Sree Gokulam Hotels India (P) Ltd vs State Of Kerala
2023 Latest Caselaw 5784 Ker

OTR No.43 of 2018                             1




                      IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                       PRESENT

                      THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

                                          &

                THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN

            WEDNESDAY, THE 24TH DAY OF MAY 2023 / 3RD JYAISHTA, 1945

                                OT.REV NO. 43 OF 2018

   AGAINST THE ORDER DATED 14.3.2018 OF THE KERALA VALUE ADDED TAX APPELLATE

                    TRIBUNAL, ERNAKULAM IN T.A.(VAT) NO.179/2017.

REVISION PETITIONER/APPELLANT/ASSESSEE:

             SREE GOKULAM HOTELS INDIA (P) LTD.
             KALOOR,KOCHI.
             BY ADV SRI.P.M.POULOSE


RESPONDENT/RESPONDENT:

             STATE OF KERALA
             REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES
             DEPARTMENT,GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001.


             SMT.RESHMITA R. CHANDRAN, GOVERNMENT PLEADER



      THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 24.05.2023,

THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 OTR No.43 of 2018                            2



                                                                                CR

                                     JUDGMENT

Dated this the 24th day of May, 2023

SHAJI P.CHALY,J

Petitioner is an assessee under the Kerala Value Added Tax Act, 2003,

hereinafter called, 'KVAT Act, 2003', on the files of the Assistant Commissioner,

Special Circle I, Commercial Taxes, Ernakulam. The subject matter of challenge is

based on Annexure - A order passed by the said authority dated 13.3.2015,

declining compounding facility sought for by the petitioner under section 8(c)(i) of

the KVAT Act, 2003, which in turn was affirmed by the Deputy Commissioner

(Appeals) - II, Ernakulam, as per his order dated 28.1.2017 and re-affirmed by

the Tribunal as per its order dated 14.3.2018.

2.Basic facts for the disposal of the revision petition are as follows;

2.1 M/s.Sree Gokulam Hotels India (P) Ltd., Kochi, is an assessee on the rolls

of Assistant Commissioner, Special Circle - I, Ernakulam, dealing in liquor, cooked

food etc. As per the applications dated 7.5.2014, 7.8.2014 and 7.5.2014

respectively, petitioner sought for a compounding facility for cooked food, sold

from the branch hotels at Guruvayoor and Thalassery. Notices were issued on the

said applications informing that the compounding applications cannot be allowed

in view of section 2(xv), 2(ii) and 2(iii) of the KVAT Act, 2003 and that all

branches of a dealer are reckoned for compounding the turnover of a dealer.

Therefore, it was intimated that compounding under section 8(c)(i) of the KVAT

Act, 2003 is not allowable for part of the turnover so long as the three business

places are remaining as branch business places of the dealer.

3. It is an admitted fact that M/s.Sree Gokulam Hotels India (P) Ltd. is a

hotel having bar facility and three star classification; and therefore, by virtue of

the provisions of section 8(c)(i), the compounding cannot be allowed. It is also an

admitted fact that the dealer - M/s.Sree Gokulam Hotels India (P) Ltd., Kaloor,

Kochi, having TIN 32070298735 has 2 branches at Guruvayoor and 1 branch at

Thalassery. Accordingly, the primary authority, after considering the objections

raised by the petitioner to the notices issued on the applications, rejected the

compounding. Even though appeals were preferred before the Deputy

Commissioner (Appeals) and the Tribunal, both the authorities were of the

opinion that the order passed by the primary authority is in accordance with law.

It is thus challenging the legality and correctness of the orders passed by the

Tribunal, the revision petition is filed.

4. The paramount contention advanced by the petitioner is that three

branches of the petitioner are only ordinary hotels having no star classification or

bar; that cooked food from these branches is not supplied to any airline service

company or institution or shipping company for serving any aircraft, ships or

steamer and therefore, the petitioner is entitled to compounding under section

8(c)(i) of the KVAT Act, 2003. It is further submitted that a dealer would have

only one registration under the KVAT Act and the Rules, and that the dealer may

be doing several business, however, the turnover of the dealer from all the

businesses cannot be clubbed together for the purpose of taxation.

5. Therefore, the sum and substance of the contention advanced by the

petitioner is that the branch hotels conducted by the petitioner at Guruvayoor and

Thalassery are different entities other than M/s.Sree Gokulam Hotels India (P)

Ltd., Kochi and therefore, the assessments are to be made in accordance with the

nature of business conducted in each of the entities and departing from the

business conducted by M/s.Sree Gokulam Hotels India (P) Ltd., which is a star

hotel.

