2003 (10) TMI 613 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notice under amended provision of section 17(4)(i) of Karnataka Act No. 5 of 2001 as unconstitutional and in violation of articles 14, 265, and 19(1)(g) of the Constitution.

Analysis:
The petitioner, a catering service provider, challenged a notice under section 17(4)(i) of Karnataka Act No. 5 of 2001, arguing it was unconstitutional and violated constitutional articles. The petitioner had a contract with a club to provide catering services but did not serve liquor on the premises. The intelligence wing of the department sought tax under the amended provisions, which the petitioner deemed unreasonable and against constitutional rights.

The respondents contended that the liquor served by the club was attributable to the petitioner under the amended Act. The petitioner argued that as a separate entity from the club, the amended provision did not apply. The court examined the agreement between the petitioner and the club, finding a close linkage between them, indicating the petitioner's involvement in club services. The court noted that serving food to liquor consumers was part of the service, making the petitioner integral to the club's operations.

Referring to a Supreme Court judgment regarding incidental services, the court emphasized that the petitioner's services were beneficial to the club members, akin to amenities provided by establishments. The court rejected the petitioner's claim of being an independent unit, citing the inter-link between the petitioner and the club. Consequently, the court upheld the respondents' decision to seek tax composition from the petitioner.

Regarding the constitutional violation claim, the court analyzed the legislative intent behind section 17(4) and the objective of restricting liquor trade. The court found no grounds for the petitioner's argument, emphasizing that reasonable restrictions could be imposed by the State. The court distinguished a Supreme Court judgment cited by the petitioner, highlighting the public interest aspect of the restriction in the present case, which aligned with the State's objectives.

In conclusion, the court dismissed the writ petition, directing the respondents to decide the case based on the judgment. The court found no justification to interfere, upholding the constitutionality of the amended provision and the State's imposition of reasonable restrictions.