An establishment classified primarily as a hotel providing luxury and leisure services is liable for luxury tax, not merely based on Ayurvedic treatment provisions.

1. In this Original Petition filed under Art.227 of the Constitution of India, petitioner challenges Ext. P5 order passed by the Tribunal and seeks a declaration that the petitioner’s establishment is an Ayurvedic Hospital providing traditional Ayurvedic treatment and that it is liable to pay luxury tax under the Kerala Tax on Luxuries Act, 1986, (hereinafter referred to as ‘the Act’ for short), only w.e.f. 01/04/2008.

2. Heard the learned Senior Counsel appearing for the petitioner and also the Special Government Pleader appearing for the respondents.

3. Ext. P2 is an order of assessment passed against the petitioner under the Act for the assessment years 2003-04 to 2007-08 treating the petitioner’s establishment as a Hotel as defined under S.2(e) of the said Act. The appeals filed against Ext. P2 order were disposed of with modifications. Aggrieved by the order, petitioner and the revenue filed appeals to the 2nd respondent Tribunal. By Ext. P3 common order, Tribunal allowed the appeals filed by the petitioner accepting the contention that its establishment is a Hospital and dismissed the appeals filed by the Revenue.

4. The Revenue challenged Ext. P3 order of the Tribunal in OP (C) 1928/12. That Original Petition was disposed of by a Division Bench of this Court by Ext. P4 judgment. In that judgment, this Court allowed the Original Petition by setting aside the order of the Tribunal and the appeals were restored to the file of the Tribunal for considering the matter on merits after hearing the parties. It was directed that if the establishment is found to be a Hotel, the same should not stand in the way of the Tribunal sustaining the assessment as a Hotel and that if it is found to be essentially a Hospital, the levy will be only after the amendment to the Act in 2008.

5. The reasoning adopted by the Division Bench of this Court is reflected in paragraph 3 and 4 of the judgment which reads thus:
“The Tribunal does not appear to be aware of health tourism which attracts lot of foreign and Indian tourists to Hotels and Ayurvedic Resorts in Kerala, where one of the services rendered is body massage done by experts using ayurvedic herbs and oils. In fact, invariably every star hotel in Kerala has got a massage centre providing service of Ayurveda Doctors and assistant for massage and allied health care services. So much so, what is required to be considered is whether the industry is a tourism Hotel where ayurvedic treatment is also provided to guests. In fact, the Tribunal failed to understand that massage which is the main ayurvedic treatment provided in tourist - resorts need not be for any specific disease but is for general improvement of health and for rejuvenation. The Government Pleader has referred to and what we have found is that the department has collected entire material about the respondent - Resort which are published in their website wherein it is projected as an Ayurvedic Resort and not as a Hospital. Further, it is seen from records that guests residing in respondent - Resort are taken to nearby tourist spots namely, the famous Nelliampathy Hills and the Malampuzha Dam. One crucial test the Tribunal should have applied is whether the charges collected is essentially for treatment or whether it is only one of the services availed by the guests staying in the Resort. Further, if it is a Hospital, massage and other treatment would be provided to out patients also. In fact, the department has collected entire data from the accounts which according to the Government Pleader shows that the rea