6. It is also pointed out that the turnover defined under the KVAT Act, 2003

means the aggregate turnover in all business places in the branch hotels distinct

from the business conducted by M/s.Sree Gokulam Hotels India (P) Ltd., which is

a star hotel. It is also contended that each category of goods and transactions is

having its own appropriate rate as per the KVAT Act and Rules, and that, if

different goods and transactions are the same, the statute would not have

stipulated different rates of tax for the goods transacted. It is further contended

that the Tribunal, pending appeal before it, sought clarification from the

Commissioner of Commercial Taxes under section 94 of the KVAT Act as to

whether the petitioner is entitled to compounding option or not, and the

Commissioner as per his order dated 8.11.2017 clarified that the dealer in cooked

food and beverages cannot opt to pay compounded tax in respect of certain

branches only and is liable to pay tax under section 6(1) in respect of other

branches; therefore, it is contended that the said course of action adopted by the

Tribunal is hit by subsection (4) of section 94, wherein it is stipulated that where

any question arises from any order already passed or any proceedings recorded

under this Act or any earlier law, no such question shall be entertained for

determination under section 94(1).

7. On the other hand, learned Government Pleader submitted that the orders

passed by the primary authority, the Appellate Authority and the Tribunal, are in

accordance with the provisions of KVAT Act, 2003 and the petitioner is not

entitled to get the facility of compounding as provided under section 8(c)(i) of the

KVAT Act, 2003. Since the dealer on the files of the Sales Tax Authority is

M/s.Sree Gokulam Hotels India (P) Ltd., which is a bar attached hotel having star

classification, it is not entitled to avail the facility of compounding. Therefore, the

sum and substance of the contention advanced by the learned Government

Pleader is that no interference is required to the orders passed by the Tribunal

and the authorities.

8. We have heard learned counsel for petitioner - Sri.P.M.Paulose, learned

Government Pleader - Smt.Reshmita R. Chandran and perused the pleadings and

material on record.

9. It is an admitted fact that the sole dealer under the KVAT Act, 2003 is

M/s.Sree Gokulam Hotels India (P) Ltd., which is assigned with TIN number. It is

also an admitted fact that the branches are not allotted with any registration

under the KVAT Act, 2003. The contention advanced by the petitioner is that even

though there is no registration for the branches for the purpose of compounding

facility, the branches have to be dealt with separately from the dealer - bar

attached and a star hotel. In order to identify the said contention advanced by

the petitioner, it is better that section 8(c)(i) of the KVAT, 2003, as it originally

stood, and later amended with effect from 2014 are extracted:

"8. Payment of Tax at compounded rates:- Notwithstanding anything contained in Section 6:-

[(c)(i)]: 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

aircraft, 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, pay tax at half per cent 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 section 6.

[Explanation:- Cooked food for the purpose of this clause shall include sweets and fresh fruit juice prepared and served in the restaurants and hotels]

The said provision was amended as per Act 29/2014, which reads as follows:

(c) in clause (c), for sub-clause (1), the following sub-clause shall be substituted, namely-

(i) any dealer in cooked food and beverages, including fresh fruit juices and sweets prepared by him, other than,-

(a) a dealer supplying cooked food or beverages to any airline service company or institution or shipping company for serving in aircraft, ships or steamer or served in aircraft, ship, steamer,

(b) a bar attached hotel or a dealer for serving cooked food in a bar attached hotel;

(c) a star hotel or a dealer serving cooked food in a star hotel." ...

10. Therefore, it could be seen that only a dealer in cooked food and

beverages including fresh juice and sweets 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 aircraft, ships or steamer or served in aircraft,

ship or steamer or a bar attached hotel or a dealer for serving cooked in a bar

attached hotel is entitled to get compounding. Admittedly, the dealer is M/s.Sree

Gokulam Hotels India (P) Ltd., which is a bar attached hotel having star

classification. The significance given to a dealer under section 8(c)(i) is to be

taken note of since it makes it clear that compounding can be sought for only by

a dealer. Therefore, it is evident that the branch hotels, which do not have KVAT

registration, cannot seek compounding. This would be more clear if the different

manifestations of the term "turnover" as defined under KVAT Act, 2003 are

analysed. Sections 2(l), 2(li) and 2(lii) of the KVAT Act, 2003 read thus;

" 2(l)"taxable turnover" means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed;

2(li) "total turnover means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-state trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of goods into the territory of India;

2(lii) "turnover" means the aggregate amount for which goods are either bought or sold, supplied or distributed by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or for other

valuable consideration, provided that the proceeds of the sale by a person not being a Company or Firm registered under the Companies Act, 1956 (Central Act 1 of 1956) and Indian Partnership Act, 1932 (Central Act 9 of 1932) or society including a co- operative society or association of individuals whether incorporated or not of agricultural or horticultural produce grown by himself or grown on any land in which he has an Interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover."

