2015 (5) TMI 1067 - HC - VAT and Sales Tax

Court clarifies luxury tax ruling, disallows retroactive application, allows offset of excess VAT.

Casino Hotel, A Unit of M/s Hotel & Allied Traders Private Limited, Versus Commercial Tax Officer (WC & LT),

The court ruled that Rule 3C of the Kerala Tax on Luxuries Rules, 1976 could not be applied retroactively to determine luxury tax for the year 2005-06. ... Assessment under the Luxury Tax Act - banquet sales bills - Rule 3C brought into rules as per SRO 566/2006 dated 28/07/2006 which prescribes procedure for computation of rent or other charges realized for hall, auditorium, Kalyanamandapam etc. where such rent or other charges are not separately ascertainable - whether Rule 3C of the Rules which was introduced only subsequent to the year of assessment, i.e. 2005-06, Rule 3C procedure can be relied on for determination of luxury tax? - Held that: - Merely because there is no definite procedure as contemplated under Rule 3C for determination of luxury tax in the year 2005, it does not divest the petitioner from any liability to pay luxury tax in the light of non obstante clause under Section 4(2) of the Act. Though, Rule 3C would not apply, its yardstick can be applied to arrive at as a best judgment - no infirmity with the calculation of the luxury tax. Whether the petitioner is entitled for credit of the payment already made for the entire amount towards sales tax? - since the petitioner has already paid VAT on full value on banquet sales, excess VAT paid has to be set off against luxury tax payable. Fresh assessment shall be made after giving credit to the excess VAT paid. Petition disposed off - decided in favor of petitioner. Issues:1. Application of Rule 3C of the Kerala Tax on Luxuries Rules, 1976 to assessment year 2005-06.2. Entitlement of the petitioner for credit of payment already made for the entire amount towards sales tax.Analysis:1. The case involved the assessment under the Luxury Tax Act for the year 2005-06. The main contention was the applicability of Rule 3C of the Kerala Tax on Luxuries Rules, 1976, which was introduced after the assessment year in question. The rule pertains to the computation of rent or charges for halls, auditoriums, etc., where charges are merged with food sales. The court held that while Rule 3C could not have been relied upon for determining luxury tax due to its introduction post-assessment year, the petitioner was still liable to pay luxury tax under Section 4(2) of the Act. The authority was justified in using the components under Rule 3C as a guideline for calculating luxury tax, even though the rule itself did not apply directly.2. The petitioner argued for credit of the VAT already paid on the full value of banquet sales against the luxury tax liability. The court found merit in this argument and directed that the excess VAT paid should be set off against the luxury tax payable. Consequently, the impugned order was set aside, and a fresh assessment was ordered to be conducted, considering the credit for excess VAT paid. The court concluded the judgment by disposing of the writ petition without imposing any costs.In summary, the judgment clarified the application of Rule 3C to an assessment year predating its introduction and addressed the issue of crediting excess VAT against luxury tax liability, ultimately ruling in favor of the petitioner on the latter issue and ordering a fresh assessment.