IMPORTANT POINT
The existence of an office within a Panchayat area necessitates the payment of profession tax, regardless of whether the services provided are free or charitable.

JUDGMENT :

(Bechu Kurian Thomas, J.)

A local authority has questioned the defiance of a medical polyclinic to pay the profession tax under the Kerala Panchayat Raj Act, 1994 (for short, ‘the Act’).

2. The Ex-Servicemen Contributory Health Scheme (for brevity, ECHS) has set up medical clinics in different parts of the country to provide health care to ex-servicemen. The said polyclinics are allegedly run by the Ministry of Defence, to provide free medical services and treatment to Ex-servicemen and their family members. A medical clinic was established on 01.11.2010 under the aforementioned scheme, at a place within the jurisdiction of the petitioner. The said clinic continues even today.

3. While so, the Panchayat issued a notice calling upon the second respondent, who was the person in charge of the ECHS Polyclinic, to submit details of the employees working in the said establishment as per Rule 14 of the Kerala Panchayat Raj (Profession Tax) Rules, 1996 (for short, ‘the Rules’). The demand triggered a dispute between the local authority and the Polyclinic. The second respondent claimed that they are not liable to pay the profession tax demanded by the Panchayat, while the latter insisted that the clinic is exigible for the said tax. Due to the failure to submit returns as contemplated under Rule 14 of the Rules, Panchayat initiated a criminal prosecution against the second respondent. However, the prosecution remains in a state of suspense as the learned Magistrate called upon the petitioner to produce the sanction to prosecute the second respondent.

4. Faced with hurdles in imposing the profession tax on the Polyclinic and its employees, the Panchayat has filed this writ petition seeking a declaration that the Polyclinic is liable to pay the profession tax. This writ petition also seeks a direction to the second respondent to furnish the list and details of the employees who are liable to pay the profession tax and to remit the entire arrears.

5. A counter affidavit has been filed by the second respondent stating that the ECHS Polyclinic provides free medical care to around 30,000 ex-servicemen and their dependents under the aegis of the Ministry of Defence and also stated that these clinics are neither business ventures nor are they profit-making bodies and the employees are mostly ex- servicemen working only for 11 months on a contract basis. The second respondent further stated that ECHS Polyclinic is a welfare measure formulated by the Government. It was stated that they are not liable to pay the profession tax since the employees are engaged on a contract basis. The second respondent has also pleaded that they are not transacting any business and hence not liable to pay any profession tax as contemplated by the local authority.

6. I have heard Sri. Sebastian Philip, the learned counsel for the petitioner, and Sri.P.R.Ajith Kumar, the learned Central Government Counsel appearing on behalf of the second respondent.

7. To appreciate the controversy, it is necessary to advert to the statutory provisions. Section 204 of the Act deals with profession tax, which reads as follows:-

204.Profession tax.-(1) The profession tax shall, subject to such rules as may be prescribed be levied every half year in every Village Panchayat area on,-

(i) every company which transacts business in such Panchayat area for not less than sixty days in the aggregate in that half year and

(ii) every person who, in that half year-

(a) exercise a profession, art or calling, or transacts business or holds any appointment, public or private--

(I) within such Panchayat area for not less than sixty days in the aggregate, or

(ii) outside in such panchayat area but who resides in it for not less than sixty days in the aggregate, or

(b) resides in such panchayat area for not less than sixty days in the aggregate and is in receipt of any income from investments.

8. It is evident on a reading of the above statutory provision that two categories of entities are liable to be t