IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 16TH NOVEMBER 2009 / 25TH KARTHIKA 1931 WP(C).No. 32695 of 2009(F) --------------------------------------- PETITIONER(S): ------------------------- RANI MATHA ARCADE, (YUVARANI RESIDENCY), M.G.ROAD, ERNAKULAM, (REPRESENTED BY THE MANAGING PARTNER M.J.ELIZABETH). BY ADVS.MR.VIJAYAN. K.U. MR.K.N.SREEKUMARAN RESPONDENT(S): ------------------------ 1. THE INTELLIGENCE OFFICER (IB) ERNAKULAM, O/O THE DEPUTY COMMISSIONER (INT), DEPARTMENT OF COMMERCIAL TAXES, EDAPPALLY, KOCHI - 24. 2. INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, ERNAKULAM AT KAKKANAD, KOCHI - 30. 3. THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, ERNAKULAM. 4. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM BY GOVT. PLEADER MR.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16/11/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss C.K.ABDUL REHIM, J. ------------------------------ W.P.(C).No.32695 OF 2009 ------------------------------ Dated this the 16th day of November, 2009 J U D G M E N T ---------------------- 1. Challenge in this writ petition is against Ext.P14 and P15 orders issued by the 3rd respondent appellate authority, on the interim applications of stay filed along with Ext.P12 and P13 appeals. Penalty was imposed under Section 67(1) of the Kerala Value Added Tax Act, 2003 (KVAT Act) alleging non-payment of VAT due for the years 2007-08 and 2008-09. The petitioner is running a Three-Star Bar attached hotel and the dispute pertains to tax due on the receipts from the Banquet Hall. According to the petitioner, he is liable to pay service tax under the provisions of the Service Tax Act to the Central Government, since he is coming within the definition of “mandap keeper” under the provisions of the said Act. Through the notification issued by the Central Government an abatement of 40% of the total receipts is permitted. Therefore the petitioner is entitled to bifurcate the receipts from the Banquet Hall, which includes service charges as well as charges on food supplied. Hence bifurcation of VAT at 60% and the service tax at 40% is effected and payments were made accordingly. But the authority took the view that the tax W.P.(C).32695/09- 2 liability under the KVAT Act as well as Payment Service Tax are different and mutually exclusive, and that the petitioner is liable to pay tax under the KVAT Act with respect to the sale of cooked food and Beverages. Allegation is that the petitioner has not remitted VAT with respect to full value of receipts in the Banquet Halls and that no deduction with respect to receipts as bifurcated by the petitioner is allowable. Therefore alleging that the petitioner had collected only lesser amount of tax with an intention to evade payment of tax legitimately due to the Government and he is keeping untrue and incorrect accounts, penalty was imposed under Section 67(1) of the KVAT Act. 2. While considering the stay petitions filed along with the appeals, the 2nd respondent had adverted to the contentions. It is observed that the question as to whether turnover of cooked food served in Banquet Hall can be included in the service charges and if so whether the service charges are taxable or not need to be examined. But the appellate authority found that all these matters need be considered meticulously at the time of disposal of the appeals. It is further found that the issue raised in the appeals is a debatable point and an advertence to the complete books of accounts and verification of the records is necessary to arrive at a conclusion. Therefore eventhough it is found that the appellant had established a prima facie case the W.P.(C).32695/09- 3 appellate authority observed that unconditional stay cannot be granted since detailed verification is necessary. Hence while granting stay the 2nd respondent had insisted the petitioner to make payment of the 40% of the amount covered by the order imposing penalty. 3. According to the petitioner the question raised is purely legal in nature and the petitioner has got support of provisions contained in the central statute as well as the notification and circulars issued by the Central Government in this regard. Therefore it is contended that the matter need elaborate consideration and the insistence for payment of 40% at this stage is causing severe hardships and prejudices to the petitioner. It is further pointed out that the impugned orders are one imposing penalty, for which the petitioner will be liable only if it is found that the petitioner had committed some willful defaults. 4. Heard, counsel for the petitioner and the Government Pleader for the respondents. Having considered facts and circumstances that the disputed question of law as well as facts raised in the appeal, I am of the opinion that the 2nd respondent can be directed to consider and dispose of the appeals itself on an early date. 5. Under the above circumstances the interim orders W.P.(C).32695/09- 4 issued by the 2nd respondent as evidenced by Ext.P14 and P15 are hereby quashed. The 2nd respondent is directed to consider and pass orders on Ext.P12 and P13 appeals as early as possible, after affording an opportunity of hearing to the petitioner, at any rate within 2 months from the date of receipt of a copy of this judgment. 6. The respondents are directed to keep in abeyance realisation of the amounts covered under Ext.P10 and P11 till the disposal of the appeals as directed above, on condition of the petitioner furnishing security for the amounts covered under those orders. C.K.ABDUL REHIM, JUDGE. okb