2018 (3) TMI 1412 - HC - VAT and Sales Tax

Concessional rate of tax - supplies effected to the Unit run canteens - It is the stand of the petitioners in the writ petition that, as per the statutory provisions, the benefit of concessional rate of tax is applicable, not only in respect of supplies effected to the Canteens Stores Department, but also in respect of supplies effected to the Unit run canteens of the Military, Navy and Air Force - Held that - taking note of the distinction between a sale effected directly to the Canteen Stores Department and sales effected directly to Unit-run canteens of the Military, Navy, Air force etc., the State Government decided to depart from the earlier practice of granting concessional rate of tax even in respect of supplies effected to Unit-run canteens and confined the benefit of concessional rate of tax only to supplies effected to the Canteen Stores Department. The amendment, however, was to take effect only from the assessment year 2014-15, and for the prior period, it was felt not necessary to interfere with the benefit of concessional rate of tax, that was already extended to unit run canteens. The assessing Authority has not taken note of this amendment, which came into effect only from the assessment year 2014-15, and appears to have applied the rationale of the amended provision to even the earlier assessment years up to, but not inclusive of the assessment year 2014-15 - the assessment orders impugned in all these writ petitions, inasmuch as they pertain to assessment years 2011-12, 2012-13 and 2013-14, must necessarily be quashed. As regards 17209/2017, Ext.P3 assessment order, that is impugned in the said writ petition, pertains to the assessment year 2014-15, and the interpretation to be placed on the provisions of the 5th proviso to Section 6(1), is as indicated in this judgment. It is made clear that, in the said case, the petitioner will not be entitled to the benefit of the concessional rate of tax in respect of supplies effected to Unit-run canteens. Petition disposed off.

Summary

Issues Involved:
Challenge against assessment orders denying concessional rate of tax to supplies to military canteens.

Analysis:
The writ petitions challenged assessment orders under the Kerala Value Added Tax Act for the years 2011-12 to 2014-15, disputing the denial of concessional tax rates for supplies to Military, Navy, and Air Force canteens. The petitioners argued that the concessional rate should apply to supplies to Unit run canteens as well, not just the Canteen Stores Department. The assessing authorities rejected the concessional rate for supplies to Unit run canteens, leading to the legal challenge.

The statutory provisions under Section 6(1), 5th Proviso, were crucial in determining the applicability of concessional tax rates. Until 2013-14, the benefit extended to sales to or by various canteens, including Unit run canteens. However, an amendment effective from 01.04.2014 restricted the benefit only to sales to specific canteens like Canteen Stores Department, Central Police Canteen, etc. This change reflected the State Government's recognition of the distinction between Canteen Stores Department and Unit-run canteens, as highlighted by the Supreme Court's observations in a relevant case.

The judgment emphasized the significance of the amendment and criticized the assessing authority for applying the amended provision retrospectively to earlier assessment years. Consequently, assessment orders for the years 2011-12, 2012-13, and 2013-14 were quashed, directing fresh assessments considering the observations in the judgment. However, for the assessment year 2014-15 (pertaining to a specific case), the petitioner was not entitled to the concessional rate for supplies to Unit-run canteens. The court annulled the assessment order for 2014-15 and instructed a fresh assessment within six weeks, allowing the petitioner to raise other issues during the reassessment process.

In conclusion, the judgment clarified the application of concessional tax rates to supplies to military canteens, highlighting the impact of statutory amendments and ensuring fair assessments based on the relevant legal provisions.