2017 (12) TMI 619 - HC - VAT and Sales Tax

Benefit of Composition Tax - dealer selling Liquor - denial on the ground that as per Rule 135(4) of the KVAT Rules, 2005, a Dealer selling liquor is not entitled to have the benefit of composition of tax under Section 15 of the Act - Held that - The petitioner-assessee is admittedly selling liquor in one of its Units or Divisions namely, 3-Star Hotel run by it. The petitioner also holds a common registration number with the Respondent-Department. Merely because the petitioner - assessee can bifurcate the turnover relating to different commodities and the Respondent-Assessing Authority can also verify the same, it does not entitle the petitioner-assessee to claim blanket benefit of composition under Section 15 of the Act. If the State does not intend to give the benefit of composition to the Dealer selling liquor, it can certainly do so and no valid challenge can be made to the same - The petitioner Dealer cannot compel the Respondent-Department to grant such composition benefit, while maintaining the common registration and also simultaneously carry on the business of the goods or commodities like liquor which is specifically prohibited under Rule 135(4) of the Rules for availing such benefit. Petition dismissed - decided against Petitioner.

Issues:
1. Denial of benefit of Composition Tax under Section 15 of the Karnataka Value Added Tax Act, 2003 to a business running multiple composite operations.
2. Interpretation of Rule 135(4) of the Karnataka Value Added Tax Rules, 2005 regarding the eligibility for Composition Tax.
3. Application of Sections 15(2)(e) and 38(6) of the Act in determining eligibility for Composition Tax.
4. Dispute over the denial of Composition Tax benefit due to the sale of liquor by the assessee.

Analysis:
1. The petitioner, a company operating various businesses like an Amusement Park, 3 Star Hotel, and a restaurant, challenged the denial of Composition Tax benefit by the Assessing Authority under Section 15 of the Karnataka Value Added Tax Act, 2003. The denial was based on Rule 135(4) of the Karnataka Value Added Tax Rules, 2005, which prohibits dealers selling liquor from availing the Composition Tax scheme.

2. The Assessing Authority contended that since the petitioner held a common registration for all its businesses and sold liquor in its 3-Star Hotel, the benefit of Composition Tax was rightly denied. The petitioner argued that Section 15(2)(e) of the Act allows for the bifurcation of turnover for eligible and ineligible commodities, thus the Composition Scheme should not be entirely denied based on the sale of liquor.

3. The Respondent-Department justified the denial of the benefit citing the violation of Rule 135(4) due to the sale of liquor along with other commodities not covered under Section 15 of the Act. The Department highlighted the appeal mechanism under Section 62 of the Act and the provision in Section 38(6) empowering the Commissioner to treat separate business units for taxation purposes.

4. The Court upheld the denial of Composition Tax benefit, emphasizing that the petitioner, despite being able to bifurcate turnover, must obtain separate registrations for eligible and ineligible businesses to claim the benefit under Section 15. The judgment clarified that the State has the authority to restrict concessions like Composition Tax for liquor dealers and that the petitioner cannot compel the Department to grant the benefit while selling prohibited goods like liquor.

5. The Court concluded that there was no conflict between Rule 135(4) and Section 15 of the Act, and dismissed the writ petitions, advising the petitioner to seek separate registrations for different divisions to avail Composition Tax benefits lawfully. The judgment highlighted the importance of complying with registration requirements and eligibility criteria for claiming tax benefits under the Act.

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