2003 (3) TMI 675 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner's turnover in relation to sales effected in canteens is exempt from sales tax under notifications dated September 1, 1964, and March 25, 1989.
2. Validity of the assessments and penalties imposed on the petitioner for the assessment years 1989-90, 1990-91, and 1991-92.

Issue-wise Detailed Analysis:

1. Exemption from Sales Tax under Notification dated September 1, 1964:
The notification dated September 1, 1964, issued under section 17 of the Madras General Sales Tax Act, 1959, exempts sales by canteens run by an employer or by employees on a co-operative basis on behalf of the employer under a statutory obligation without profit-motive, provided the employer subsidizes at least 25% of the total expenses incurred in running the canteen. The court held that the petitioner did not satisfy these requirements as the canteens were run by independent contractors with a profit motive. The provisions of the Factories Rules, which require employers to provide canteens, do not mandate that employers must run the canteens themselves. The exemption is limited to canteens run directly by the employer or by employees on a co-operative basis, not by independent contractors.

2. Exemption from Sales Tax under Notification dated March 25, 1989:
The notification dated March 25, 1989, grants exemption from tax payable on the sale of food and drinks by hotels, restaurants, sweet stalls, or any other eating houses whose total turnover does not exceed Rs. 18,25,000 per annum. The court interpreted "total turnover" as the aggregate turnover of all goods of a dealer at all places of business in the State. The petitioner, who runs canteens at multiple locations, must consider the total turnover from all locations to determine eligibility for exemption. The court found that the petitioner's total turnover exceeded the specified limit, thus disqualifying them from the exemption.

3. Validity of Assessments and Penalties:
The petitioner did not file returns for the relevant years, leading to assessments on a best judgment basis and a penalty of 150%. The appellate authority remanded the case for fresh assessments based on the petitioner's records, setting aside the penalty. The court upheld the appellate authority's decision, emphasizing that the assessing officer must consider the bona fides of the assessee when imposing penalties. The court directed the assessing officer to re-examine the penalty in light of relevant legal precedents, including the decisions in State of Madras v. Fairmacs Trading & Co. and Appollo Saline Pharmaceuticals (P) Ltd. v. Commercial Tax Officer.

Conclusion:
The petitioner is not entitled to exemptions under the notifications dated September 1, 1964, and March 25, 1989, as the canteens were run by independent contractors with a profit motive, and the total turnover exceeded the specified limit. The court directed the assessing officer to re-examine the penalty imposed, considering the bona fides of the petitioner. The writ petitions were disposed of accordingly, with connected miscellaneous petitions closed.