IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 9TH MARCH 2010 / 18TH PHALGUNA 1931 WP(C).No. 24235 of 2009(Y) -------------------------- PETITIONER(S): --------------- K.V.R.AUTO CARS PVT.LTD., CALICUT ROAD, THIRURKKAD, PERINTHALMANNA, MALAPPURAM DISTRICT. REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER UNNI K.NAIR. BY ADV. SRI.V.R.VENKATAKRISHNAN, SENIOR ADVOCATE SRI.S.ANANTHAKRISHNAN SRI.N.K.SUBRAMANIAN RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, REVENUE (SPECIAL CELL) DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. TAHSILDAR, PERINTHALMANNA. 3. THE REVENUE DIVISIONAL OFFICER, PERINTHALMANNA. GOVERNMENT PLEADER SRI. MATHEW GEORGE VADAKKEL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08/03/2010, THE COURT ON 09/03/2010 DELIVERED THE FOLLOWING: WP(C).No. 24235 of 2009 2 EXHIBITS -------------- PETITIONER'S EXHIBITS ------------------------------ P1:- TRUE COPY OF G.O.(Rt) NO. 1465/09/RD DT.16.5.09 P2:- TRUE COPY OF ORDER NO.31647/SC2/09/Rd DT.4.8.09 P3:- TRUE COPY OF ORDER NO. K1-8624/07 DT.28.1.08 P4:- TRUE COPY OF ORDER NO. K1-8624/07 DT. 26.6.09 P5:- TRUE COPY OF LICENSE NO.16A/09-10 DT.NIL P6:- TRUE COPY OF PERMIT NO. 119/08 DT.6.8.08 P7:- TRUE COPY OF APPEAL DT.27.2.08 BEFORE RDO P8:- TRUE COPY OF RECEIPT OF PAYMENT DT.25.2.08 P9:- TRUE COPY OF SPECIFICATION REPORT OF AREA DETAILS P10:- TRUE COPY OF REVIEW PETITION DT.1.6.09 P11:- TRUE COPY OF AREA DETAILS OF WORKSHOP DT.11.8.09 //TRUE COPY// PA TO JUDGE (CR) P.R. RAMACHANDRA MENON, J. ......................................................................... WP (C) NO. 24235 OF 2009 ............................................... Dated this the 9th day of March, 2010 J U D G M E N T The petitioner is mainly challenging Exhibit P1 order, passed by the Government, rejecting the claim for exemption of the Building, under Section 3(1) (b) of the Kerala Building Tax Act. Eventhough, the petitioner filed Exhibit P10 Review Petition, the same did not turn to be fruitful and it was rejected vide Exhibit P2 which made the petitioner to approach this Court by filing this Writ Petition, challenging the steps taken by the respondents to realise the amount stated as due from the petitioner. 2. When the matter came for admission before this Court on 24-08-2009, taking note of the fact that the petitioner had already satisfied 1/4th of the liability, as borne by Exhibit P8 receipt, coercive steps were intercepted directing the respondents to file counter affidavit, if any. The first respondent has filed a counter WP (C) NO. 24235 OF 2009 2 affidavit, seeking to sustain the impugned proceedings, asserting that the building belonging to the petitioner does not qualify to get any exemption under Section 3 (1) (b) of the Act and hence that the impugned orders are not assailable under any circumstances. The petitioner has filed a reply affidavit rebutting the facts and figures stated in the counter affidavit, simultaneously asserting that, the specific case put forth by the petitioner in Exhibit P10 has not been properly considered as evident from Exhibit P2, whereby the rejection is stated as for a new reason that there was 'no manufacturing process' in the workshop situated in the building. 3. With regard to the sequence of events, the petitioner is a dealer of 'Maruthi Vehicles', engaged in sale and 'after sales service' effecting the necessary repairs and maintenance of the vehicles. In connection with the business, the petitioner constructed a building having a WP (C) NO. 24235 OF 2009 3 plinth area of 8997.86 m2 and necessary license as borne by Exhibit P5 was obtained from the local authority, for running the unit. Similarly, the petitioner also approached the Director of Factories and Boilers, who, after considering all the relevant particulars issued Exhibit P6 permit under the Factories Act, also referring to the area of the building as 8997.86m2 and also clearly mentioning against column No. 7 that, the 'manufacturing activity' was with regard to the repair and service of automobiles. 4. On the basis of the report stated as obtained from the Village authorities, the 2nd respondent, who is the Assessing Authority under the Kerala Building Tax Act, passed Exhibit P3 assessment order, where by a liability of about 16 lakhs was imposed upon the petitioner, observing that the total plinth area of the building as defined under Section 2(k) of the Act was nearly 11152.653m2 and since the area being used as 'workshop' was only 1566.57 m2, the WP (C) NO. 24235 OF 2009 4 remaining area was liable to be assessed accordingly. With regard to the extent of 'workshop' area, the matter was referred for decision of the Government, as provided under Section 3 (2) of the 'Act'. 