Kerala High Court
Amala Cancer Hospital Society vs The State Tax Officer on 9 March, 2020
Author: Amit Rawal
Bench: Amit Rawal
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE AMIT RAWAL
MONDAY, THE 09TH DAY OF MARCH 2020 / 19TH PHALGUNA, 1941
WP(C).No.4150 OF 2020(P)
PETITIONER:
AMALA CANCER HOSPITAL SOCIETY
AMALA NAGAR, TRISSUR - 680 555, KERALA STATE,
REPRESENTED BY FINANCE MANAGER SRI BABY SCARIA.
BY ADV. SRI.C.JOSEPH ANTONY
RESPONDENTS:
1 THE STATE TAX OFFICER
OFFICE OF THE STATE TAX OFFICER,
STATE GOODS AND SERVICE TAX DEPARTMENT,
3RD CIRCLE, GST COMPLEX,
POOTHOLE, TRISSUR - 680 004.
2 THE DEPUTY COMMISSIONER (APPEALS)
COMMERCIAL TAX DEPARTMENT, COMMERCIAL TAX COMPLEX,
POOTHOLE, TRISSUR - 680 004.
3 STATE OF KERALA
REPRESENTED BY SECRETARY (TAXES),
GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM - 695 001.
GP DR THUSHARA JAMES
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
09.03.2020, ALONG WITH WP(C).4998/2020(Y), THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
WP(C).Nos.4150/2020 & 4998/2020
2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE AMIT RAWAL
MONDAY, THE 02ND DAY OF MARCH 2020 / 12TH PHALGUNA, 1941
WP(C).No.4998 OF 2020(Y)
PETITIONER:
AMALA CANCER HOSPITAL SOCIETY
AMALA NAGAR,
TRISSUR 680 555,
KERALA,
REPRESENTED BY ITS FINANCE MANGER SRI BABY
SCARIA.
BY ADVS.
SRI.C.JOSEPH ANTONY
SHRI. JOHN MANJOORAN
RESPONDENTS:
1 STATE TAX OFFICER(ENQUIRY)
OFFICE OF THE DEPUTY COMMISSIONER STATE TAXES,
STE GST DEPARTMENT,
KERALA,
TRISSUR 680 004.
2 THE STATE TAX OFFCIER,
3RD CIRCLE THRISSUR,
OFFICE OF THE STATE TAX OFFICER,
STATE GOODS AND SERVICE TAX DEPARTMENT,
3RD CIRCLE GST COMPLEX,
POONTHOLE,
TRISSUR 680 004.
3 THE DEPUTY COMMISSIONER
(APPEALS),
COMMERCIAL TAX DEPARTMENT,
COMMERCIAL TAX COMPLEX,
POONTHOLE,
TRISSUR 680 004.
WP(C).Nos.4150/2020 & 4998/2020
3
4 THE STATE OF KERALA,
REPRESENTED BY SECRETARY (TAXES),
GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM 695 001.
DR THUSHARA JAMES GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 09.03.2020, ALONG WITH WP(C).4150/2020(P), THE COURT ON
THE SAME DAY DELIVERED THE FOLLOWING:
WP(C).Nos.4150/2020 & 4998/2020
4
JUDGMENT
By this judgment, this Court disposed of two writ petitions; W.P.(C).No.4998/2020 seeking quashing of penalty orders under Section 47 of the erstwhile Kerala Value Added Tax Act, 2003 (hereinafter referred to as '2003 Act' for short) Exts.P6 to P16 and all further proceedings subsequent thereto and W.P. (C).No.4150/2020, claiming mandamus for deferring the assessment proceedings under Section 25 of the 2003 Act, before finalisation of the proceedings under Section 47(b). The facts and question of law to be decided, are, identical.
