2002 (10) TMI 758 - HC - VAT and Sales Tax

Summary

Issues:
Rate of tax on the sale of soda in a bar attached hotel.

Analysis:
The case involved a dispute over the rate of tax applicable to the sale of soda in a bar attached hotel for the assessment year 1992-93. The assessee claimed that soda sold in the bar attached hotel should be taxed at 6 per cent under entry 40 of the Kerala General Sales Tax Act, 1963. However, the assessing authority contended that soda falls under entry 87 of the Act, which imposes a tax rate of 12.5 per cent. The first appellate authority upheld the assessing authority's decision, but the Tribunal ruled in favor of the assessee, stating that soda is a beverage and should be taxed at 6 per cent under entry 40, which is a special entry for bar attached hotels.

The Government Pleader argued that soda is considered "aerated water," falling under entry 87, and cited previous court decisions supporting this interpretation. On the other hand, the counsel for the assessee contended that when a taxing statute has both a general and a special entry, the special entry should prevail. The counsel also emphasized that the Tribunal correctly classified soda as a beverage under entry 40 for bar attached hotels.

The High Court analyzed entries 40 and 87 of the First Schedule to the Act. Entry 40 pertains to cooked food, including beverages, sold in bar attached hotels, taxable at 6 per cent. The court noted that beverages under entry 40 are expected to be products of the kitchen. Referring to previous court decisions, the High Court concluded that soda should be taxed at 12.5 per cent under entry 87 as a non-alcoholic drink, not falling under the category of beverages under entry 40. Therefore, the High Court reversed the Tribunal's decision and allowed the revision, ruling in favor of the department.

In conclusion, the High Court clarified that soda sold in a bar attached hotel should be taxed at 12.5 per cent under entry 87 of the First Schedule to the Act, as it does not qualify as a beverage under entry 40. The judgment emphasized the importance of interpreting tax entries accurately to determine the applicable tax rate for specific goods sold in different establishments.