Sanchayita Lahkar

The Kerala High Court Division Bench, comprising of Dr. Justice A.K. Jayasankaran Nambiar and Justice Easwaran S dismissed intra-court appeals by a resort operator challenging assessments of luxury tax and penalties imposed by the Commercial Tax Officer, Alappuzha, concluding that the factual findings established that the appellant’s primary activities extended beyond Ayurvedic healthcare services.

The Court proceeded on the basis that the factual matrix of the matter had already been examined by the statutory and judicial forums below, including the appellate tribunal and the learned Single Judge, who had reduced the penalty amount to 50% of the tax payable while upholding the assessment.

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The matter concerned assessments under the Kerala Tax on Luxuries Act made against an Ayurvedic resort, Keraleyam Ayurvedic Resort, operated by S.D. Pharmacy Pvt. Ltd., located in Alappuzha. The assessments pertained to the period prior to the amendments introduced via the Kerala Finance Act, 2008, which expanded the ambit of the term “hospital” under the Luxury Tax Act. The amended provision included establishments such as “nursing home, therapy centre, rejuvenation or recuperation centre, nature care or cure centre, Ayurvedic cure or care centre and other treatment.”

For the pre-amendment period, the tax authorities were required to demonstrate that the establishment met the definition of a hotel under Section 2(e) of the Luxury Tax Act to levy the tax. The assessing authority concluded that the resort was operating in a manner consistent with that of a hotel by providing accommodation and associated services to tourists, while also offering Ayurvedic wellness treatments.

The assessing authority found that the resort derived its primary income from providing accommodation to tourists and held that the wellness treatments offered were provided alongside the accommodation facilities. Based on these findings, the assessing officer issued an assessment order dated 30.09.2009 imposing luxury tax on the resort. The resort was also issued a penalty order shortly thereafter.

The appellant challenged the assessment and penalty orders through statutory appeals before the Deputy Commissioner (Appeals), which were dismissed. Subsequently, the appellant approached the appellate tribunal, which dismissed the appeals but modified the demand of penalty, limiting it to the extent of the tax payable.

Aggrieved by the appellate tribunal's decision, the appellant filed writ petitions before the High Court, which were considered by a learned Single Judge. The Single Judge declined to interfere with the assessment on the basis that the appellant had failed to furnish evidence to demonstrate that the income from accommodation was merely incidental to its healthcare-related activities.

The Single Judge recorded that the appellant had not produced books of accounts or any supporting materials before the authority to establish that the revenue earned from providing accommodation was subordinate to its Ayurvedic treatment services. The Court did, however, reduce the penalty to 50% of the tax payable. The resort subsequently challenged this decision in the present intra-court appeals.

The appellant, represented by Senior Advocate Anil D. Nair and assisted by Ms. Mekhala M. Benny, contended that its primary activity was that of running an Ayurvedic hospital and that the accommodation provided was incidental to the medical services rendered. Counsel for the appellant submitted that the authorities did not properly consider the nature of the appellant’s operations prior to the 2008 amendment of the Act.

The respondents, represented by Senior Government Pleader V.K. Shamsudheen, supported the assessment orders and submitted that the conclusions drawn by the assessing authority and confirmed by the appellate tribunal and the Single Judge were proper and within jurisdiction.

The Division Bench recorded that the learned Single Judge had found that “the appellant did not produce the books of accounts in order to establish that the income derived out of the rent received from the accommodation is incidental to the treatment given to the inpatients by the appellant.” The Court noted that such factual determinations did not call for interference at the appellate stage.

The Court further noted that “the appellant having failed to prove that the income derived out of the accommodation was incidental to the treatment extended by the appellant, we are of the view that the appellant cannot succeed.”

The Division Bench examined the order passed by the appellate tribunal, which was based on materials placed before the assessing authority, including promotional materials and brochures. The Court recorded that, according to the appellate tribunal, “the main activities of the appellant as per the brochures produced before the assessing officer, are canoeing, motor boat cruises, houseboat stay, trekking, Alleppey beach visit, coir factory visit, elephant ride, Kathakali, temple dance, dramas, Mohiniyattam and Kalaripayattu.”

The tribunal had taken note of the resort’s advertised offerings, concluding that the primary function of the establishment was the provision of hospitality and recreational services, with Ayurvedic treatments being supplementary. The Bench recorded, “in the light of these activities, the tribunal took note of the fact that the main activities of the appellant are not running the hospital but providing a resort and other facilities and the Ayurvedic treatment is only incidental to that of the facilities.”

The tribunal had further observed that the room tariffs were inclusive of other amenities, which, in its view, indicated the resort's commercial hospitality focus. The Division Bench noted, “the tribunal further found that the tariff rate of the rooms described are inclusive of the breakfast and other facilities.”

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The Court noted that this included “the fact that an extra person is accommodated in the resort is charged with a rate and the fact that the breakfast, lunch, and dinner have been provided, shows that the appellant is not running an ayurvedic treatment centre but a resort where the incidental facility of ayurvedic treatment is being given to the occupants.”

The Court concluded that these concurrent findings by the tribunal and the learned Single Judge were factual in nature and beyond the scope of re-examination in the intra-court appeals. The Bench recorded, “In the light of the findings rendered by the tribunal as well as by the learned Single Judge, we are of the view that they are essential in the realm of finding of facts which cannot be re-appreciated by us while considering these intra-court appeals.”

The Court recorded, “we are of the view that there is no merit in these appeals, and accordingly, the same is dismissed.”

It also specified that “No order as to costs.”

Advocates Representing the Parties

For the Petitioner : Anil D. Nair Senior Advocate , Asish Mohan Advocate, P. Jinish Paul Advocate, G. Krishnakumar Mallya Advocate, Mekhala M. Benny Advocate, Mary Jossy Advocate, R. Sreejith Advocate

For the Respondent : V.K. Shamsudheen, Senior Government Pleader

Case Title: Keraleyam Ayurvedic Resort, A Unit of SD Pharmacy Pvt. Ltd. v. The Commercial Tax Officer (Luxury Tax) and Another
Neutral Citation: 2025:KER:22193
Case Numbers: WA Nos. 585 of 2018 and 709 of 2018
Bench: Dr. Justice A.K. Jayasankaran Nambiar, Justice Easwaran S.

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