2015 (12) TMI 1086 - HC - VAT and Sales Tax

Revision petition - Whether on the facts and circumstances of the case, the learned Commercial Tax Tribunal was justified in law in confirming the order passed by the assessing authority holding that the revisionist is liable to pay the tax inspite of finding recorded that the first sale is effected by the respondent no.2 - Whether on the facts and circumstances of the case, the authority below was justified in law in holding that the assessee revisionist is liable to pay tax inspite of recording a finding of fact that the sale order was with the name of Dehradun Club and the sale consideration is received by Dehradun Club through its employee - substantial questions of law are answered against the revisionist - Decided against Assessee.

Summary

Issues Involved:
1. Tax liability determination between the revisionist and the 2nd respondent.
2. Interpretation of the contractual relationship and its impact on tax liability.
3. Evaluation of the role of the 2nd respondent and the revisionist in the business operations.
4. Applicability of relevant tax notifications and legal precedents.

Issue-wise Detailed Analysis:

1. Tax Liability Determination Between the Revisionist and the 2nd Respondent:
The primary issue was whether the revisionist or the 2nd respondent was liable to pay the tax on the sale of cooked food. The assessing authority initially held the revisionist liable under Section 7(3) of the U.P. Trade Tax Act, 1948, assessing tax liabilities of Rs. 1,76,750/- and Rs. 1,45,750/- for the assessment years 1998-99 and 1999-2000, respectively. The First Appellate Authority set aside this order, but the Tribunal later reinstated it, leading to the current revisions.

2. Interpretation of the Contractual Relationship and Its Impact on Tax Liability:
The revisionist argued that the 2nd respondent, owning the place of business, kitchen appliances, and employing the waiters, was the actual manufacturer and thus liable for the tax. The revisionist claimed to be merely a contractor receiving job charges and reimbursement for raw materials. However, the Tribunal and the High Court found that the revisionist was effectively conducting the business, receiving the sale proceeds after deducting a 12% commission paid to the 2nd respondent.

3. Evaluation of the Role of the 2nd Respondent and the Revisionist in the Business Operations:
The 2nd respondent, a limited company, facilitated the business by providing the infrastructure and receiving a commission. According to the memorandum of association, the club aimed to provide privileges and entertainments to its members, not to gain profits from the sale of food. The revisionist, on the other hand, managed the purchase, preparation, and sale of food, bearing the risk and receiving the majority of the sale proceeds, thus being deemed the dealer liable for tax.

4. Applicability of Relevant Tax Notifications and Legal Precedents:
The revisionist cited a notification dated 30.11.1998, arguing that tax on cooked food was to be levied at the point of sale to the consumer, which was managed by the 2nd respondent. However, the court noted that the actual business operations and profit realization were conducted by the revisionist. The cited case law, 'Commissioner of Trade Tax U.P. vs. SS Ayodhya Distillery and ors.' (2009) 19 VST 251, was found irrelevant as it dealt with a different issue concerning the classification of commodities.

Conclusion:
The High Court upheld the Tribunal's decision, confirming that the revisionist was liable for the tax. The court emphasized that despite the 2nd respondent's involvement in providing infrastructure and receiving commissions, the revisionist was the actual dealer conducting the business and earning the profits from the sale of cooked food. The substantial questions of law were answered against the revisionist, and both revisions were dismissed without any order as to costs.