2009 (7) TMI 1188 - HC - VAT and Sales Tax

Interpretation of entry 57 of the First Schedule to the KGST - Held that - As already held that the term which referred to in entry 57(i) refers to hotel and restaurant which again means the dealer owning or running the restaurant, and therefore the turnover referred to therein is the total turnover of the dealer in all the goods. In other words, if the sale of all the goods in the hotel or restaurant reaches or exceeds ₹ 20 lakhs, then the dealer running the hotel or restaurant will be liable to pay sales tax on the turnover of cooked food and beverages at the rate provided under entry 57(i) of the Act. Therefore, the decision rendered by this court abovereferred cannot be said to have laid down the correct position of law. We accordingly overrule the same. The S.T. revision cases are consequently dismissed.

Summary

Issues:
Interpretation of entry 57 of the First Schedule to the KGST Act for sales tax assessments of a company running hotels and restaurants.

Analysis:
The case involves the interpretation of entry 57 of the First Schedule to the KGST Act for sales tax assessments of a company operating hotels and restaurants. The petitioner, a government undertaking, claimed exemption from sales tax on cooked food and beverages in certain restaurants with turnover below Rs. 20 lakhs. However, the Deputy Commissioner set aside the exemption orders and directed assessment of the entire turnover of cooked food. The Tribunal upheld the levy based on a Division Bench judgment. The Division Bench referred the matter for decision, questioning the correctness of the previous judgment.

The key issue raised was whether the turnover of cooked food and beverages alone or the total turnover of the hotel should be considered for liability under entry 57(i). The court clarified that liability is triggered when the turnover of cooked food and beverages reaches Rs. 20 lakhs, excluding turnover of other goods. The Special Government Pleader argued that the turnover referred to in entry 57(i) encompasses the total turnover of the hotel, including all branches, based on a Supreme Court decision reversing a Madras High Court judgment.

Another crucial question was whether each hotel or restaurant should be treated as an independent unit for tax liability determination. The court observed that the Act allows a dealer to have a single registration with branch registrations for each business place. The definition of "turnover" indicates it includes the aggregate amount from all business locations. Therefore, the turnover of all hotels and restaurants operated by the petitioner should be considered collectively to ascertain liability under entry 57(i).

The court emphasized that the term "which" in entry 57(i) refers to the hotel or restaurant itself, not the cooked food. Consequently, the turnover mentioned in the entry pertains to the dealer running all branches in the State. The judgment overruled the previous decision that excluded turnover of other goods in a hotel for tax liability determination, stating that if the total sales of all goods exceed Rs. 20 lakhs, tax is applicable on cooked food and beverages. The court dismissed the revision cases, affirming the Tribunal's decision and clarifying the correct interpretation of entry 57(i) for sales tax assessments in the context of hotels and restaurants.