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2024 DIGILAW 561 (KER)

Pentafour Associates v. State Of Kerala

2024-05-24

A.K.JAYASANKARAN NAMBIAR, SYAM KUMAR V.M.

body2024
JUDGMENT : Dr. A.K.Jayasankaran Nambiar, J. As the issue involved in all these revision petitions is the same, they are taken up for consideration together and disposed by this common judgment. 2. The brief facts necessary for the disposal of the O.T. Revisions are as follows: The revision petitioner before us was a dealer in bakery products and beverages, most of which were prepared by him and sold through a commercial outlet owned by him in front of an amusement park. During the assessment years 2012-13, 2013-14 and 2014-15, the petitioner had opted to pay tax on the goods sold by him from his outlet at the rate of 0.5% in terms of Section 8(c)(i) of the Kerala Value Added Tax Act (‘the Act’ for short). Section 8(c)(i) of the Act reads as follows: Any dealer in cooked food and beverages, including beverages prepared by him, other than a dealer supplying cooked food or beverages to any airline service company or institution or shipping company for serving in air craft, ships or steamer or served in air craft, ship, steamer, bar attached hotel or star hotel may, at his option, instead of paying tax in accordance with the provisions of sub-section (1) of section 6 but subject to payment of tax, if any, payable under sub-section (2) thereof, paid tax at half percent of the turnover of cooked food and beverages prepared by him and also on the turnover of other goods in respect of which he is not the dealer effecting first taxable sale, as defined in the explanation under sub-section (5) of the section 6. Cooked food for the purpose of this clause shall include sweets and fresh fruit juice prepared and served in the restaurants and hotels. 3. The Assessing Authorities while completing the assessment found that out of the total sales turnover conceded by the petitioner, there was a certain portion of the turnover that pertained to sales of bakery products that had been purchased by the petitioner from other dealers within the State for the purposes of resale. 3. The Assessing Authorities while completing the assessment found that out of the total sales turnover conceded by the petitioner, there was a certain portion of the turnover that pertained to sales of bakery products that had been purchased by the petitioner from other dealers within the State for the purposes of resale. The Assessing Authority was of the view that the second limb of Section 8(c)(i), which permitted an assessee opting to pay tax under Section 8(c)(i) to pay tax at 0.5% even on the turnover of other goods of which he was not the dealer effecting first taxable sales as defined in the explanation under Section 6(5) of the Act, would not apply to the petitioner since according to it, the other goods had also to be in the nature of cooked food and beverages. 4. The Assessing Authority therefore completed the assessment by subjecting the turnover of re-sale bakery products to the regular rate of tax under Section 6 of the Act and accepting the petitioner’s claim for payment of tax at the compounded rate under Section 8(c)(i) of the Act in respect of the remaining turnover. 5. In the appeal preferred by the petitioner before the First Appellate Authority, the said authority confirmed the order of assessment, but permitted the petitioner to avail input credit of the tax paid at the time of purchase of those bakery products including beverages on the sale of which he was required to pay tax at the regular rate under Section 6(1) of the Act. 6. In the further appeal preferred before the Appellate Tribunal, the Tribunal chose to affirm the findings of the authorities below and dismissed the appeal preferred by the petitioner. It is impugning the said order of the Appellate Tribunal, that the petitioner is before us through these O.T. Revisions by raising the following questions of law: 1. Whether the findings of the Tribunal that there is no merit in the contention of the appellant that he is eligible for payment of compounded tax @1/2% on the turnover of other packaged bakery items such as bread, jam, chocolate, ‘kurkure', etc produced by others and purchased by the revision petitioner from local registered dealers paying tax at their sale point, is correct in law? 2. 2. Whether the findings of the Tribunal that the compounded rate of tax in terms of Sec.8(c)(i), is applicable only on the turnover of cooked food and beverages prepared by a dealer in cooked food and beverages, is correct in law? 3. Whether the finding of the Tribunal is correct in upholding the order passed by the 1st Appellate Authority and the Assessing Authority rejecting the claim of payment of compounded tax @1/2% of the entire turnover conceded by the revision petitioner, especially when he has paid over tax under Sec.6(2) on the turnover of goods purchased from unregistered dealers and when the other packaged bakery products dealt with were purchased from registered dealers in Kerala paying VAT at their sale point? 4. Whether the finding of the Tribunal is correct in upholding the assessment of the turnover of packaged bakery products sold by the petitioner at Scheduled rates? 7. We have heard Sri.R.Muraleedharan, the learned counsel for the petitioner in these O.T. Revisions and Sri.V.K.Shamsudheen, the learned senior Government Pleader for the respondent State. 8. On a consideration of the facts and circumstances of the case and the submissions made across the bar, we are of view that the interpretation of the provisions of Section 8(c)(i) of the Act by the authorities below is legally unsustainable. As can be seen from the provisions of Section 8(c)(i) of the Act, an option is given to a dealer in cooked food and beverages, including beverages prepared by him, to pay tax at half percent of the turnover of cooked food and beverages prepared by him and also on the turnover of other goods in respect of which he is not the dealer effecting first taxable sale as defined in the explanation under Section 6(5) of the Act. 9. In our view, once a dealer satisfies the definition of a dealer in cooked food and beverages, including beverages prepared by him, then he is permitted to pay tax at the rate of half percent of the turnover of not only the cooked food and beverages prepared by him, but also on the turnover of other goods in respect of which he is effecting a second sale within the State. On the facts of the instant case, we find that the respondents do not dispute the fact that the petitioner is a person who is entitled to pay tax at the rate of 0.5% as envisaged under Section 8(c)(i) since, on a substantial part of his disclosed turnover, they had unequivocally accepted the payment of tax at 0.5%. If that be so, then the only other question to be considered is whether the other goods in which he had traded as a dealer had to be of the same nature as cooked food and beverages. We are of the view that the very purpose of the legislature using the words “other goods” would be frustrated if the phrase is interpreted to refer to goods of the same nature as cooked food and beverages. The purport of the Section appears to be to enable a dealer primarily dealing in cooked food and beverages, including beverages prepared by him, to discharge his tax liability at the rate of 0.5% on his total turnover, which includes cooked food and beverages as well as other goods in which he may be incidentally dealing with as part of his business. So long as a substantial part of his turnover pertains to cooked food and beverages, including beverages prepared by him, he would be entitled to pay tax at the compounded rate even on the turnover of the other goods incidentally sold by him in the course of business. 10. We therefore set aside the impugned orders of the authorities below and allow these revisions by answering the questions of law raised in favour of the assessee and against the revenue. The O.T. Revisions are allowed as above.