2019 (11) TMI 1588 - HC - VAT / Sales Tax

Seeking to declare the definition of Sec. 2(15)(ix) to Explanation I and Sec.2(33)(vi) to Explanation I of Tamil Nadu Value Added Tax Act, 2006, as void, unconstitutional, inoperative and unenforceable and the recoveries pursuant thereto are without authority of law and infringe Article 19(g) and 265 of the Constitution of India - Doctrine of mutuality - HELD THAT - Very recently the Hon'ble Supreme Court has settled the issue in the case of STATE OF WEST BENGAL ORS. VS. CALCUTTA CLUB LIMITED, 2019 (10) TMI 160 - SUPREME COURT . The issue before the Hon'ble Supreme Court was whether the judgment and order passed by the Division Bench of the Hon'ble Calcutta High Court affirming the view expressed by the West Bengal Taxation Tribunal and disposing of the appeal preferred by the dealer along with other connected appeals holding, inter alia, that the assessee, the Calcutta Club Limited, was not liable for payment of sales tax under the provision of the West Bengal Sales Tax Act, 1994. In the light of the recent decision of the Larger Bench of the Hon'ble Supreme Court, we have to necessarily interfere with the show cause notice issued by the Assessing Officers proposing to levy tax on the writ petitioners. However, we are convinced of the fact that there may be other issues, which may require to be adjudicated by the Assessing Officer and since the prayer sought for in these writ petitions are for declaratory relief, we dispose of these writ petitions by holding that the law laid down by the Hon'ble Supreme Court in the case of Calcutta Club Limited, holds good and it shall enure in favour of the petitioners' club. The petitioners are permitted to give suitable reply to the notice issued by the Assistant Commissioner and in the light of the decision of the Hon'ble Supreme Court, the theory of mutuality will apply to both incorporated and unincorporated clubs and this issue should be taken into consideration by the respective Assessing Authorities - petition disposed off.

Summary

Issues:
Challenge to the definition of Sec. 2(15)(ix) and Sec.2(33)(vi) of Tamil Nadu Value Added Tax Act, 2006 as void, unconstitutional, and infringing constitutional rights.

Analysis:
The writ petitions sought a declaration to invalidate the definitions of Sec. 2(15)(ix) and Sec.2(33)(vi) of the Tamil Nadu Value Added Tax Act, 2006, claiming them to be void, unconstitutional, and infringing on constitutional rights. However, the High Court refrained from deciding on the prayer sought, citing a recent judgment by the Hon'ble Supreme Court in the case of STATE OF WEST BENGAL & ORS. VS. CALCUTTA CLUB LIMITED. The Supreme Court addressed the issue of whether the doctrine of mutuality applies to incorporated clubs post the 46th amendment to the Constitution of India. The Larger Bench of the Supreme Court, in its order dated 03.10.2019, clarified that the doctrine of mutuality continues to be applicable to both incorporated and unincorporated members' clubs after the constitutional amendment.

The judgment emphasized that the decisions in Young Men's Indian Association and other related cases still hold valid after the 46th Amendment. Additionally, it was clarified that the provision of food and beverages by incorporated clubs to their permanent members does not constitute a sale liable to sales tax under sub-clause (f) of Article 266(29-A). The Larger Bench dismissed the appeal in the Calcutta Club case, affirming the findings of fact and declaration of law by the West Bengal Taxation Tribunal and the Calcutta High Court.

In light of the Supreme Court's decision, the High Court concluded that the doctrine of mutuality applies to both incorporated and unincorporated clubs. Consequently, the show cause notice proposing tax levy on the petitioners was set aside. However, the court acknowledged the possibility of other issues requiring adjudication by the Assessing Officer. The writ petitions were disposed of by affirming the law laid down by the Supreme Court in the Calcutta Club case, ensuring its application in favor of the petitioners' club. The petitioners were permitted to respond to the notice issued by the Assistant Commissioner, with a directive for the Assessing Authorities to consider the doctrine of mutuality in their assessment.

In the final disposition, the High Court closed the writ petitions with no costs, emphasizing the application of the doctrine of mutuality to both incorporated and unincorporated clubs as per the decision of the Supreme Court.