2. The petitioner, a Charitable Society running a cancer hospital under the name and style M/s Amala Cancer Hospital Society, Amala Nagar, Thrissur, is the holder of a registration under Section 12AA of the Income Tax Act 1961 for providing the inhouse medical facility to the various patients besides other facilities. They are also bringing the Liquid Medical Oxygen, relevant for consideration in this case, accompanied by Form 8F and 16, as required under the Kerala Value Added Tax Rules, 2005, hereinafter called '2005 Rules'. 2003 Act prohibits the WP(C).Nos.4150/2020 & 4998/2020 5 person to transport within the state across or beyond notified area any consignment of goods exceeding such quantity and value as may be prescribed, by any vehicle or vessel unless he is in possession of either a Tax invoice or delivery note or certificate of ownership.
3. Mr.Raju Joseph, learned Senior Counsel, appearing on behalf of the petitioner, in support of the averments in this writ petitions, submits the relevant assessment year in the instant case is 2014-15, whereby eleven consignments spanning from March 2014 were intercepted by the officials finding the consignee to be not registered under the 2003 Act, and on submission of the simple bond, released the Liquid Medical Oxygen and thereafter initiated the proceedings of penalty under Section 47 of the 2003 Act. It is next contended that the penalty proceedings are not permissible in law for the petitioner has been issued certificates of exemption of various financial years under Section 18(C) of the 2003 Act. The same had been handed over to this court during the course of hearing and ordered to be paginated and stitched at the back of the paper WP(C).Nos.4150/2020 & 4998/2020 6 book of W.P.(C).No.4998/2020. The aforementioned registration also reflects the holder of registration under Section 12AA of the Income Tax Act. The matter in controversy with regard to the exemption from payment of the Value Added Tax regarding the facilities provided to the inter-hospitals ie, with regard to medical equipments etc., including the Liquid Medical Oxygen is no longer res integra in view of the judgment rendered by two Division Benches of Hon'ble Punajab-Hariyana High Courts in M/s Fortis Healthcare Limited And V. State Of Punjab And Others on on 23.01.2015 and M/s Hometrail Estate Pvt.Ltd V. The State Of Punjab & Anr on 27.08.2018 and Full Bench of this Court in Sanjose Parish Hospital v. Commercial Tax Officer [2019 (1) KLT 336].
4. In order to buttress his arguments, the learned counsel also referred to the last proviso to Section 18(C), whereby the charitable hospitals are not mandatorily required to obtain registration and file returns under this Act. Liquid Medical Oxygen has been provided to the indoor patients during the course of treatment and purchase of the same from a dealer WP(C).Nos.4150/2020 & 4998/2020 7 outside the state and not registered, cannot be a ground of interception or initiation of penalty proceedings as the certificates of the exemption are still holding the field.
5. The purpose of filing the W.P.(C).No.4150/2020 was to prevent prevailing of any prejudice in the assessment proceedings till the finalisation of penalty proceedings under Section 47 and though this Court had granted interim injunction, but in the meantime, the penalty orders had already been passed, but were not communicated to the petitioner. I am, therefore, of the view that the cause of action accrued in W.P. (C).No.4150/2020 in view of challenge to the penalty orders, no longer survives.
6. It was next contended that the fiction of deem sale would only apply to cases where the amount of Liquid Medical Oxygen as offered to the patients would not fall in the package. There is no separate sale of Liquid Medical Oxygen by issuing any bills towards the patients. Thus the part of the provisions of Article 366(29-A) of the Constitution of India dealing with the severance of the service would not come into play. There is no WP(C).Nos.4150/2020 & 4998/2020 8 interim stay vis-a-vis the judgment of Full Bench of this Court in Sanjose Parish Hospital v. Commercial Tax Officer in the pending SLP. Thus the medical procedures under services offered by the petitioner are in service which would not be exegible to Value Added Tax.
