M/s.Coonoor Club,Coonoor-643 101, Nilgiris v. Tvl.Neyveli Lignite CorporationLimited, P.O.Neyveli-607 801,South Arcot District

his power under section 11 of the Act and cancel the order passed bythe first respondent on 15.3.1995.PRAYER in WP.25522 of 2002 : Petition filed under Article 226 of theConstitution of India praying for the issuance of a writ ofcertiorari to call for the records on the file of the secondrespondent in Ref.Rc.1128/2002-A-5, dated 20.6.2002 and quash theproceedings as the same is vitiated by an error apparent on the faceof the records. PRAYER in WP.Nos.24743 to 24746 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorari to call for the records on the file of the thirdrespondent in RP.JJ2/4011, 4012, 4013 and 4014/98 (93-94)(92-93) (94-95)(95-96) dated 01.2.2001 and quash the same. PRAYER in WP.Nos.38296 to 38302 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorari to call for the records of the respondent inRef.No.2571/2002 and quash the order passed therein dated 11.9.2002for the Assessment Years 1993-94, 1994-95, 1992-93, 1995-96, 1991-92,1996-97 and 1997-98 respectively.PRAYER in WP.Nos.39555 to 39557 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorari to call for the records of the respondent inTNTL.No.032731/1999-2000, 032731/2000-2001 and 032731/2001-2002respectively dated 13.9.2002 and quash the same.PRAYER in WP.Nos.39564 to 39566 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorari to call for the records of the respondent inTNTL.No.032731/1996-1997, 032731/1997-1998 and 032731/1998-1999respectively dated 13.9.2002 and quash the same.PRAYER in WP.Nos.45486 of 2002: Petitions filed under Article 226 ofthe Constitution of India praying for the issuance of a writ ofprohibition prohibiting the respondent from invoking the provisionsof the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act inthe case of the petitioner in respect of the assessment years 1997-98in the light of the law laid down by the Division Bench of this Courtin 104 STC 553.PRAYER in WP.Nos.45856 to 45859 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorarified mandamus calling for the records of therespondent in his proceedings Ref.D3.13/1998-1999, Ref.D3.13 /1999-2000, Ref.D3.13/2000-2001, Ref.D3.13/2001-2002 respectively, dated20.11.2002 and quash the same and direct the respondent not to invokethe provisions of the Tamil Nadu Tax on Luxuries in Hotels and https://hcservices.ecourts.gov.in/hcservices/ Lodging Houses Act in the case of the petitioner club, in the lightof the law laid down by the Division Bench of this Court in 104 STC553.PRAYER in WP.Nos.310644 to 10647 of 2002: Petitions filed underArticle 226 of the Constitution of India praying for the issuance ofa writ of certiorari to call for the records of the respondent inRef.No. 2571/2002 in relation to Assessment Year 1998-1999, 1999-2000, 2000-2001, 2001-2002 respectively on his files and quash theorder dated 28.2.2003.For petitioner in WPs.8400/1999, 38296to 38302, 45486, 45856 to45859 / 2002, 10644 to 10647/2003 :: Mr.R.L.Ramani for M/s.Chandran Karuppiah For Petitioner :: Mr.K.RamgopalFor petitioner in WP.25522 of 2002 :: Mr.S.A.RajanFor petitioner in WP.24743 to 24746 of 2002, 39555 to 39557 of 2002, 39564 to 39566 of 2002 :: Mr.N.InbarajanFor respondents in all the writ petitions :: Mr.Haja Naziruddin, Spl.G.P.(Taxes) *****O R D E R In this batch of writ petitions, various clubs have questionedthe applicability of the provisions of the Tamil Nadu Tax on LuxuriesAct, 1981 (for short, 'the Luxuries Act'). The petitioners havechallenged the final Assessment Orders in some writ petitions. Inother writ petitions, pre-assessment notices and notices callingupon the petitioner clubs to register themselves under the LuxuriesAct were also under challenge. In one writ petition, the order passedby the revisional authority confirming the appellate order upholdingthe assessment was also under challenge. 2. The short question that arises for consideration is whetherSection 4 of the Luxuries Act levying tax on the luxuries provided ina hotel in respect of every room under occupation by any person isapplicable to the clubs having rooms rented for accommodation for itsmembers is covered by the Luxuries Act. https://hcservices.ecourts.gov.in/hcservices/

