2008 (1) TMI 858 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in giving a finding that the provisions of section 6 of the Act are attracted only if the goods purchased from unregistered dealers in the course of business are consumed in the manufacture of other goods? Whether, in the facts and circumstances of the case, the purchase of charcoal, firewood and brickets from unregistered dealers and consumed for heating water in the course of business attracts the provisions of section 6 of the Act and is eligible to levy of tax under section 6 of the Act? Whether the Tribunal was justified in deleting the turnover added by the revised authority so far as levy of tax on food and drinks is concerned, without appreciating the evidence on record? Held that - When the books of account is not in dispute, having been accepted by the revisional authority it is not open for the revisional authority to hold that there is no nexus between the purchase of the provision for the assessee and turnover. It all depends upon the number of employees he has employed in the entire establishment and if the assessee is giving supply of food at concessional rate to its employees, then there cannot be nexus between the purchase of the provision and the turnover.Therefore, the contention of the Revenue has to be rejected so far as the purchase of provision and the business turnover is concerned. In regard to the non-levying of purchase tax on the purchase of firewood from unregistered dealer, the Tribunal has given its definite finding that the main purpose of using the charcoal and brickets is for heating the water for lodging section and a finding has been given that no charcoal is used in preparing food articles in the restaurant section. As a matter of fact, it is to be stated on a higher side in regard to the use of charcoal at 40 per cent in boarding section. Admittedly, the hotel in question is a well known hotel in Bangalore and it is not the case of the Revenue that the charcoal is used by the assessee for preparation of food articles. Thus no justification in regard to the revision of assessment on the purchase of charcoal. Lastly, coming to the turnover on the liquor, admittedly there is an exemption with effect from February 16, 2001. The exemption has been granted from levying of tax only in regard to sale of liquor and beer after February 16, 2001. Accordingly, this petition is dismissed.

Summary

Issues:
1. Revision filed by Revenue challenging assessment orders under Karnataka Sales Tax Act.
2. Revisional authority found assessment orders prejudicial to Government's interest.
3. Tribunal allowed assessee's appeal against revisional authority's order.
4. Substantial questions of law raised in revision petition.

Analysis:
1. The Revenue filed a revision challenging the assessment orders under the Karnataka Sales Tax Act, contending that the assessing officer's determination of sales turnovers was not commensurate with purchases and expenditure. The revisional authority found the assessment orders prejudicial to the Government's interest due to discrepancies in turnover determination and non-levying of purchase tax on certain items.

2. The Tribunal allowed the assessee's appeal against the revisional authority's order. The Tribunal held that the provisions of section 6 of the Act, regarding purchases from unregistered dealers, did not apply to goods consumed for heating water in the course of business. The Tribunal also disagreed with the revisional authority's findings on the turnover of food and drinks, stating that the evidence on record was not properly appreciated.

3. The Revenue contended that the Tribunal erred in reversing the revisional authority's findings without considering the reasons provided. The Revenue argued that purchases of charcoal, firewood, and brickets from unregistered dealers were used for both heating water and cooking, justifying the levy of tax. However, the assessee argued that the revisional authority had accepted the books of account, and without disputing them, had no jurisdiction to modify the assessment order.

4. The Court considered the contentions of both parties and examined the revisional authority's order. It noted that the revisional authority had accepted the turnover disclosed in the books of account, indicating no dispute over their genuineness. The Court rejected the Revenue's argument regarding the purchase of provisions and business turnover, emphasizing the lack of nexus between provision purchases and turnover due to concessional food supply to employees.

5. Regarding the non-levying of purchase tax on firewood, the Tribunal found that charcoal and brickets were primarily used for heating water, not food preparation. The Court agreed with the Tribunal's findings and dismissed the Revenue's claims on the purchase of charcoal. Additionally, the Court noted an exemption on liquor sales after February 16, 2001, further weakening the Revenue's case.

6. Ultimately, the Court dismissed the Revenue's petition, upholding the Tribunal's decision in favor of the assessee. The judgment clarified the application of tax laws to purchases from unregistered dealers and the assessment of turnovers, emphasizing the importance of proper scrutiny of evidence and books of account in tax assessments.