M-FAR HOTEL LIMITED COCHIN REP BY ITS DIRECTOR Vs. STATE OF KERALA REP BY ITS SECRETARY TO GOVERNMENT LOCAL ADMINISTRATION DEPARTMENT THIRUVANANTHAPURAM

JUDGEMENT

(1.) This Writ Petition relates to demand for building tax under the Kerala Panchayat Raj Act from the petitioner. The petitioner is a company running a five star hotel within the jurisdictional limits of the 2nd respondent Panchayat. By a notice dated 28.6.2001, the petitioner was directed to pay building tax of Rs. 29,81,600/- under the Kerala Panchayat Raj Act and Rs. 1,49,080/- as library cess for the period from 1.4.2001 to 31.3.2002. Against the demand, the petitioner filed a revision petition before the Standing Committee on Taxes of the Panchayat, which was disposed of by order dated 27.7.2001 reducing the tax and cess to Rs. 26,83,414/- and Rs. 1,34,172/- respectively. On appeal, the Panchayat Committee, by resolution dated 25.8.2001, reduced the same further to Rs. 22,36,200/-and Rs. 1,11,810/- respectively. The petitioner filed a further appeal to the Deputy Director of Panchayats, which was disposed of by Ext.P1 order dated 14.1.2002, directing the Panchayat to fix the tax as directed therein. The petitioner challenged the said order in O.P.No.7137/2002 and obtained Ext.P2 order of stay. During the pendency of the Original Petition, demand notices were issued fixing the tax as Rs. 16,75,217/-, the recovery as per which, was stayed by Exts.P3 and P4 interim orders on payment of 50% of the amounts demanded. The petitioner complied with the condition for the interim orders. Challenging Ext.P1 order, the petitioner filed Ext.P5 appeal before the Government and, by Ext.P6 judgment, this Court permitted the petitioner to withdraw the Original Petition on the submission of the learned Government Pleader that the said appeal would be disposed of within two months, with a further direction that the demand for tax pending shall not be enforced till the Government passes orders on the appeal. Pursuant thereto, Ext.P7 order dated 7.12.2004 was passed by the Government, dismissing the petitioner's appeal. Against the same, the petitioner filed Ext.P8 review petition before the Government, which was entertained by the Government and Ext.P9 order dated 23.12.2005 was passed, the operative portion of which reads as follows:

(2.) The petitioner raises three contentions. The first is that the hotel building is not a building that is ordinarily let out and, therefore, the assessment has to be made under Rule 4(ii) of the Kerala Panchayat Raj (Building Tax and the Surcharge Thereon) Rules, 1996, and not under Rule 6(4) thereof as directed in Ext.P9. The second is that even assuming that Ext.P9 is valid, in Ext.P10, by assessing the area other than the rooms let. out, separately, the respondents 2 and 3 have violated the direction in Ext.P9. The third is that since interest under Section 209E being expressly made penal in nature, the same can be imposed only if the petitioner has deliberately refused to pay the tax, and in this case, since the non-payment of balance tax was on account of stay granted by this Court, no penal interest is leviable on the petitioner. It is also contended that since the demand was raised only by Ext.P11, the penal interest is payable only from the date of issue of Ext.P11 and not before. In support of the contention that for the period when recovery of tax was stayed by the court no interest is payable, the petitioner relies on the decision of the Supreme Court in Consolidated Coffee Ltd. v. Agricultural Income Tax Officer, 2001 1 SCC 278.

(3.) Although separate counter affidavits have been filed by the Government and the Panchayat, the same do not effectively controvert any of the contentions of the petitioner. In the counter affidavit of the Government, they justify the demand for penal interest on the ground that the same is compensatory in nature and, therefore, the decision relied on which relates to a penal provision is not applicable to the facts of this case. The counter affidavit of the Panchayat finds fault with the petitioner for filing several appeals, Writ Petition, revision petition and a review petition only for protracting the recovery of tax and according to the Panchayat, the review petition was not maintainable.