3. In all these cases, the clubs have disclosed their bye-laws /Articles of Association, wherein it is stated that they are renderingservice to their members by collecting subscriptions, contributionsand fees, which is being utilised for rendering services andamenities exclusively for and on behalf of the members without anyprofit margin. In essence, whether the ''doctrine of mutuality" willapply to these cases is the question. 4. In order to appreciate the demand of levy of luxury tax madeby the respondents, it is necessary to refer to the followingdefinitions found under the Luxuries Act:-''Section 2(f) defines ''hotel" which is as follows:-''hotel" means a building or part of a building whereresidential accommodation with or without board is by way ofbusiness provided for a monetary consideration and includesa lodging house. Section 2(fff) defines ''luxury" which is as follows:-''luxury" means luxury provided in hotel or any tobaccoproduct supplied by a tobacconist or the scheduled commoditywhich is for enjoyment over and above the necessities oflife. Section 2(g) defines ''luxury provided in a hotel", which is asfollows:-''luxury provided in a hotel" means accommodation forresidence provided in a hotel, the rate of charges for which(including charges for air-conditioning, television, radio,music, extra beds and the like but excluding charges forfood, drink and telephone calls) is two hundred rupees ormore. 5. A temple devasthanam by letting out its rooms for the devoteesfor hire would amount to a ''hotel" or a ''lodging house" and whetherit is liable for tax under the Luxuries Act came up for considerationbefore a Division Bench of this Court in Sri Palani DhandayuthabaniDevasthanam -vs- Commercial Tax Officer, Palani Circle II, Palanireported in (2001) 124 STC 553. In paragraphs 9 and 10, it isobserved as follows:-''9. As far as the appellant is concerned, therespondent has treated it as a lodging house. For theappellant to come under the definition of ''hotel", it mustbe that the appellant must rent it out by way of business.Then the question is how the term ''business" has to beunderstood. The Act does not define the term ''business".The question would be then as to whether the term''business" as defined in section 2(d) of the Tamil NaduGeneral Sales Tax Act,1959 can be applied. https://hcservices.ecourts.gov.in/hcservices/

10. The Tamil Nadu General Sales Tax Act has beenenacted with a view to consolidate and amend the lawsrelating to the levy of a general tax on the sale orpurchase of goods in the State of Tamil Nadu. As far as theAct now in question is concerned, the object is to providefor the levy and collection of a tax on luxuries provided inhotels and lodging houses. Inasmuch as the object in thesetwo Acts cannot be said to be one and the same, it would notbe correct to read the definition of the term ''business" asgiven in the Tamil Nadu General Sales Tax Act, 1959 into theTamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act,1981. This issue can be examined from another angle as well.The Tamil Nadu General Sales Tax Act was enacted in the year1959, whereas the Act in question was enacted in the year1981. If really the Legislature desired the definition asgiven in Sales Tax Act as amended by the Amendment Act,1964to be adopted, that would have been certainly made clear inthis present Act by indicating sufficiently (i.e.,) byintroducing an explanation clause mentioning the same. Butthat has not been done. For the above reasons we are of theview that the definition of the term ''business" as given inthe Tamil Nadu General Sales Tax Act, 1959 cannot beapplied."6. But another Division Bench of this Court, in the context ofthe membership clubs availing the doctrine of mutuality and seekingexclusion from the sales tax in the matter of supply of food anddrinks to their members, considered the issue in Cosmopolitan Cluband others -vs- Tamil Nadu Taxation Special Tribunal and othersreported in (2002) 127 STC 475. This Court, after taking note of thedefinition provided under Clause 29A(f) of Article 366 of theConstitution of India read with Section 2(n)(vi) of the Tamil NaduGeneral Sales Tax Act, 1959, held that the said provision does notmake a distinction between the incorporated bodies and theunincorporated bodies. It was also held that the judgment in YoungMen's Indian Association Case reported in (1970) 26 STC 241 (SC)making a distinction does not help any more. In paragraphs 20 and 21,it is held as follows:-''20. The question considered in the Young Men'sIndian Association Case (1970) 26 STC 241 (SC), was, asalready stated, whether the supply of various preparationsby each club to its members involved a transaction of sale.The preparations referred to therein are refreshments foodand drink both of which are expressly covered by sub-clause(f) clause (29A) of Article 366. The Court did not lay downin that judgment that the supply of goods by incorporatedbodies were not sales. The court only held that in the caseof members' clubs, though incorporated where service orsupply is only to members, and there are no shareholders https://hcservices.ecourts.gov.in/hcservices/ who are not members, the supply of refreshments to suchmembers would not amount to sale.21. The supply of food, drink or refreshments havingbeen expressly dealt with in sub-clause (f) of clause(29A), whether or not incorporated, clubs can no longertake shelter under that decision of the Apex Court to avoidthe payment of sales-tax on the refreshments delivered orsupplied by them to their members, for valuableconsideration." 7. However, the decision of the Division Bench was taken to theSupreme Court in Civil Appeal No.3950 of 2002. The said appeal wasallowed by a judgment dated 25.9.2008. The following passages foundin the said judgment are relevant :-'' That decision of the Tribunal has been confirmed by theimpugned judgment. Suffice it to state that in this casethere was no determination by the fact finding authoritiesregarding the relationship between the Club and its membersin the matter of supply of food and drinks; that is to say,was the Club acting as an agent of the members or did theproperty in food and drinks pass from the club to themembers?"''In the circumstances, we think it appropriate that thematter should go back to the Tribunal, who will decide, onfacts, as to the exact relationship between the parties inthe matter of supply by the Club of food and drinks to itsmembers. In other words, the principle of mutuality andagency among other circumstances shall be gone into by theTribunal before which the said appeal is pending.At this stage, it may be noted that the Department isalso relying upon clause (vi) inserted to Section 2(n) ofthe 1959 Act. All these amendments have been brought on thestatute book in view of the 46th Amendment of theConstitution. We grant liberty to both sides to add by wayof amendment any ground open to them in law in the pendingappeal before the Tribunal. All contentions that areavailable to both the sides are expressly kept open andthey may raise the same before the Tribunal. The Tribunalshall decide the said appeal without reference to theimpugned judgment of the High Court which is under appeal."(Emphasis added)8. In the present context, it is unnecessary to go into thequestion whether the members' clubs are eligible to pay sales tax onthe food and drinks supplied by them in the light of theconstitutional backing and the subsequent amendment made to the TamilNadu General Sales Tax Act. The Court is only concerned with theissue relating to liability to pay luxury tax on the lodging https://hcservices.ecourts.gov.in/hcservices/ accommodation provided by the clubs on hire charges. 9. Mr.Ramani, learned counsel for the petitioners drew theattention of this Court to the judgment of the Karnataka High Courtreported in (1999) 115 STC 338 in the case relating to Bangalore GolfClub -vs- Assistant Commissioner of Luxury Taxes. In that decision,the Karnataka High Court was concerned with the similar provisionsfound in Karnataka Tax on Luxuries Act. The Karnataka High Court,after referring to various dictionary meanings of the words ''hotel"and ''residential hotel" held that the Karnataka Luxuries Tax Actwill not apply to every building where lodging accommodation isprovided. It was observed that if the wide definition as suggested bythe revenue is accepted, then it will be necessary to tax evenGovernment Guest Houses and Circuit Houses.10. In paragraph 12 of the judgment, it is observed asfollows:-''12. The charge is on the luxury provided in a hotel. Theword hotel refers to a building or part of a building whereaccommodation is provided. Charging provisions have to bestrictly construed. In a hotel normally the transient orguests are provided sleeping accommodation. Lodgingaccommodation must be by way of business for monetaryconsideration. The term ''hotel" includes lodging house,but has not included clubs. In the definition of ''hotel"under the Karnataka Tax on Luxuries (Hotels and LodgingHouses) Act, 1979, it cannot be interpreted to includeevery building where lodging accommodation is provided.Even in Government guest houses, circuit houses,etc.lodging accommodation is provided, but whether they canbe called as hotel. In any case the term ''hotel" and''club" are not convertible and distinction exists betweenthem. It is no doubt true that clubs are providing