Correctness and sustainability of the condition imposed by the Appellate Authority, while passing Ext.P7 interim order of stay, during pendency of the appeal, made the petitioner to approach this Court by filing the writ petition.
2. The sequence of events reveals that, the lapse on the part of the petitioner in not paying the tax in respect of the consumables supplied to the patients in the Hospital belonging to the petitioner, came to the notice of the authorities concerned, who sought to proceed against the petitioner. The offence in this regard was sought to be compounded by invoking the power and procedure under Section 74 of the KVAT Act. The extent of consumables supplied was segregated from the balance and the compounding fee was remitted by the petitioner, as borne by Ext.P1 order dated 03.08.2013.
3. In the course of further proceedings, the petitioner was served with Ext.P2 notice of reassessment under Section 25(1) of the KVAT Act, on receipt of which, the petitioner submitted Ext.P3 statement of objections. After considering the same, Ext.P4 assessment order was passed, fixing huge liability upon the shoulders of the petitioner. This made the petitioner to have it challenged by way of appeal before the 2nd respondent. After considering the I.A. for stay, the Appellate Authority passed Ext.P7 order dated 14.10.2014, directing the petitioner to satisfy 30% of the disputed figure, so as to avail the benefit of interim stay during pendency of the appeal. This in turn is under challenge before this Court.
4. Heard the learned counsel for the petitioner as well as the learned Government Pleader appearing for the respondents.
5. The learned counsel appearing for the petitioner submits with reference to the specific case projected from the part of the petitioner in the writ petition and also the proceedings before the Departmental Authorities, that the case projected right from the beginning, before the Assessing Authority was never considered properly. Paragraph 5 of the Statement of objections, filed in this regard reads as follows:
“You have proposed to make a further addition of an amount of Rs.6,03,26,815.46 to the turnover conceded by us on the ground that we had made a purchase of consumables and general items for Rs.5,02,72,346.22. This is illegal. The entire goods had been used as consumables in the treatment of patients and all such consumption are properly accounted for by us as treatment charges. As there was no sale of such goods, it was not shown under sales. Instead it forms part of hospital income which has been shown under the head “Revenue from operations” in the profit and loss account. In view of the decision of the Hon'ble Supreme Court in Bharat Sanchar Nigam Ltd. vs. Union of India and others [(2006) 14 KTR 115 (SC)] [Para 45 & 46], no part of the amount representing the value of consumables used in the course of such treatment will come under the purview of the term “turnover” as defined under the Act.”
This was reiterated before the Appellate Authority as well, as contained in 'Ground 6' of Ext.P5 Memorandum of Appeal, which reads as follows:
“6. The assessing authority is not justified in law in assuming that the consumables used in the treatment of the patients was taxable. He ought to have noted that the income was derived not from sale of goods; but from the services rendered to the patients which does not involve any transfer of property in goods. The assessment is therefore unconstitutional and unsustainable in law in view of the judgment of the Hon'ble Supreme Court in Imagic Creative (P) Ltd. vs. Commissioner of Commercial Taxes and Others (2008) 2 SCC 614.”
5. The learned counsel for the petitioner submits that, once the amount covered under the above specific head is excluded, the tax liability now mulcted upon the petitioner will be substantially scaled down, by an extent of nearly 93%. This vital aspect was omitted to be considered by the Appellate Authority while passing the interim order.
6. The case projected by the petitioner as referred to in paragraph 4(iv) paragraph 4 of Ext.P7, reads as follows:
“(iv) The assessing authority is not justified in law in assuming that the consumables used in the treatment of the patients was taxable. He ought to have noted that the income was derived not from sale of goods but from the services rendered to the patients which does not involve any transfer of property in goods. The assessment is therefore unconstitutional and unsustainable in law in view of the judgment of the Hon'ble Supreme Court in Imagic Creative (P) Ltd. vs. Commissioner of Commercial Taxes and Others (2008) 2 SCC 614.”
After considering the matter, the only observation made by the Appellate Authority is to the effect that, sustainability or otherwise of the contentions raised by the appellant can be examined in detail, only on verification of the connected assessment records, which will take time, thus granting interim stay, subject to satisfaction of the condition to an extent of 30%. Considering the nature of case pleaded and projected by the petitioner and the probable extent of liability, this Court finds that the condition now imposed upon the petitioner happens to be onerous and as such, the matter requires to be reconsidered.
7. In the above facts and circumstances, Ext.P7 is set aide and the 2nd respondent is directed to reconsider the matter in the light of the observations as above, and also in the light of the law declared by the Apex Court on the point, as referred to in the part of the petitioner and extracted by the Appellate Authority himself in paragraph 4(iv) of the impugned order. The proceedings as above shall be finalised, at the earliest, at any rate, within 'one month' from the date of receipt of a copy of this judgment.
Coercive proceedings shall be kept in abeyance till such time.
Petitioner shall produce a copy of this judgment, along with a copy of the writ petition, before the 2nd respondent, for further steps.
The writ petition is disposed of.
P.R. RAMACHANDRA MENON, JUDGE sp