IMPORTANT POINT
Collection charges for luxury tax arrears are valid under the Kerala Revenue Recovery Act when invoked for recovery, despite previous rulings being overturned.

JUDGMENT :

A.K.Jayasankaran Nambiar, J.

The State has preferred this Writ Appeal against the judgment dated 04.12.2018 of a learned Single Judge in WP(C).No.14732 of 2013.

2. The brief facts necessary for the disposal of this Writ Appeal are as follows:

The Writ Petition was preferred by the respondent herein challenging the demand made by the appellants for collection charges in connection with revenue recovery proceedings that were initiated against them for recovering arrears of luxury tax under the Kerala Tax on Luxuries Act.

3. The respondent assessee is a partnership firm engaged in the business of running hotels. The appellants herein had issued a demand notice under Section 7 of the Revenue Recovery Act demanding arrears of luxury tax for the assessment year 2005-06 along with collection charges at the rate of 5% for arrears up to Rs.5 lakhs and at the rate of 7.5% for arrears above Rs.5 lakhs. The total amount demanded towards arrears was a sum of Rs.5,73,379/-.

4. The learned Single Judge, who considered the matter, placed reliance on a Division Bench judgment of this Court in Deputy Tahsildar (RR) v. Vijaya Builders [2016 (1) KLT 684] to hold that collection charges could not be realised when there was no recovery effected by way of revenue recovery proceedings. In particular, it was found that when payment was made directly to the requisitioning authority or when payments were made under a One Time Settlement (OTS) Scheme, the collection charges could not be realised. The learned Single Judge, therefore, set aside the demand of collection charges from the respondent and directed the appellants herein to refund the amounts collected by way of collection charges. It was also made clear that if the refund was not granted within a period of three months from the date of receipt of a copy of the judgment the amount would carry interest at the rate of 7% per annum from 01.04.2013 onwards.

5. Before us, it is the submission of Smt. Resmitha Ramachandran, the learned Government Pleader appearing for the appellants that the reliance by the learned Single Judge on the judgment of the Division Bench in Vijaya Builders (Supra) is wholly misplaced. It is pointed out that the said decision pertains to a case where the amount due from a partnership firm that had availed financial assistance from Kerala Financial Corporation was settled by way of a One Time Settlement Scheme. She points out that, not only was the amount due in that case from a financial institution to which the provisions of the Revenue Recovery Act had been extended, but the settlement of the liability was also under a One Time Settlement Scheme. It is her contention that the factual situation obtaining in the present case is wholly different since it is a recovery of tax dues from an assessee, who qualifies as a defaulter. It is her further contention that when it comes to recovery of tax dues, it is the provisions of Rule 4 of the Kerala Revenue Recovery Rules, 1968 that will apply and not Rule 5 of the said Rules. It was the latter Rule that came up for consideration before the learned Single Judge in Cochin Port Trust v. State of Kerala [2008 (1) ILR 718], in which a view in favour of the assessee was taken. It is contended, therefore, that the said decision of the learned Single Judge would also not come to the aid of the respondent assessee in the instant case.

6. Per contra, it is the submission of Sri. Aji V.Dev the learned counsel for the respondent herein that the decision in Vijaya Builders (Supra) is authority for the proposition that so long as the provisions of the Revenue Recovery Act were not relied upon for recovering the amounts due from the assessee, the collection charges could not have been recovered from the respondent. He also places reliance on an earlier decision of the Division Bench of this Court in Usha Mary v. Kerala Financial Corporation and Others [2009 (4) KHC 254], wherein the Division Bench had declared Item (viii) under Rule 4, and Rule