9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (4) TMI 507 - HC - VAT and Sales TaxClassification of liquor dealers - imposition of different rates of tax on different dealers - violative of Article 14 and 19 of the Constitution - Held that - There is no longer any scope for the petitioners to contend that the State Legislature had no competence to provide for the levy of additional sales tax. The nature and identity of the additional sales tax imposed by the 1970 Act have not been in any way altered by the impugned Act. As already pointed out what has been done by the impugned Act is only to provide for a different mode of computation of the additional sales tax by linking the rate of levy to the taxable turnover instead of to the amount of tax assessed under the Act of 1959. The constitutional validity of the levy of additional tax is not in any manner affected by the said change brought about in the mode of levy and computation as a result of the amendments effected by the impugned Act. The Legislature with the sole intention of capturing substantial value addition taking place on liquor consumed in the premises of a Boarding House and Lodge, has brought this class of dealer under the net of tax, but Bar and Restaurants located in rural area which do not have the advantage of catering to the class of customers of economic superiority are exempted. Thus, the impugned notification dated 28.02.2014 which exempts liquor sold by dealers holding licence in Form No.CL-9 operating in rural areas in comparison with liquor sold by a person operating a Boarding House and Lodge in a rural area holding licence in Form No.CL-7 would form separate class of dealers. The State Legislature in its economic wisdom of taxation having chosen to provide for levy of tax on liquor sold by certain licence holders, considering the potential for tax collection on the huge value addition while exempting others whose sale price is regulated by the MRP indicated on the label of the container cannot be construed as discriminatory. The classification of dealers based on value addition criteria for the purpose of tax levy and exempting the dealers based on area criteria cannot be held to be discriminatory. - Decided against the petitioners.
Issues Involved:
1. Levy of cess/fee for CL-9 licence. 2. Alleged discrimination in the grant of exemption by the State. 3. Power to levy tax under the Karnataka Value Added Tax Act, 2003. 4. Validity of the impugned notification dated 28.02.2014. 5. Classification of dealers for tax purposes. 6. Rationality and legality of the classification based on area/population. 7. Examination of judicial precedents regarding taxation and classification. Detailed Analysis: Issue 1: Levy of cess/fee for CL-9 licence The appellants challenged the levy of cess/fee for CL-9 licences and other incidental aspects. The learned Single Judge dismissed the petitions based on an earlier order dated 30.09.2015 in the case of Sri M. Madhava Gowda Vs. Under Secretary to Government and Others. The Division Bench upheld this decision, finding no merit in the appellants' contentions. Issue 2: Alleged discrimination in the grant of exemption by the State The appellants argued that there was discrimination in the grant of exemption, contending that if liquor shops or wine dealers were exempt, restaurants or hotels selling liquor should also be exempt. The Court found that the classification between dealers and CL-9 licence holders was rational. The Court noted that dealers sell liquor in its original packaging, while CL-9 licence holders sell it in smaller quantities (pegs or glasses), justifying different treatment. Issue 3: Power to levy tax under the Karnataka Value Added Tax Act, 2003 The appellants contended that the Karnataka Value Added Tax Act, 2003, did not empower the State to levy tax on services or extra charges by bars and restaurants. The Court rejected this argument, stating that the tax was levied on goods (liquor) and not on services or ambience provided by the establishments. Issue 4: Validity of the impugned notification dated 28.02.2014 The Court examined the impugned notification, which exempted certain dealers from tax. The notification was found to be within the State's power under Section 5(1) of the KVAT Act. The Court upheld the notification, stating that it did not violate any constitutional provisions. Issue 5: Classification of dealers for tax purposes The Court found that the classification of dealers based on the type of licence and area of operation was rational and not arbitrary. The classification aimed to capture the value addition in urban areas where bars and restaurants could charge more due to the services provided. Issue 6: Rationality and legality of the classification based on area/population The Court upheld the classification based on area/population, noting that it was a common practice in taxation to classify based on economic and social factors. The classification was found to be reasonable and not violative of Articles 14, 19, and 304-B of the Constitution. Issue 7: Examination of judicial precedents regarding taxation and classification The Court referred to several judicial precedents, including the cases of ORIENT WEAVING MILLS PVT LTD vs UNION OF INDIA and STATE OF KARNATAKA vs M/S.HANSA CORPORATION, to support its decision. These precedents established that classification in taxation laws is permissible if it is based on rational criteria and serves a legitimate purpose. Conclusion: The appeals were dismissed, and the Court upheld the levy of cess/fee for CL-9 licences, the validity of the impugned notification, and the classification of dealers for tax purposes. The Court found no discrimination in the grant of exemptions and confirmed the State's power to levy tax under the Karnataka Value Added Tax Act, 2003.
|