7. Per contra, the learned Government Pleader placed particular reliance on provisions of clause B of 18(C) introduced with effect from 01.04.2014 ie., the condition as envisaged in sub clause-I, providing that for availing the exemption, the purchase of the equipment or medicines has to be from the dealers registered under this Act. She submits that the consignors of the petitioner hospital is not registered under the Kerala Value Added Tax Act. The vehicle was intercepted and penalty were initiated and there is no embargo for the revenue to continue the escape assessment proceedings under Section 25 and after its culmination, by invoking section 67 as and when eventuality arises. During the course of the argument, the registration certificate issued under Section 18(C) purportedly in view of the fact that the petitioner has been granted exemption under Section 12A of the Income Tax Act. The penalty order also WP(C).Nos.4150/2020 & 4998/2020 9 reveals there is likelyhood of suspected sale of the Liquid Medical Oxygen other than to the inhouse patients and therefore it is too farfetched or premature to entertain the writ petition vis-a-vis the penalty order as the petitioner has a remedy to file appeal under Section 55 of the 2003 act. The few interceptions were prior to introduction of section 18(C) with effect from 01.04.2014, but most of the consignors were post thereof.
8. In rebuttal, Mr.Raju Joseph submits that in the case of the petitioner only an assessment order was served with a penalty order under Section 47 (6) of the 2003 Act, in respect of one of the consignments pertaining to the same assessment year 2014-15, appeal was preferred before the Deputy Commissioner of Appeals, Commercial Tax, Thrissur. Vide order dated 26.06.2017, received by the petitioner on 26.09.2017, handed over during the course of hearing order of penalty has been set aside by relying upon the ratio culled out in the judgment of Full Bench of this Court and as well as the Punjab and Hariyana High courts and there is no further appeal by the revenue. Reliance has also been laid to another order ie. KVATA Nos. 124 of 2016. Once the proviso for charitable hospital do not WP(C).Nos.4150/2020 & 4998/2020 10 necessarily require for obtaining registration on filing returns the alleged compliance of clause B of Section 18(C) would be rendered otiose, as it only pertains to exemption with regard to the purchase of only medicines or with regard to the stores or consumables. The aforementioned provisions have also been referred to the judgment of Full Bench of have been negated and thus urge this Court for quashing of the penalty order.
9. Having heard both the parties and appraised the paper book and the judgment cited at bar I am the view of that, it is a fit case where the penalty order Ext.P6 to P16 are not sustainable on account of following reasons;
10. The issuance of a certificate under Section 12AA of the Income Tax Act for the relevant assessment year issued by the Deputy Commissioner of Commercial Taxes under the Kerala Value Added Tax Act 2003 are not in dispute, much less the orders dated 26.02.2017 passed in kerala Value Added Tax Appeal Nos.123/2016 and 124/2016 of Deputy Commissioner of Appeals, Commercial Taxes. Operative part of the order reads as under:
"I have examined the contentions raised by the appellant WP(C).Nos.4150/2020 & 4998/2020 11 along with the documents available in the records. The sole issue for consideration in this appeal is whether there is any attempt of evasion of tax in this case?. Here in this case, the Intercepting Officer (Intelligence Inspector) collected security deposit from the appellant for the reason that the appellant is not a registered dealer under KVAT Act 2003. At the Enquiry stage, the appellant had failed to produce the certificate issued by the Commissioner of Commercial Taxes to exempt them from taking registration under KVAT Act. In the absence of evidence, the Designated Enquiry Officer converted the security deposit of Rs.2050/- collected from the appellant in to penalty. On perusal of the penalty order passed by the Intelligence Officer, it can be seen that the Designated Enquiry Officer has not established any attempt of evasion of tax in this case. Now the appellant has produced copy of Certificate dated 29.05.2015 issued by the Commissioner of commercial Taxes to exempt them from taking registration under KVAT Act 2003. Considering the above facts and the copy of certificate issued by the Commissioner of Commercial Taxes, I am of the view that the ere was no attempt evasion of tax is committed by the appellant in this case.
7. In the result, the appeal is allowed. Order accordingly."
11. In M/s Fortis Healthcare Limited (supra), the WP(C).Nos.4150/2020 & 4998/2020 12 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. No doubt the SLP Nos.21097/2019 and 21102/2019 against the Full Bench of the Kerala High court in Sanjose Parish Hospital is pending adjudication, but there is no interim order. Revenue collecting authorities consisting of Assessing Officers, interception staffs who are assigned to deal with the penalty proceedings cannot be permitted to adopt a pick and choose policy. The judgments referred to above, have to apply WP(C).Nos.4150/2020 & 4998/2020 13 in letter and spirit and not wishfully. The KVATA Orders Nos.123/16 and 124/16, whereby the demand raised by the Assessing Officer has been concededly set aside in appeal and obtained finality in the absence of any further challenge.
