, in the alternate, that the breach by the petitioner of

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the provisions of Rule 3 would also attract the provisions of Section 17A (a)(ii) of the Act.

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On a consideration of the facts and circumstances of the case and the submissions made across the Bar, I find force in the contention of learned counsel for the petitioner that the provision that ought to have been invoked by the respondents in the instant case is Section 6(3) of the Kerala Tax on Luxuries Act. Rule 3 of the Kerala Tax on Luxuries Rules and in particular Rule 3(5) mandates that every proprietor, who is liable to pay the tax under the Act shall submit a monthly return on or before the 10^th day of every month to the assessing authority, showing the transactions relating to the preceding month, together with a receipt of treasury challan, crossed cheque or crossed demand draft in favour of the assessing authority for the amount of tax due. The said provision therefore makes it mandatory for the assessees under the Act to file a return and submit the same together with proof of payment of the tax due as per the return. As per the provisions of Section 6(3) of the Act, If the Luxury Tax that is payable in not paid within the prescribed period, the assessing authority may levy a penalty equal to a sum, not exceeding the amount of luxury tax payable under the Act. There is therefore express provision for dealing with the situation, where, the assessee

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defaults in paying the admitted tax along with the return as mandated under Section 3(5) of Kerala Tax on Luxuries Rules. The issue that then arises for consideration is whether, when there is an express provision to deal with a breach of the provisions of Rule 3, the provisions of Section 17A of the Act can be invoked. The learned Government Pleader would submit that the provisions of Section 17A (a)(2) would be attracted in that the non-payment of tax by the petitioner along with the return would tantamount to the failure to submit a return as required by the provisions of the Act or Rules. I am afraid, I cannot accept the said contention of the learned Government Pleader, since it is not in dispute in the instant case the petitioner had filed a return, containing the particulars which were mandated therein, and the said return was accepted by the assessing authority for the purposes of determining the tax liability of the petitioner. No doubt the said return was not accompanied by proof of payment of tax, but this does not take away from the fact that the petitioner had submitted the return as required under the provisions of the Act. The other relevant provision of Section 17A is Section 17A (d), which deals with the imposition of penalty if an assessee has acted in contravention of the provisions of the Act or Rules for contravention of which, no express provision or payment of penalty or punishment is made under the Act. This latter provision would

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obviously have no application to the case of the petitioner, since, as already noted above, there was an express provision for payment of penalty in cases where, the petitioner had breached the provisions of Rule 3 of the Kerala Tax on Luxuries Rules. I am therefore of the view that the liability of the petitioner to a penalty under the Act, ought to have been examined by the authorities concerned, in the light of Section 6(3) of the Kerala Tax on Luxuries Act and not in the light of Section 17A of the said Act. Inasmuch as none of the authorities below have examined the liability of the petitioner for penalty under Section 6(3) of the Act, I quash Exts.P1, P2 and P3 orders and direct the 1^st respondent to consider the matter afresh in the light of the observations in this judgment. The 1^st respondent shall pass fresh orders as directed within a period of three months from the date of receipt of a copy of this judgment, after hearing the petitioner.

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The writ petition is disposed as above.

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Sd/-

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A.K.JAYASANKARAN NAMBIAR JUDGE

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sm/

M/S. Manuel Sons Hotels (P) Limited v. the Asssitant Commissioner

Case brief

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M/S. Manuel Sons Hotels (P) Limited v. the Asssitant Commissioner

Case brief

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