luxuriesand amenities as defined in section 2(5) (luxury providedin a hotel). The main activity of a club is not that of ahotel and it is only incidental that the members or guestsof the members of other clubs are provided the facility forstay and food on reciprocal basis. In common as well ascommercial parlance, club providing such activity would notbe considered to be a hotel. That stage has not beenpointed, where the club ceased to have its own existence asa club and is converted into a hotel. The business which ahotel is required to carry on for lodging accommodation, iswith the intention and main object as lodging house oraccommodation or building where the lodging accommodationis provided by way of carrying on business. The activity ofrenting the room or charging for food in a club cannot beconsidered to be its main activity so as to fall within thecharging section". https://hcservices.ecourts.gov.in/hcservices/

11. In fact, subsequent to the judgment referred to above, theKarnataka State Legislature has amended the definition to includeclubs specifically under the Act. Therefore, in the present case, inthe absence of any wider definition, by reading into the term''hotel", lodging accommodation provided by the clubs will causeviolence to the said definition.12. Mr.Haja Naziruddin, learned Special Government Pleader placedreliance upon the definition of the term ''hotel" found in Section 2(f). According to him, the said section has the followingingredients:-(a)a building or part of a building;(b)where residential accommodation with or without board isprovided;(c)provision of accommodation is by way of business;(d)for a monetary consideration; and(e)includes a lodging house. (Emphasis added)13. The learned Special Government Pleader, after referring tothe definition, stated that the ingredients found in sub-clauses (a)(b) and (d) of Section 2(f) stand satisfied. He stated that even ifthe definition (a) to (d) should have the ingredients of sub-section2(f)(c), and the activity by way of a business was not found in aclub but the definition in section 2(f) (e), which includes a lodginghouse, will certainly cover all the clubs where residentialaccommodation is provided. The learned Special Government Pleadercontended that the term 'Lodging House' includes wider connotation.In this regard, he referred to the judgment of the Supreme Court inReserve Bank of India -vs- Peerless General Finance and InvestmentCo. Ltd. and others reported in AIR 1987 SC 1023. The learnedcounsel placed reliance upon paragraph 31 of the said judgment andsubmitted that the term ''include" is used in order to enlarge themeaning of the words or phrases not only to have the ordinary popularand natural sense of the word but also the sense which the statutewishes to attribute to it.14. This argument overlooks the fact that as in the case of theTamil Nadu General Sales Tax Act, they want to have a widerdefinition of the term ''sale" as set out in Section 2(n) and afterthe Constitutional amendment made to the Act, certainly theLegislature would have felt in similar way to amend the provisions ofthe Luxuries Act. After the judgment of the Karnataka High Courtunder the Luxuries Act, the Karnataka Legislature has made a specificinclusion by adding the term ''club" but such is not the case herein.In fact, even after the judgment of the Division Bench in Sri PalaniDhandayuthabani Devasthanam case (2001) 124 STC 553 (supra) (renderedon 27.9.2001), such an exercise was not done. https://hcservices.ecourts.gov.in/hcservices/

15. This Court is not able to agree with the submission that theword ''lodging house" can have a meaning different from that of theword ''hotel" and for running a hotel, the ingredient of profitmotive must be shown, whereas in the case of a lodging house, such anexclusion was deliberately made by the Legislature. It will not beout of place to refer to the definition ''Residential Hotel" found inSection 2(11) of the Tamil Nadu Catering Establishments Act, 1958. Itreads as follows:-''Residential Hotel means any premises in which thebusiness of providing dwelling accommodation and supply ofmeals to any member of the public or a class of the publicis carried on".16. When the provisions of the Act was sought to be applied to amembership club (i.e. to the YMIA), a learned Single Judge of thisCourt after noting the object of the Act for the welfare of theemployees made a liberal interpretation. However, the matter wastaken to the Division Bench and that view was reversed. The saiddecision is reported in 1964 (2) LLJ 302 in the