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. Therefore, the penalty notice/order is quashed and W.P.C.No.4998/2020 is allowed. In view of the fact that penalty orders are quashed, the relief sought in the W.P.(C).No.4150 filed no longer subsists and it is dismissed as infructuous.
Sd/-
AMIT RAWAL
nak JUDGE
WP(C).Nos.4150/2020 & 4998/2020
14
APPENDIX OF WP(C) 4150/2020
PETITIONER'S/S EXHIBITS:
EXHIBIT P1 TRUE COPY OF THE ORDER OF THIS HONOURABLE
COURT PASSED IN WPC 5296 OF 2014 DATED
21.5.2014.
EXHIBIT P2 TRUE COPY OF THE JUDGMENT IN WP(C) 11476
OF 2019 DATED 3.9.2019.
EXHIBIT P3 TRUE COPY OF THE NOTICE UNDER SECTION 95
OF THE KVAT ACT 2003 ISSUED BY THE 1ST
RESPONDENT DATED 22.8.2019.
EXHIBIT P4 TRUE COPY OF THE REPLY FILED BY THE
PETITIONER BEFORE THE 1ST RESPONDENT
DATED 18.9.2019.
EXHIBIT P5 TRUE COPY OF MEMORANDUM OF APPEAL AGAINST
THE ORDER OF PENALTY R10 (E1879-2013-14) DATED 5.2.2020.
EXHIBIT P6 TRUE COPY OF THE NOTICE UNDER SECTION 95 READ WITH SECTION 25(1) AND 25AA OF THE KVAT ACT 2003 ISSUED BY THE 1ST RESPONDENT DATED 23.1.2020.
WP(C).Nos.4150/2020 & 4998/2020 15 APPENDIX OF WP(C) 4998/2020 PETITIONER'S/S EXHIBITS:
EXHIBIT P1 TRUE COPIES OF THE INTERIM ORDER DATED 21.05.2014 IN WPC NO. 5296 OF 2014.
EXHIBIT P2 TRUE COPY OF THE JUDGMENT IN WPC 11476/2019 DATED 03.09.2019.
EXHIBIT P3 TRUE COPY OF THE INTERIM ORDER IN WPC NO.
4150/2020 DATED 13.02.2020 EXHIBIT P4 TRUE COPY OF THE NOTICE NO. OR 37/4/14-15 ISSUED BY THE 2ND RESPONDENT DATED 02.12.2019.
EXHIBIT P5 TRUE COPY OF THE COMMON REPLY GIVEN BY THE PETITIONER TO EXT. P4 AND SIMILAR NOTICES DATED 19.12.2019.
EXHIBIT P6 TRUE COPY OF THE ORDER NO. R10 (E) 112/14-15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P7 TRUE COPY OF THE ORDER NO. R10(E) 137/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P8 TRUE COPY OF THE ORDER NO. R10(E) 364/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P9 TRUE COPY OF THE ORDER NO. R10(E) 516/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P10 TRUE COPY OF THE ORDER NO. R10(E) 515/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P11 TRUE COPY OF THE ORDER NO. R10(E) 517/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P12 TRUE COPY OF THE ORDER NO. R10(E) 514/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
WP(C).Nos.4150/2020 & 4998/2020 16 EXHIBIT P13 TRUE COPY OF THE ORDER NO. R10(E) 699/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P14 TRUE COPY OF THE ORDER NO. R10(E) 844/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P15 TRUE COPY OF THE ORDER NO. R10(E) 878/14- 15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
EXHIBIT P16 TRUE COPY OF THE ORDER NO. R10(E) 1130/14-15 DATED 18.01.2020 PASSED BY THE 2ND RESPONDENT.
//TRUE COPY// P.A TO JUDGE