11. On an analysis of the said provision, it is clear that the turnover is the

turnover of a dealer, who is liable to pay tax as determined by the authority and

total turnover means the aggregate turnover in all goods of a dealer at all cities of

business in the State, whether or not the whole or any portion of such turnover is

liable to tax; and turnover means the aggregate amount for which goods are

either bought or sold, supplied or distributed by a dealer, either directly or

through another, on his own account or on account of others, whether for cash or

for deferred payment or for other valuable consideration. Here, in the case on

hand, the dealer being a bar hotel with star classification is not entitled for

compounding facility by virtue of the provisions deliberated above.

12. Therefore, it is certain and clear that only a dealer is entitled to seek

compounding in terms of the provisions of section 8(c)(i) read with other

provisions of the KVAT Act, 2003. That being the legal position, we are of the

considered and undoubted opinion that the primary authority was right in

declining the applications submitted by the branch hotels of the dealer - M/s.Sree

Gokulam Hotels India (P) Ltd. Be that as it may, petitioner has raised a

contention that the Tribunal went wrong in relying upon a clarification order

issued by the Commissioner, Commercial Taxes dated 8.11.2017 under section 94

of the KVAT Act, 2003 since such a course of action is prohibited under sub-

section 4 of section 94. Section 94 deals with the powers of the authority to deal

with clarification and sub-section (1) specifies that if any dispute arises otherwise

than in a proceedings before any appellate or revisional authority or in any court

or tribunal as to whether any person is a dealer or; any transaction is a sale; or

any particular dealer is required to be registered; or any tax is payable in respect

of any sale or purchase or if tax is payable, the point and the rate thereof etc.,

the authority shall decide the question after giving the parties to the dispute a

reasonable opportunity to put forward their case and produce evidence.

Therefore, whatever prohibition contained under section 4 of section 94 of KVAT

Act, 2003 is in respect of the case on hand before the Tribunal. Here is a case

where a clarification order was issued by the Commissioner of Taxes in some

other proceedings, which was relied upon by the Tribunal.

13. Anyhow, even assuming that the said finding of the Tribunal is not in

accordance with law, what is to be looked into by this Court is whether the

payment of tax sought for as per the compounded rate is in accordance with law.

As we have pointed out above, the dealer had not sought the benefits of

compounding under section 8(c)(i) of the KVAT Act, 2003 for the obvious reason

that the dealer is a bar hotel having star classification, which is not entitled to

seek compounding. Therefore, the branch hotels conducted at various places, not

being a dealer in terms of the provisions of the KVAT Act, 2003, are not entitled

to seek compounding independent of the dealer as per the KVAT Act, 2003. To

put it differently, a branch, which is not a dealer, has no independent and

exclusive right to seek the facility of compounding in terms of Section 8 (c) (i) of

the KVAT Act, 2003.

Upshot of the above discussion is that, the petitioner has not made out any

case of illegality or other legal infirmities, justifying interference with the order

passed by the Tribunal. Needless to say, the revision petition fails, accordingly, it

is dismissed.

Sd/-

SHAJI P.CHALY

JUDGE

Sd/-

                                                  SHOBA ANNAMMA EAPEN

smv                                                        JUDGE





                        APPENDIX OF OT.REV 43/2018

PETITIONER ANNEXURES
ANNEXURE A             TRUE COPY OF THE ORDER DATED 13/3/2015 OF THE
                       ASSESSING AUTHORITY
ANNEXURE B             TRUE COPY OF THE ORDER DATED 28/01/2017 OF THE FIRST
                       APPELLATE AUTHORITY.
ANNEXURE C             TRUE COPY OF THE ORDER DATED 14/3/2018 OF THE KERALA

VALUE ADDED TAX APPELLATE TRIBUNAL,ERNAKULAM IN T.A.

(VAT)NO.179/2017 ANNEXURE D TRUE COPY OF THE NOTICE NO.A5-2254/15 DATED 8.2.2018 ISSUED BY THE 2ND RESPONDENT.