2026 (1) TMI 150 - HC - Indian Laws

Luxury tax on hospital ICU facility charges-'other than ICU' amendment treated as clarificatory, exemption applied retroactively; demands quashed.

The dominant issue was whether the State notification and the amendment inserting 'other than facilities provided in intensive care unit (ICU)' into the ... Constitutional Validity of Sections 3-E(1) and 2(1-C) of the Karnataka Tax on Luxuries Act, 1979 - exemption from luxury tax for charges collected towards facilities provided in an Intensive Care Unit (ICU), introduced through the State Government Notification dated 20.01.2016 - clarificatory or declaratory in nature? - HELD THAT:- Any registration / amendment if clarificatory, elucidatory or declaratory would be retrospective / retroactive in nature and application. In this context, it is relevant to state that originally that prior to amendment, charging Section i.e. Section 3-E of the said Act 1979, specifically provided for payment of luxury tax on charges collected for luxuries provided in a hospital in a room including accommodation, air conditioning, telephone, telephone calls, etc., where charges are more than Rs. 1000/- per room. However, pursuant to the Notification dated 20.01.2016 and the amendment to Section 3-E of the said Act of 1979, the said charging provision, which directed levy of luxury tax on charges collected from the hospital towards accommodation, air condition, etc., has been clarified by stating that the charges collected from patients admitted in ICU would be exempt; it follows there from while originally / free amendment, all facilities attached to a room / accommodation in hospital would be available to payment of luxury tax come on the amendment, merely clarifies / declares that the said liability to pay luxury tax would not apply to the patients admitted to ICU and charges collected in this regard by the hospitals. It is also relevant to state that by way of an amendment, the phrase 'other than facilities provided in intensive care unit (ICU)' has been inserted by way of clarification / declarations / elucidation by making it clear that all charges towards accommodation rooms in hospital except ICU charges facilities provided in ICU accommodation would be available to luxury tax. In this context also, it is significant to note that amendment which has been inserted to clarify an existing provision is sufficient to come to the conclusion that it relates back to the date of the original provision and the same cannot be treated or construed as prospective as wrongly held by the respondents and averment in this regard is also made in the petitions. The Notification dated 20.01.2016 and the amendment to Section 3-E of the said Act, 1979, specifically declaring, clarifying and elucidating that luxury tax on charges received / collected from patients admitted to in ICUs, would be exempt from payment of luxury tax since the said provision would not apply to such charges is clear from the said amendment. Under these circumstances, having regard to the Notification dated 20.01.2016 and the amendment to Section 3-E of the said Act, 1979, which should operate and apply retrospectively / retroactively to previous assessment years including the subject assessment years, the impugned order deserves to be quashed. The impugned assessment order and demand notices are hereby set aside - petition allowed. Issues: Whether the State Government Notification dated 20.01.2016 and the amendment to Section 3-E of the Karnataka Tax on Luxuries Act, 1979 operate retrospectively/retroactively to exempt luxury tax on charges collected for facilities provided to patients admitted in Intensive Care Units (ICUs), and whether the impugned reassessment/assessment orders and demand notices imposing luxury tax on such ICU charges should be quashed.Analysis: The relevant legal framework comprises the pre-amendment and post-amendment text of Section 3-E of the Karnataka Tax on Luxuries Act, 1979, the State Notification of 20.01.2016 purporting to exempt ICU charges, and established principles on retrospectivity: (a) the presumption against retrospective operation unless the legislature's intent to give retrospective effect is clear; (b) the exception that declaratory or clarificatory statutes and notifications which explain existing law may be given retrospective effect; and (c) vested rights created by completed assessments cannot be disturbed unless the amending provision is clearly retrospective. Applying these principles, the amendment to Section 3-E and the Notification clarify that charges for facilities provided in ICUs are not covered by the levy originally framed for hospital room luxuries. The amendment and Notification are interpretative of the scope of the charging provision rather than creation of a new charge, and therefore are declaratory/clarificatory in character such that they relate back to the original provision and apply to earlier assessment years. Where the amendment/notification removes liability rather than imposes a new burden, the clarificatory character supports retrospective application. In consequence, reassessment/assessment orders and demand notices that sought to levy luxury tax on ICU charges for the subject assessment years are inconsistent with the clarified exemption and must be set aside.Conclusion: The Notification dated 20.01.2016 and the amendment to Section 3-E of the Karnataka Tax on Luxuries Act, 1979 operate retrospectively/retroactively to exempt luxury tax on ICU charges; accordingly, the impugned assessment/reassessment orders and demand notices imposing luxury tax on such ICU charges are quashed in favour of the petitioners (assessees).