case relating toYoung Men's Indian Association -vs- Assistant Inspector of Labour,Madras. The following passages found in page Nos.304 and 305 may beusefully extracted below:-''Jagadisan, J., however held that as the Act was a pieceof welfare legislation of promoting the interests oflabour, to prevent exploitation by employers, a widermeaning should be given to the word ''business". Thelearned Judge referred, in this connection, to severaldecisions which lay down the principle that the words in astatute should be interpreted in accord with the intentionof the legislature. There can be little doubt in regard tothe correctness of this proposition. But at the same time,it must be recognised that the definition given in a statueprovides the key to its meaning. A statute has, therefore,to be understood in the light of the definition containedin it. Generally, the scope and extent of operation of astatute has to be determined according to the language usedtherein. That language again has to be understood normallyin the light of the definition contained in the Act. Therehave been instances where an apparently wide meaningimported by the definition has been controlled by theoperative words of the statute. But, where there is no suchquestion of conflict between the definition and theoperative part of the statute, the normal rule is that themeaning of the statute has to be ascertained only withreference to the definition. It will not therefore be opento the Court to enlarge the scope of the statute on anyassumed or presumed policy of the legislature behind theenactment. Except perhaps in cases where the statute is https://hcservices.ecourts.gov.in/hcservices/ obscure or ambiguous, external aids to the interpretationshould not be resorted to. It may be that the legislationin the instant case was a welfare legislation. But that isnot a reason why its operation should extend beyond itsplain intendment. As we have pointed out, the definition of''catering establishment", imports the idea of a businessin supplying articles of food to the public. It is a well-settled rule of interpretation that where two or more wordsare coupled together and used, they take colour from eachother. In Maxwell, on Interpretation of Statutes, 11thEdn., p.321, it is stated:''When two or more words which are susceptible ofanalogous meaning are coupled together noscunter asociis, they are understood to be used in theircognate sense. They take, as it were, their colourfrom each other, that is, the more general isrestricted to a sense analogous to the lessgeneral."The limits of this rule was discussed by the SupremeCourt in State of Bombay -vs- Hospital Mazdoor Sabha (1960-1-LLJ 251) where Gajendragadkar, J. (as he then was),observed at p.256:''It must be borne in mind that noscuntur asociis is merely a rule of construction and itcannot prevail in cases where it is clear thatthe wider words have been deliberately used inorder to make the scope of the defined wordcorrespondingly wider. It is only where theintention of the legislature in associating widerwords with words of narrower significance isdoubtful, or otherwise not clear that the presentrule of construction can be usefully applied. Itcan also be applied where the meaning of thewords of wider import is doubtful; but, where theobject of the legislature is using wider words isclear and free of ambiguity, the rule ofconstruction in question cannot be pressed intoservice."In the present case, the word ''business" thoughgenerally of wide import does acquire a more limitedmeaning when read with the words ''of the supply ofrefreshments.... to the public....". Having regard to thefact that ''residential hotel" and ''restaurant" have beendefined in the Act, and are intended to interpret the words''catering establishments" implying as they do a businesswith a profit motive, we must conclude that the object of https://hcservices.ecourts.gov.in/hcservices/ the legislature was to use the word ''business" in itscommonly accepted sense, namely, that form of systematicactivity prompted by a profit motive. To give a differentinterpretation would bring within the meaning of the Act,annachatrams, private guest houses, etc. It would hardlyhave been the intention of the legislature that theseinstitutions should be comprehended by the Act." 17. The ruling in Sri Palani Dhandayuthabani Devasthanam case(supra) had become final and the present attempt is to review thedecision of the Division Bench. The question raised is not whether byletting out the rooms for hire for their members' use onconsideration, the doctrine