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TMI Blog2023 (3) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal that confirmed the demand of penalty on the petitioner under the Kerala Tax on Luxuries Act, 1976 (hereinafter referred to as the 'KTL Act' for brevity) for the assessment years 2009-10, 2010-11 and 2011-12. O.P.(Tax).No.23 of 2016 is filed by the same assessee viz. M/s Madhavaraja Club impugning the order of the Appellate Tribunal that conformed penalty on it under the KTL Act for the assessment year 2008-09. W.A.No.601 of 2021 is preferred by M/s Madhavaraja Club aggrieved by the judgment of a learned Single Judge in W.P(C).No.2942/2021 that dismissed the writ petition that impugned the assessment orders and first appellate orders passed against the appellant under the KTL Act for the assessment years 2014-15, 2015-16, 2016-17 and 2017-18, and relegated the appellant to its alternate remedy of preferring appeals before the Appellate Tribunal against the first appellate orders. In all the above cases, the assessee M/s Madhavaraja Club had taken a specific contention before the lower authorities that in view of the principle of mutuality that applied to cases where a members' club supplied goods or provided luxury to its members, it could not be fastened with any tax liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uxury tax under the KTL Act as has been found by a Division Bench of this Court in the petitioner's own case for an earlier assessment year viz. Madhavaraja Club v. The Commercial Tax Officer [Neutral Citation: 2013/KER/9816]. It is his further contention, by placing reliance on the Division Bench decisions of this Court in Asianet Satellite Communications Ltd v. State of Kerala - [2010 (3) KLT SN 22 (C No.29)], Trivandrum Club v. Sales Tax Officer - [2012 (3) KLT 682], Lotus Club v. State of Kerala [Neutral Citation No. 2018/KER/40520] and the decisions of the Supreme Court in Express Hotels Private Ltd. v. State of Gujarat - [(1989) 3 SCC 677], State of Karnataka & Ors v. Drive-in Enterprises - [(2001) 4 SCC 60], Godfrey Phillips India Ltd v. State of UP - [(2005) 2 SCC 515] and State of WB & Ors. v. Purvi Communication Pvt. Ltd. - [(2005) 3 SCC 711] that the incidence of the levy under the KTL is on the enjoyment of the luxury and the person on whom the levy is imposed is that person who enjoys the luxury and that the provider of the luxury is merely the person who is liable to collect the tax and pay it over to the government. Since the taxable event under the KTL Act is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value on which, and the rate at which, the tax is to be paid. Sub-sections (2), (2A), (4) and (5) of Section 4 of the Act answer the said question by providing the value and the rate of tax applicable when various kinds of luxury are provided. The answer to question (iv) that seeks the manner in which the tax is to be paid, is contained in the various provisions of the Act that deal with the procedure for registration of the 'proprietors' who provide the luxury, the collection of tax by the said 'proprietors' from the persons who enjoy the luxury so provided, the manner of payment of the tax so collected by the 'proprietors' to the government exchequer by filing returns, and the assessment of the 'proprietor' to determine whether the tax has been correctly paid. 7. A reading of the provisions of the KTL Act therefore clearly reveals that it is a tax on the enjoyment of a luxury, that is attracted at a point in time when such luxury is provided by a 'proprietor' to another person for the latter's enjoyment. The incidence and levy of the tax is on the "proprietor" although the ultimate impact of the tax may be on the person who enjoys the luxury that is provided. The 'proprietor' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the said recommendation and went on treat a supply of goods by any unincorporated association or body of persons to their members, for cash, deferred payment or other valuable consideration, as deemed sales for the purposes of sales tax, the court found that notwithstanding the amendment, the supply of goods by a members' club to its members did not satisfy the requirement of there being two persons in the transaction viz. a person making the supply and a person to whom the supply was made. In other words, where the supply of goods was to oneself the deeming provision had no application. The court further held that in the absence of any language in clause (e) of Article 366 (29-A) of the Constitution that expressly made the supply of goods by members' clubs to its members taxable, it could not be said that the doctrine of mutuality had been done away with. (See: State of West Bengal v. Calcutta Club Ltd - [(2019) 19 SCC 107 @ pp.149- 150]. 10. As regards the applicability of their findings to the levy of service tax, the court found as follows @ para 79 of the judgment; "[I]f the doctrine of agency, trust and mutuality is to be applied qua members' clubs, there has to be an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. In Lotus Club, the Division Bench essentially followed an earlier division bench judgment of this Court in Trivandrum Club v. Sales Tax Officer (Luxury Tax) - [2012 (3) KLT 682] that unambiguously held that under the KTL Act, the charging section recognised the club as the person liable to luxury tax. The Division Bench therefore recognised the club as the person on whom the incidence of tax fell. Since the later division bench in Lotus Club did not find any cause for doubting the propositions laid down in Trivandrum Club and dismissed the appeal preferred by Lotus Club by following the decision in Trivandrum Club, we cannot read the observations of the Division Bench in Lotus Club as having laid down the proposition that the incidence of tax under the KTL Act is on the person enjoying the luxury and not on the 'proprietor' who provides the luxury. 13. The reliance placed by the learned Government Pleader on the decisions in Godfrey Philips India Limited v. State of UP - [(2005) 2 SCC 515] and State of Karnataka & Ors v. Drive-in Enterprises - [(2001) 4 SCC 60] in support of his contention that the incidence of luxury tax is on the enjoyment of luxury and not on the providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e KTL Act, save under Section 4 (2A) thereunder, on charges collected from its members for amenities provided to them. Since it is not in dispute that the petitioner club has paid the tax in terms of Section 4 (2A) during the assessment years in question, we allow O.P (Tax).No.9 of 2016 and O.P (Tax).No.23 of 2016 by setting aside the orders of the Appellate Tribunal impugned therein and the orders of penalty passed against the petitioner under the KTL Act for the assessment years 2008-09, 2009-10, 2010-11 and 2011-12. We also allow W.A.No.601 of 2021 by setting aside the judgment of the learned Single Judge in W.P(C).No. 2942/2021 and allowing the writ petition by quashing the assessment orders and first appellate orders passed against the appellant under the KTL Act for the assessment years 2014-15, 2015-16, 2016-17 and 2017-18. The assessing authority shall proceed to complete the assessment of the appellant club under the KTL Act for the aforesaid assessment years afresh by excluding that part of the turnover for the said years, as is covered by the mutuality principle discussed above. The assessing authority shall complete the said exercise within a period of three months from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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