5. Being aggrieved of Exhibit P3, the petitioner preferred Exhibit P7 Appeal before third respondent after satisfying the initial/statutory deposit of 25% as borne by Exhibit P8 receipt. It is stated that the Appeal is still pending before the 3rd respondent . 6. While so, the reference made by the second respondent was considered by first respondent/ Government and as per Exhibit P1, it was observed that the course pursued by the assessing authority, segregating the portions as 'workshop' and the remaining area, thereby causing a reference in respect of the smaller extent of 'workshop area', for considering the question of exemption was not correct or proper. It is stated, as per provisions of WP (C) NO. 24235 OF 2009 5 the statute, exemption is contemplated in respect of the whole building, if the same is 'principally being used' for the religious, charitable or educational purpose or for the other purposes, as specified. In the instant case, the dispute also relates to the measurement conducted by the PWD authorities, which is stated as made at the request of the petitioner during the pendency of the proceedings before the first respondent. As per the said measurement, the building was found having a total plinth area of 11156.213 m2; out of which, only a small portion of 1803.805 m2 constituted the workshop. This being the position, it was held that the building belonging to the petitioner could not be considered as being 'principally used' for the purpose of functioning the workshop. Accordingly, it was held that the whole building was not eligible for any exemption and the assessing authority was directed to take further steps to refix the liability. It was WP (C) NO. 24235 OF 2009 6 pursuant to Exhibit P1 that, the matter was reconsidered by the 2nd respondent, whereby the entire area was held as liable to be taxed and accordingly, the liability was re fixed vide Exhibit P4 order dated 26-06-2009 directing the petitioner to satisfy a sum of Rs.19,80,000/-, simultaneously, demanding the balance amount, after giving credit to the amount already deposited, vide Exhibit P8. 7. Sri. V.R. Venkatakrishnan, the learned Senior Counsel appearing for the petitioner vehemently challenges the course and proceedings pursued by the respondents in fixing the tax liability upon the petitioner. The establishment of the petitioner is very much a 'Factory' as borne by Exhibit P6 'Permit' issued by the Director of Factories and Boilers, wherein the area of the Factory building is shown as 8997.86 m2, also showing the 'manufacturing process' against column No.7 constituting 'repairing and service' of the automobiles. This being the WP (C) NO. 24235 OF 2009 7 position, the learned Senior Counsel submits that entire building belonging to the petitioner is liable to be exempted from the purview of tax and hence that Exhibit P1 order passed by the first respondent is liable to be set aside. Equal emphasis is also placed on the challenge against Exhibit P2 order passed by the first respondent, dismissing Exhibit P10 Review Petition, that too, placing reliance on a 'new ground' holding that there was 'no manufacturing act' at all in case of the workshop belonging to the petitioner. 8. Heard the Government Pleader as well, who sought to sustain the impugned proceedings, asserting that there is 'no manufacturing process' in the premises of the petitioner and that the 'workshop' is situated only in a very small portion of the building and hence that, the building is 'not principally being used for running the workshop'. 9. Learned Senior counsel for the petitioner submits that the measurement stated as effected by the PWD WP (C) NO. 24235 OF 2009 8 authorities pursuant to the instructions given by the first respondent /Government is not correct or sustainable. It is contended that no reference has been made as to the date on which the inspection was conducted. No notice was issued to the petitioner at any point of time in this regard and further that the premises of the petitioner are well guarded and always kept under lock and key, placing sufficient security, in view of the very nature of the business/operations involving the sale of 'brand new cars' & 'Company spares' and also in view of the value of the goods/spares stored in the premises. It is contended that, absolutely no inspection was conducted at any point of time and that the so called 'report' procured by first respondent was only on the basis of the materials reflected from the proceedings of the assessing authority and nothing more. It is also pointed out that, the various aspects projected by the petitioner in Exhibit P10 Review Petition have not been WP (C) NO. 24235 OF 2009 9 properly considered by the Government, while issuing Exhibit P2 order, dismissing the same. However, this Court does not find it necessary to go into such disputed questions of facts, for another reason as given below. 