1984 (11) TMI 305 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of "turnover of sales" in entry 9 of the notification issued under section 41 of the Bombay Sales Tax Act, 1959.
2. Eligibility for exemption under entry 9 based on the nature of the establishment.

Detailed Analysis:

Issue 1: Interpretation of "turnover of sales" in entry 9 of the notification issued under section 41 of the Bombay Sales Tax Act, 1959

The primary issue was whether the term "turnover of sales" in entry 9 of the notification under section 41 of the Bombay Sales Tax Act, 1959, referred to the turnover of taxable sales or the turnover of all sales. The respondent, a registered dealer running a hotel and restaurant, argued that only the taxable sales should be considered for the turnover limit of Rs. 30,000 to qualify for the exemption.

The court examined the definition of "turnover of sales" as provided in clause (36) of section 2 of the Bombay Sales Tax Act, which includes the aggregate of sale prices received and receivable by a dealer. However, the court noted that the context in which the term is used in the notification is crucial. The opening part of the notification indicated that the classes of sales referred to are those that would have been liable to tax but for the exemption.

The court concluded that the turnover of sales referred to in entry 9 should be interpreted as the turnover of taxable sales, not all sales. This interpretation was supported by the deletion of the word "all" from the phrase "turnover of all sales" in the corresponding condition of the earlier version of the notification. The court found it difficult to accept that the deletion was merely to remove redundancy. Instead, it was to clarify that only taxable sales were to be considered.

Thus, the court held that the Tribunal was justified in holding that the expression "turnover of sales" meant the turnover of taxable sales and not the turnover of all sales.

Issue 2: Eligibility for exemption under entry 9 based on the nature of the establishment

The second issue was whether the respondent was eligible for the exemption under entry 9, given that the establishment was not primarily for the sale of sweetmeats. The court examined the language of entry 9, which provided exemptions for sales by dealers conducting various types of establishments, including hotels, restaurants, and shops primarily for the sale of sweetmeats.

The court found it unreasonable to interpret that a hotel or similar establishment could be primarily for the sale of sweetmeats, as their primary business is to provide boarding and lodging. The phrase "conducted primarily for the sale of sweetmeats" was found to apply only to shops or establishments of a like nature, not to hotels, eating houses, or boarding establishments.

Therefore, the court concluded that the Tribunal was correct in holding that the respondent was eligible for the exemption under entry 9, as the establishment did not need to be primarily for the sale of sweetmeats.

Conclusion:

- Question 1: The Tribunal was justified in holding that "turnover of sales" meant the turnover of taxable sales.
- Question 2: The respondent was eligible for the exemption under entry 9, as the establishment need not be primarily for the sale of sweetmeats.

Both questions were answered in favor of the respondent-dealer, and the Commissioner was ordered to pay the costs of the reference.