Ayurvedic Treatment Centre Providing Only Prescribed Therapies Classified As Hospital, Not Hotel; Luxury Tax Cannot Be Levied: Kerala HC
Sanchayita Lahkar
The High Court of Kerala Division Bench of Justice A. Muhamed Mustaque and Justice Harisankar V. Menon has held that an Ayurvedic treatment centre must be classified as a hospital rather than a hotel, and that luxury tax cannot be levied on its operations for the period in question. Examining a petition by a company running a residential Ayurvedic facility against assessments raised by the state tax authorities, the Bench concluded that where guests are admitted only as patients for prescribed Ayurvedic therapies over a minimum stay and are provided clinically supervised treatment without typical hotel amenities, the establishment answers to a hospital under the Luxury Tax Act. The assessment order was set aside, with directions to reassess treating the unit as a hospital.
The petitioner, a private limited company operating an Ayurvedic treatment facility at the leased premises of Kollengode Palace, challenged an assessment order issued under the Kerala Tax on Luxuries Act, 1976 for the period 2004–05 to 2007–08. The proceedings treated the establishment as a “hotel” and levied tax at 15% on both room rent and treatment charges.
The petitioner stated that only persons admitted for minimum 14-day Ayurvedic treatment were accommodated and that there was no restaurant, entertainment facility, or separate food tariff. It asserted that the facility functioned as a hospital and relied on certificates of doctors, treatment documentation, and prior adjudication recognising its activities as Ayurvedic treatment.
The respondents argued that the assessment correctly treated the unit as a hotel, referring to brochures, guest comments, and tariff structures. The Court noted the 2008 amendment introducing tax on hospital luxuries but held that the impugned assessment pertained to the pre-amendment period. The dispute centered on whether the petitioner’s activities constituted those of a hotel or a hospital for the relevant statutory period.
The Court recorded that the first respondent relied on guest comments and brochures to conclude that “M/s. Kalarikovilakom is not a hospital and what is offered therein to the guests is not treatment in true medical sense” and described the services as “better caring or wellness treatment…associated with holiday tourism.” It referred to observations in the assessment order such as “The relation between the occupants and Kalarikovilakom is not that like a patient to hospital but like guest to hotel.” The Court noted the treatment programmes extracted in the assessment order and the remarks cited therein, including references to “healthier mind, body and soul”, “meditating woman”, and “Privileged to learn much from my yoga teacher, the doctors, the massagers…”.
The Court recorded that these comments nevertheless “go on to show that the petitioner is to be treated as a hospital alone,” pointing out that the references to doctors indicated treatment improving general well-being. It recorded that Ext.R1(i) showed various types of Ayurvedic treatments being provided for anti-ageing and stress relief, and that Ext.R1(j) also reflected Ayurvedic treatment. The Court noted the assessment order’s statement that “a consolidated amount is collected from guests for all expense including to and fro journey,” and the tariff variations based on suites, including the specific figures for stress-relief programmes. It recorded that treatment charges exceeded room rent for all years.
The Bench analysed its earlier Division Bench judgment (OP (Tax) No.1/2015), quoting that the assessee “admittedly carries on an ayurvedic care centre which is included in the definition of a hospital” and that the legislature included establishments providing wellness treatment within the definition of hospital. The Court stated that the earlier judgement concluded the petitioner’s status as a hospital for later years and found that the factual findings in Ext.P16 aligned with that position. It recorded that the facts in OP (Tax) No.33 of 2016 were distinguishable, since that case involved guests declaring their purpose of visit as holiday or sightseeing and doctors having no role. The Court stated that no such facts existed here. Concluding, it recorded that the findings in OP (Tax) No.1/2015 “concludes the issue as regards the treatment of the petitioner as a ‘hospital’.”
The Court stated: “Resultantly, this writ petition would stand allowed, setting aside Ext.P16 order issued by the first respondent and directing the first respondent to pass a fresh order treating the petitioner as a ‘hospital’. We do not see any reason to order a remit as contended by the learned Government Pleader for the afore reason.”
Advocates Representing the Parties
For the Petitioner: Sri. Joseph K. Kodianthara (Senior Advocate), Sri. Mathews K. Uthuppachan, Shri. Terry V. James
For the Respondents: Dr. Thushara James, Senior Government Pleader
Case Title: M/s Escapade Resorts Pvt. Ltd. v. Commercial Tax Officer & State of Kerala
Neutral Citation: 2025: KER:87677
Case Number: W.P.(C) No.18245 of 2008
Bench: Justice A. Muhamed Mustaque; Justice Harisankar V. Menon