10. Section 3 (1) b of the 'Act' provides exemption from the tax liability, if the building is being 'principally used' for; i) Religious purpose, ii) Charitable purpose, iii) Educational purpose, iv) Workshop or v) Factory 11. Undisputedly the petitioner is running a 'workshop' in the premises. It is a 'factory' as well, by virtue of the very nature of the establishment, and also in the light of Exhibit P6 factory license issued by the Director of Factories and Boilers and as such, the matter has to be examined whether exemption will be available, if it a WP (C) NO. 24235 OF 2009 10 Factory. A 'Factory' is defined under Section 2 (m)of the Factories Act, which is extracted below. Section 2(m) “factory means any premises including the precincts thereof- (i)whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or (ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or eating place. 12. Obviously the definition of the term 'Factory' refers to a 'manufacturing process'. Now the question is whether WP (C) NO. 24235 OF 2009 11 the petitioner is engaged in any 'manufacturing process' in any part of the building, so as to make it 'Factory'. The term 'manufacturing process' is defined under Section 2 (k) of the Factories Act, which is extracted below: “manufacturing process” means any process for- (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substance; or (iii) generating, transforming or transmitting power; or (iv) composing types for printing by letter press, lithography, photogravure or other similar process or book binding or (v) constructing, reconstructing, repairing, reflecting, finishing or breading up ships or vessels; or (vi) preserving or storing any article in clod storage. 13. From the above, it is very much clear that Section WP (C) NO. 24235 OF 2009 12 2 k (i) clearly contemplates making, altering, repairing, ornamenting, finishing, packing, oiling, washing, clearing, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use or sale, transport, delivery or disposal. There is no case for the respondents that the petitioner is not engaged in either of the above activities. Since Section 3(1)b of the Kerala Building Tax Act, not only refers to 'workshop' for providing exemption, but also to a 'Factory', the crucial question to be considered is whether the petitioner's establishment comes within the definition of 'Factory', so as to get the exemption under Section 3 (1) b of the Act. This vital aspect has not been considered anywhere, by the first respondent/ Government while passing Exhibit P 1 order, rejecting the claim for exemption, stating that the building is not being principally used as 'workshop' and also while rejecting Exhibit P10 Review Petition, as per Exhibit P2 order, WP (C) NO. 24235 OF 2009 13 stating that, there is 'no manufacturing exercise'. This Court finds that, the matter has not been dealt with by the first respondent/Government in the proper perspective, so as to give effect to the purpose of exemption as provided under Section 3 (1) b of the Act. The purpose of exemption is always with a specific intent. The liability is very much there, from which the person concerned or the instance, as the case may be, is given 'exemption' on satisfying the parameters prescribed. The necessity to bring about more and more industrialization and such other relevant aspect s might be the reason, which weighed with the mind of the legislators so as to include a 'Factory' as well, within the purview of Section 3 (1) (b) of the statute. Since the above crucial aspect has not been considered by the Government, this Court finds that the matter requires to be reconsidered. 14. In the above facts and circumstances, Exhibits P1 WP (C) NO. 24235 OF 2009 14 and P2 orders are set aside and the matter is remanded to the first respondent for reconsideration. The first respondent shall reconsider the matter in the light of the above observations and pass appropriate orders thereon, of course after giving an opportunity of hearing to the petitioner, which exercise shall be pursued and finalized as expeditiously as possible, at any rate within 4 months from the date of receipt of a copy of this judgment. It is made clear that till the matter is finalized as above, all further coercive steps for realization of the balance amount stated as due from the petitioner shall be kept in abeyance. Writ petition is allowed to the above extent. No cost. P.R. RAMACHANDRA MENON, JUDGE. rkc