2019 (5) TMI 804 - HC - VAT and Sales Tax

Payment of tax by hotels, restaurants and sweet-stalls - scope of Section 3-D of the TNGST Act - petitioner is one selling food and drinks at any other eating house - TNGST Act - HELD THAT - Section 3-D of the TNGST Act forms part of a fiscal statute and there is no room for adding words or phrases in the statutory provision. The first requirement for Section 3-D(1) of the TNGST Act to apply is the total turnover of the dealer should not be less than twenty five lakhs of rupees. The second aspect is that the provision stands attracted on the first point of sale - for being entitled to the concessional rate of tax at 2%, the first point of sale of food and drinks should be in a hotel or in a restaurant or in a sweet stall orany other eating houses. Therefore, what is contemplated is sale of food and drinks in these named establishments and any other eating houses cannot be read disjunctively, but to be read conjunctively along with hotels, restaurants and sweet stalls. This is more so because Section 3-D of the TNGST Act deals with payment of tax by hotels, restaurants and sweet stalls. Section 3-D of the TNGST Act does not state any other eating house but this is found in Subsection (1) of Section 3-D. Therefore, necessarily the interpretation for the words any other eating houses should be tandem with with a hotel, a restaurant or a sweet stall - The point of first sale is to the establishment which has set up the facility for its employees or the people who visit the establishment such as shopping malls. Therefore, the petitioner would not stand qualified for concessional rate of tax under Section 3-D(1) of the TNGST Act. The second limb of argument is based upon the amended Section 3-D of the TNGST Act which came into effect from 01.04.2002. Admittedly, the assessment years under consideration in these cases are 2002-2001 and 2001- 2002. Therefore, the amended Section 3-D of the TNGST Act would have no application to the cases on hand. There are several features which have been added in the amended Section 3-D, as it originally stood related only to the sale of food and drinks in the establishments named therein. Whereas the amended Section 3-D deals with sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages. The amended provision also includes serving in or catered indoors or outdoors by hotels, restaurants, sweet stalls, clubs, caterers and any other eating houses other than those falling under item 29 of Part C of the First Schedule. Thus there is entire change in the scheme as provided under the amended Section 3- D(1) of the TNGST Act and this is one more reason to hold that the amended provision cannot be retrospective or retroactive prior to 01.04.2002. The petitioner cannot rest his case based on the clarifications which were issued much prior to the amendment and those clarifications were assessee specific and does not bind the Court. Thus, the three main issues which we had taken up for consideration have to be decided against the petitioner - the questions of law framed for consideration have to be answered against the petitioner/assessee. The tax case revisions are dismissed and the substantial questions of law framed for consideration are answered against the petitioner/assessee.

Issues involved:

1. Whether the Tribunal erred in assessing the petitioner as a caterer not covered by Section 3D before 01.04.2002.
2. Whether the Tribunal failed to appreciate that the petitioner sells food and drinks at "any other eating house" as referred to in Section 3D.
3. Whether the Tribunal was wrong in concluding that caterers were excluded from Section 3D before 01.04.2002.
4. Whether the amendment to Section 3D effective from 01.04.2003 is clarificatory.

Detailed Analysis:

Issue 1: Tribunal's Error in Assessing Petitioner as a Caterer
The Tribunal assessed the petitioner under Section 3D of the TNGST Act, treating them as a caterer. The petitioner argued that their services, which include running canteens in hospitals, industrial establishments, and other places, should fall under "any other eating house" as per Section 3D. The Tribunal, however, held that the petitioner’s activities did not align with those of hotels, restaurants, or sweet stalls and thus did not qualify for the concessional rate of 2% tax under Section 3D.

Issue 2: Scope of "Any Other Eating House"
The petitioner contended that their sale of food and drinks in various establishments should be considered under "any other eating house" in Section 3D. The Tribunal disagreed, emphasizing that the provision applies to sales within specific establishments like hotels, restaurants, and sweet stalls. The court noted that the term "any other eating house" should be read in conjunction with these establishments, meaning the sale should occur within such places to qualify for the concessional rate.

Issue 3: Inclusion of Caterers Before 01.04.2002
The petitioner argued that caterers were implicitly included in Section 3D before the amendment on 01.04.2002. The Tribunal held that the explicit inclusion of caterers in the amended Section 3D from 01.04.2002 indicated that they were not covered prior to this date. The court supported this view, stating that the amendment brought a new concept and was not merely clarificatory.

Issue 4: Clarificatory Nature of the Amendment
The petitioner claimed that the amendment to Section 3D effective from 01.04.2002 was clarificatory, thus applicable retrospectively. The court disagreed, noting that the amendment introduced new elements and was substantive, not clarificatory. It pointed out that the legislative intent was clear in making the amendment effective from 01.04.2002, as stated in the official gazette.

Additional Points:
- The court emphasized that fiscal statutes must be strictly construed without adding words or phrases.
- The court rejected the petitioner’s reliance on clarifications issued by the Commissioner for other assessees, stating that such clarifications are not binding on the court.
- The court held that definitions from other enactments could not be transplanted into the TNGST Act.
- The court dismissed the petitioner’s argument that previous appellate authority decisions in their favor should bind the Tribunal, noting that the substantial questions of law must be independently considered.

Conclusion:
The court dismissed the tax case revisions, upholding the Tribunal’s decision that the petitioner did not qualify for the concessional rate under Section 3D before 01.04.2002. The substantial questions of law were answered against the petitioner.

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