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2008 DIGILAW 42 (KAR)

STATE OF KARNATAKA v. WOODLANDS HOTEL (P. ) LTD.

2008-01-17

A.S.BOPANNA, K.L.MANJUNATH

body2008
ORDER K. L. MANJUNATH, J. - This revision is by the Revenue under section 23(1) of the Karnataka Sales Tax Act, 1957. The respondent - assessee is running a boarding and lodging at Bangalore. For the assessment years 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02 the assessing officer accepted the returns filed by the assessee under the Sales Tax Act and passed an order under section 12(3) of the Act. The revisional authority, on examining the assessment order observed that the orders of assessment were found to be prejudicial to the interest of the Government on the following three grounds : (1) The sales turnovers relating to food and drinks determined by assessing authority was not commensurate with the purchases and also with the expenditure relating to salaries and establishment. (2) Purchase of charcoal and brickets from unregistered dealers not having been assessed for full value of purchase was not in accordance with law; and (3) There was error in not having levied purchase tax on purchases of firewood from unregistered dealers. A show-cause notice was issued by the Joint Director for which a detailed reply was submitted by the assessee. After rejecting the contention, the Joint Commissioner of Commercial Tax has directed the assessing authority to issue a revised demand as per his order dated October 30, 2004 and held that the assessee has not disclosed the actual purchase of charcoal, firewood and brickets purchased by the assessee for its business and that there is an escaped assessment in regard to the sale of food and drinks and that no purchase tax has been paid on the purchase of liquor. The order of the revisional authority was challenged by the assessee by filing an appeal before the Karnataka Appellate Tribunal, Bangalore in STA Nos. 2948 to 2952 of 2004. The Tribunal has allowed the appeal of the assessee and set aside the order passed by the revisional authority by its judgment dated September 16, 2005. Being aggrieved by the judgment of the Tribunal, the present revision petition is filed raising the following substantial questions of law. (1) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in giving a finding that the provisions of section 6 of the Act are attracted only if the goods purchased from unregistered dealers in the course of business are consumed in the manufacture of other goods ? (1) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in giving a finding that the provisions of section 6 of the Act are attracted only if the goods purchased from unregistered dealers in the course of business are consumed in the manufacture of other goods ? (2) Whether, in the facts and circumstances of the case, the purchase of charcoal, firewood and brickets from unregistered dealers and consumed for heating water in the course of business attracts the provisions of section 6 of the Act and is eligible to levy of tax under section 6 of the Act ? (3) Whether the Tribunal was justified in deleting the turnover added by the revised authority so far as levy of tax on food and drinks is concerned, without appreciating the evidence on record ? We have heard the learned counsel appearing for the parties. According to the learned counsel for the Revenue, the Tribunal without considering the reasonings assigned by the revisional authority has given benefit to the assessee and allowed the appeal erroneously. He further contends that the Tribunal was not justified in giving a finding that the provisions of section 6 of the Act attract only goods purchased from unregistered dealers in the course of business. According to him, the assessee has purchased charcoal, firewood and brickets from unregistered dealers and the same was used not only for heating the water for the purpose of running the lodge but also as a cooking media for preparing food articles. He further submits that considering the total purchase of provisions and other articles by the assessee and considering the business turnover of the assessee, the Tribunal was not justified in reversing the findings of the assessing officer. Therefore, he requested the court to allow the appeal. He has relied upon the judgment of this court in Ayodhya Restaurant, Hubli v. Deputy Commissioner of Commercial Taxes (Assessments) - II, Hubli reported in [2001] 121 STC 618; [2000] 48 Kar LJ 224. According to the learned counsel for the assessee, the Tribunal was justified in reversing the findings of the revisional authority since the revisional authority has accepted the books of account maintained by the assessee. According to the learned counsel for the assessee, the Tribunal was justified in reversing the findings of the revisional authority since the revisional authority has accepted the books of account maintained by the assessee. When the books of account of the assessee are not rejected by the revisional authority, the revisional authority