of mutuality is applicable or not. On thecontrary, when the luxury tax is liable to be imposed under section 4only on hotels, which has got a specific definition under the Act,and when such definition cannot apply to include the accommodationprovided by the clubs to its members whether the clubs areincorporated or unincorporated bodies. The charging section undersection 4 must take its colour from section 2(f) of the Luxuries Actand it cannot be divorced from the meaning contained therein.18. The attempt by the State to distinguish that a templedevasthanam or a religious institution is not commercially orientedwhereas clubs can be commercially oriented is to really circumventthe issue and to somehow cover all the clubs under the Luxuries Act.If in a parallel legislation, the legislature had undertaken anattempt to plug any loophole in the definition by taking advantage ofthe constitutional backing under Article 366 (29-A), it isunthinkable as to how the revenue can still argue thatnotwithstanding any amendment to the Act, the word ''lodging house"will include all the clubs providing accommodation to its members.What is important ingredient in section 2(f) is a business motive andit was not the intention of the legislature to divorce the word''business" from the consideration of the term ''lodging house". Itis not necessary to refer to the other provisions under theIndustrial Disputes Act by referring to Cosmopolitan Club case assuggested by the counsel for the petitioner or under the provisionsof the Income Tax Act by placing reliance upon Bangalore Golf Clubscase as relied on by the respondent. While the legislature has gotevery right to legislate on the subject under Entry 62 of List II ofSchedule VII and having legislated on the said entry, this Court hasto decide only the relationship between the charging section and thedefinition portion. It cannot introduce any artificial meaning to theterm ''hotel" as suggested by the counsel for the respondent State.19. Though an attempt is made by stating that the matter willhave to be decided only after remitting the matter to the appropriateauthority, this Court is unable to agree with the said submission.The definition of the term ''hotel" as provided under the Act is notsusceptible for any different meaning. It is not even suggested by https://hcservices.ecourts.gov.in/hcservices/ the counsel for the State that the clubs while providingaccommodation is doing a business so as to attract the chargingsection under section 4 of the Luxuries Act.20. In view of the above, the action instituted by therespondents in attempting to cover the clubs which are thepetitioners before this Court within the purview of the Luxuries Actis without jurisdiction and any action taken pursuant to suchcoverage will become void ab initio. 21. Hence, all the writ petitions will stand allowed. No costs.If any tax is collected by any coercive process or by compulsion, thesaid tax collected shall be returned to the petitioners within aperiod of eight weeks form the date of receipt of a copy of thisorder. The question of unjust enrichment and hence the amounts shouldgo back to the State will not arise in these cases as it wascollected only from the members of the clubs and not from anyunidentifiable public. The clubs can utilise those amounts forproviding better amenities to their members.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarjsTo1. The Commercial Tax Officer, Coonoor Asst.Circle, Coonoor-2, The Nilgiris. 2. The Commercial Tax Officer, Cuddalore.3. The Special Commissioner and Commissioner of Commercial Taxes, Chennai. 4. The Commissioner and Secretary, Commercial Taxes and Religious Endowment Board, Fort St.George, Chennai-9.5. The Commercial Tax Officer, Egmore I-Assessment Circle, Chetpet, Chennai-31. https://hcservices.ecourts.gov.in/hcservices/

6. The Commercial Tax Officer, Trichy Road Assessment Circle, Coimbatore. 7. The Appellate Assistant Commissioner (CT), Coimbatore.8. The Joint Commissioner and Commissioner of Commercial Taxes (RP), Chepauk, Chennai -5. 9. The Deputy Commercial Tax Officer, Udagamandalam (North), Udagamandalam, The Nilgiris. 1 cc To Mr.Inbarajan, Advocate, SR.610341 cc To Mr.K.J.Chandran, Advocate, SR.615501 cc To Mr.S.A.Rajan, Advocate, SR.613419 ccs To The Government Pleader (Taxes) SR.No.61087, 61088, 61089,61090, 61091, 61092, 61093, 61094 & 61095.W.P.Nos.8400 of 1999,25522, 24743 to 24746, 38296 to 38302, 39555 to39557, 39564 to 39566,45486, 45856 to 45859 of2002, 10644 to 10647 of2003 and all connected WPMPs.KSK(CO)SRA(13/11/2008)