2006 (8) TMI 557 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of exemption under Notification S.R.O. No. 363/92 for purchase turnover of goods consumed in preparation of cooked food for sale by respondent-assessee, specifically regarding bar attached hotels.

Analysis:
The High Court of Kerala examined the question raised in the sales tax revision case filed by the State concerning the exemption granted to the respondent-assessee on the purchase turnover of goods consumed in the preparation of cooked food for sale under Notification S.R.O. No. 363/92. The State argued that exemption is only granted under section 5A of the Kerala General Sales Tax Act, 1963 for materials used in the preparation of cooked food for sale in hotels and restaurants, excluding bar attached hotels. The relevant portion of the notification, S.R.O. 363/92, was analyzed to determine the scope of exemption.

The Court noted that the exemption under the notification is from liability under section 5A and is specific to the persons and goods mentioned in the notification. Clause 3 of the notification specifies that dealers in cooked food, excluding beverages falling under certain categories, sold in hotels and restaurants are entitled to exemption on the purchase of goods for consumption in the preparation of such food for sale. The condition for exemption is that the cooked food made from the purchased goods must be sold or served in hotels or restaurants. The exclusion of dealers in liquor under certain categories from the exemption indicates that bar attached hotels are not entitled to the exemption.

The Court emphasized that the notification clearly distinguishes between hotels and restaurants, excluding bar attached hotels, as eligible for exemption. The interpretation that bar attached hotels are entitled to exemption was deemed erroneous. Consequently, the High Court reversed the Tribunal's order, ruling that bar attached hotels and restaurants are not entitled to exemption under S.R.O. No. 363/92 for the purchase turnover of goods used in the preparation of cooked food for sale where liquor is also sold. As a result, the sales tax revision case was allowed by vacating the Tribunal's order and reinstating the assessment.