The Joint Commissoner Of ... vs M/S Yosemite Hospitalities
2022 Latest Caselaw 9987 Kant

                                       STRP No.1/2019


                          1

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 30TH DAY OF JUNE, 2022

                       PRESENT

      THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                         AND
 THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

                S.T.R.P No.1 OF 2019

BETWEEN :

1.     THE JOINT COMMISSONER OF
       COMMERCIAL TAXES
       (APPEALS)-5
       SHANTHINAGAR
       BENGALURU

2.     THE ASSISTANT COMMISSIONER OF
       COMMERCIAL TAXES
       (AUDIT & RECOVERY)-5.9
       DVO- 5, BENGALURU             ... PETITIONERS

(BY SHRI. JEEVAN J. NERALAGI, AGA)

AND :

M/S. YOSEMITE HOSPITALITIES
A SOLE PROPRIETORSHIP HAVING
ITS OFFICE AT SY NO.36/5
4TH FLOOR, FOOD COURT
DODDANEKUNDI VILLAGE
BENGALURU-560 037                    ... RESPONDENT

(SERVED)

     THIS STRP IS FILED UNDER SECTION 65(1) OF THE
KARNATAKA VALUE ADDED TAX ACT, 2003, AGAINST THE
JUDGMENT AND ORDER DATED 23.03.2018 PASSED IN STA
                                           STRP No.1/2019


                           2
NO.913/2016 ON THE FILE OF THE KARNATAKA APPELLATE
TRIBUNAL AT BENGALURU, ALLOWING THE APPEAL AND
SETTING ASIDE THE ORDER DATED 17.05.2016 PASSED IN
VAT:AP.NO.67 TO 78/15-16 AND VAT:AP.NO.79 TO 90/15-16
ON THE FILE OF THE JOINT COMMISSIONER OF
COMMERCIAL    TAXES    (APPEALS)-5,  SHANTHINAGARA,
BANGALORE, AND THE ORDER DATED 25.02.2015 AND
28.02.2015 PASSED BY THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES (AUDIT AND RECOVERY)-5,9, DVO-5,
BANGALORE FOR THE TAX PERIODS OF APRIL 2012 TO
MARCH 2013 AND APRIL 2013 TO MARCH 2014 PASSED
UNDER SEC.39(1) R/W SEC.72(2) AND 36(1) OF THE KVAT
ACT 2003.

     THIS STRP, HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON 01.06.2022, COMING ON FOR PRONOUNCEMENT
OF ORDERS THIS DAY, P.S.DINESH KUMAR             J,
PRONOUNCED THE FOLLOWING:-

                       ORDER

This Revision Petition by the Revenue is filed

for consideration of the following questions:

"1. Whether the Karnataka Appellate Tribunal has erred in passing the impugned order insofar as it holds that the Respondent has not violated any of the conditions of the composition scheme prescribed under the KVAT Act and Rules, despite admittedly purchasing goods from outside the State of Karnataka for use in the course of its business?

2. Whether the Karnataka Appellate Tribunal has erred in passing the impugned order, insofar as it holds that the prohibition on purchase of STRP No.1/2019

goods from outside the State by composition dealer under the KVAT Act does not apply to capital goods?"

2. Heard Shri. Jeevan J.Neralagi, learned

AGA for petitioners.

3. Brief facts of the case are, respondent is

a Proprietary firm and runs a Fast Food Restaurant.

It has opted for composition scheme for payment of

tax as per Section 15(1) of the KVAT Act, 20031

and filing monthly returns in Form VAT 120, and the

same were being assessed at the rate of 4% on the

sale of food items.

4. Assessee's premises was inspected by

the jurisdictional Commercial Tax Officer on

27.11.2013. A notice was issued under Section 15

of the KVAT Act read with Rules 135 and 144 of the

KVAT Rules, 20052 alleging violation of restrictions

Karnataka Value Added Tax Act

Karnataka Value Added Tax Rules, 2005 STRP No.1/2019

imposed under the said Rules and it disentitled him

from the composition scheme. Assessee submitted

his reply and after considering the same re-

assessment orders have been passed under Section

39(10)(a) of the Act and consequential demands

have been raised in Form VAT 180. Feeling

aggrieved, respondent filed appeal before the First

Appellate Authority3 and vide common order dated

17.05.2016 in VAT.AP.67-78/2015-16 and

VAT.AP.79-90/2015-16, the First Appellate

Authority partly modified the re-assessment order

and set-aside the tax levied on discarded goods like

metal detectors, cookers, lockers etc. Feeling

aggrieved, assessee filed STA No.913/2016 before

the KAT4, Bengaluru. By the impugned order the

KAT has allowed the appeal and set-aside the

re-assessment order. Hence, this appeal by the

Revenue.

Joint Commissioner of Commercial Taxes (Appeals)-V, Shanthinagar, Bengaluru

Karnataka Appellate Tribunal, Bengaluru STRP No.1/2019

5. Shri. Jeevan J. Neeralagi, learned AGA

submitted that it is not in dispute that the

respondent has purchased the Refrigerator and

other items from outside the State. In terms of Rule

135(1) & (2) of the KVAT Rules, the option to pay

tax by way of composition shall not be available to

a dealer, who makes inter-State purchase. The

Assessing Authority and the First Appellate

Authority, on appreciation of facts on record have

rightly denied the benefit to pay taxes under

composition to the respondent. However, the KAT

has allowed the appeals on an erroneous

assumption that the goods in question are not

'goods held in stock'. In view of the admitted facts,

the benefit of composition is not available to the

assessee. Therefore, the impugned order passed by

the KAT is unsustainable in law.

STRP No.1/2019

6. We have carefully considered the

submissions of Shri. Jeevan Neeralagi and perused

the records.

7. Undisputed facts of the case are,

respondent owns a Fast Food Restaturant. He has

purchased Refrigerators, Freezers etc., from outside

the State as capital equipment to run the

restaurant. Its main business is not dealing in the

said goods.

8. In the case of Shri. Anantha

Padmanabha Bhat Vs. Commissioner of Commercial

Taxes and another5, rightly relied upon by the KAT,

this Court has held that the vitrified tiles used in the

restaurant owned by the assessee therein, were not

sold by him in the regular course of business but

they were used for the flooring of the restaurant.

W.P. No. 54356, 54357/2015 (Tax-res) and W.P. Nos. 57006- 57027/2015 decided on 03.06.2016 STRP No.1/2019

Hence, it had become part of the immovable

property. It is held thus in that case:

"7. Admittedly, the petitioner is running a restaurant only and is engaged in the business of serving vegetarian food and not engaged in the business of sale of Vitrified Tiles. In the restaurant, the Vitrified Tiles in question were not sold by him in the regular course of business, but were used only for the purpose of flooring of the restaurant premises. When so fixed in the floor, the Vitrified Tiles of- course became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. The assessing authorities trained and well acquainted with the commercial terms, cannot be allowed to take such perverse views."

9. In the instant case, admittedly,

respondent is in the Restaurant business. The

goods purchased by him are in the nature of capital

goods for the Restaurant. Hence, they cannot be STRP No.1/2019

considered as 'goods held in stock'. We are in

respectful agreement with the view taken by this

Court in Anantha Padmanabha Bhat's case.

10. In view of the above, the questions

framed by the Revenue are answered in favour of

the assessee.

11. Resultantly, this revision petition fails

and it is accordingly dismissed.

No costs.

Sd/-

JUDGE

Sd/-

JUDGE

SPS