Kerala High Court Reiterates Interest Under Kerala Luxury Tax Act Cannot Be Demanded For Pre-2009 Period

The Kerala High Court has recently reiterated that interest under the Kerala Tax on Luxuries Act cannot be demanded for any period before the statutory provision enabling such recovery came into force on April 1, 2009.

It dismissed the State's appeal, following its earlier ruling in Casino Hotel v. State of Kerala, which had already settled the issue.

The Kerala Tax on Luxuries Act imposes a tax on charges collected for specified luxury accommodation and services.

A Division Bench of Justice Devan Ramachandran and Justice Basant Balaji observed that the earlier decision in Casino Hotel had attained finality after the Revenue did not challenge it before the Supreme Court.

"We find great force in the afore submissions of the learned Senior Counsel because, Casino Hotel (supra) has declared it without ambiguity that, interest under Section 10(2) of the 'Act' cannot be demanded for a period which is prior to it.", the court ruled.

The appeal was filed by the Commercial Tax Officer (Works Contract & Luxury Tax), Alappuzha, against a Single Judge's judgment in favour of Escapade Reports Private Limited, represented by its Director Michael Dominic.

The dispute arose from a luxury tax assessment for the 1999-2000 assessment year. The tax department sought to recover interest even though the statutory provision permitting such recovery came into force only on April 1, 2009.

The State argued that a reading of the provision showed that it extended to earlier assessment years. It contended that where taxable charges were omitted from returns or had escaped assessment, interest would accrue from the date on which the tax originally became payable, indicating that the provision also covered assessments for earlier years.

Senior Advocate Abraham Joseph Markos, appearing for the assessee, argued that the Single Judge had correctly relied on Casino Hotel v. State of Kerala. He submitted that the earlier judgment had already settled the issue and had attained finality because the Revenue did not challenge it before the Supreme Court.

The division bench accepted that contention and found no reason to interfere with the Single Judge's decision. The court also questioned why the Revenue had chosen to pursue the appeal despite the earlier judgment having attained finality.

"When it is admitted, rather unequivocally, that Casino Hotel (supra) has attained finality, we fail to fathom how the Revenue chose to file this appeal, without doing so against the judgment, on which it relies upon exclusively.", the court concluded.

Finding no reason to interfere with the Single Judge's judgment, the court dismissed the State's appeal.

For Appellant: Sudhish Kumar S., Government Pleader 

For Respondent: V. Abraham Markos, Abraham Joseph Markos, Govind Vijayakumaran Nair, Haran Thomas George and Isaac Thomas, Advocates