would not get jurisdiction to modify the order of assessment by holding that there is an escaped assessment and that the assessing officer did not scrutinize the accounts properly. He further contends that Ayodhya Restaurant's case [2001] 121 STC 618 (Karn); [2000] 48 Kar LJ 224 has no application in regard to the firewood, charcoal or brickets purchased by the assessee from an unregistered dealer which is consumed for heating purpose. He further contends that with regard to the sale of liquor, the authority has no power to levy tax in respect of the liquor sold by the assessee subsequent to February 16, 2001. He further contends that in regard to the purchase of provisions, there cannot be any nexus between the purchase of the business turnovers of the assessee as the assessee has been supplying the food to the employees of the entire establishment which is inclusive of boarding and lodging at a concessional rate. Therefore, he has relied upon the judgment of this court reported in STA No. 28 of 2002 dated November 24, 2004 (B. P. Pujari v. Asst. Commissioner of Commercial Taxes, Gokak). Therefore, he requests the court to allow the appeal. He further contends that the question of law framed by the Revenue cannot be treated as a substantial question of law as they are based on facts of the case. In the circumstances, he requests the court to dismiss the petition. Having heard the counsel for the parties, we have to consider whether the questions of law in this petition would arise for consideration, if these questions can be considered by us, provided these questions are not based on facts of the case and are purely questions of law. Be that as it may, considering the order passed by the Joint Commissioner (revisional authority), we have noticed from page 10 of his order that he has accepted the contention of the respondent - assessee as to the turnovers disclosed and based on the audit of the books and the turnover disclosed on actual receipts. Be that as it may, considering the order passed by the Joint Commissioner (revisional authority), we have noticed from page 10 of his order that he has accepted the contention of the respondent - assessee as to the turnovers disclosed and based on the audit of the books and the turnover disclosed on actual receipts. From this it is clear that the revisional authority has not doubted the genuinity of the books of account produced by the assessee. If the books of accounts produced by the assessee has not been disputed or rejected by the revisional authority as noticed by the Tribunal, the revisional authority would not get any jurisdiction to reopen the assessment or modify the order of assessment. Mr. Gangadhar Sangolli, though, has made an earnest attempt to convince this court that the revisional authority has not accepted the books of account, but he is unable to show the same from the order passed by the revisional authority. When the books of account is not in dispute, having been accepted by the revisional authority it is not open for the revisional authority to hold that there is no nexus between the purchase of the provision for the assessee and turnover. It all depends upon the number of employees he has employed in the entire establishment and if the assessee is giving supply of food at concessional rate to its employees, then there cannot be nexus between the purchase of the provision and the turnover. Therefore, the contention of the Revenue has to be rejected so far as the purchase of provision and the business turnover is concerned. In regard to the non-levying of purchase tax on the purchase of firewood from unregistered dealer, the Tribunal has given its definite finding that the main purpose of using the charcoal and brickets is for heating the water for lodging section and a finding has been given that no charcoal is used in preparing food articles in the restaurant section. Even then the assessing officer has given a finding of the use of charcoal in boarding at the rate of 40 per cent and in lodging at 60 per cent. As a matter of fact, it is to be stated on a higher side in regard to the use of charcoal at 40 per cent in boarding section. Even then the assessing officer has given a finding of the use of charcoal in boarding at the rate of 40 per cent and in lodging at 60 per cent. As a matter of fact, it is to be stated on a higher side in regard to the use of charcoal at 40 per cent in boarding section. Admittedly, the hotel in question is a well known hotel in Bangalore and it is not the case of the Revenue that the charcoal is used by the assessee for preparation of food articles. Therefore, we do not see any justification in regard to the revision of assessment on the purchase of charcoal. Lastly, coming to the turnover on the liquor, admittedly there is an exemption with effect from February 16, 2001. The exemption has been granted from levying of tax only in regard to sale of liquor and beer after February 16, 2001. Therefore, we do not see any merits in this petition. Accordingly, this petition is dismissed.