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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF SEPTEMBER, 2021
PRESENT
THE HON’BLE MRS.JUSTICE S.SUJATHA
AND
THE HON’BLE MR. JUSTICE RAVI V. HOSMANI
S.T.R.P.No.9/2020
BETWEEN:
M/s PRASHANTI AFFILIATES NO.54, MANI BHAVAN, CHENNAKESHAVA NAGARA, SINGASANDRA POST, BANGALORE-560068, (REP BY ITS PROPRIETOR SUBRAMANI …PETITIONER
(BY SRI ATUL K. ALUR, ADV.)
AND:
STATE OF KARNATAKA REP BY THE COMMISSIONER OF COMMERCIAL TAXES, KARNATAKA VANIJYA THEREGE KARYALAYA, KALIDAS ROAD, GANDHINAGAR, BENGALURU-560009
…RESPONDENT
(BY SRI K.HEMAKUMAR, AGA.)
THIS STRP IS FILED UNDER SECTION 23(1)OF KARNATAKA SALES TAX ACT, AGAINST THE JUDGMENT DATED 07.03.2019 PASSED IN STA.No.2196/2014 ON THE FILE OF THE DISTRICT JUDGE COMMERCIAL TAXES MEMBER, DISMISSING THE APPEAL AND UPHOLDING THE ORDER DATED 16.08.2014
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PASSED IN No.JCCT(A)/DVO-6/SMR-12(11-12)/2014-15 REVERSING THE ASSESSMENT ORDER DATED 09.07.2002 PASSED UNDER SECTION 12(3) OF CST ACT AND 18(3) OF KST ACT, BY THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, ADDITIONAL DISTRICT CIRCLE IV, BANGALORE (HEREIN AFTER REFERRED IN SHORT AS THE AA) FOR THE ASSESSMENT YEAR 2000-2001.
THIS PETITION COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J., MADE THE FOLLOWING:
O R D E R This revision petition is filed by the assessee under Section 23(1) of the Karnataka Sales Tax Act, 1957 (‘KST Act’ for short) assailing the order of the Karnataka Appellate Tribunal, Bengaluru, (‘Tribunal’ for short) dated 07.03.2019 passed in STA No.2196/2014, whereby the appeal filed by the assessee has been rejected relating to the assessment year 2000-01.
The petitioner – assessee was a proprietorship concern carrying on the business of running the canteen on no-profit basis. The assessee was also registered under the provisions of the
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Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956 [‘CST Act’ for short]. Assessment proceedings were concluded by the Assessing Authority as per the order dated 09.07.2002 exempting the sales of food and drinks said to have been supplied to the canteens by the assessee as falling under Entry No.6(a) of the Fifth Schedule placing reliance on the ruling of this Court in the case of Vikrant Tyres, Mysore vs. ACCT, Mysore (W.P.No.9861/1991, W.P.No.14155/1990). Subsequently, revisional proceedings were initiated by the Joint Commissioner of Commercial Taxes, Bengaluru, exercising the powers under Section 21(2) of the KST Act and revisional orders were passed on 13.02.2004 setting aside the assessment order of the assessing authority, against which the assessee preferred the appeal before the Tribunal. The said appeal came to be disposed of, by order dated 21.06.2010 allowing the appeal in part holding that the sale of food and drinks to the canteen as claimed by the
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assessee would not fall under Entry 6(a) of the Fifth Schedule to the KST Act and is exigible to levy of tax under Section 5 of the Act. However, as far as the exemption claimed on the second sales of Biscuits, cakes etc., i.e., bakery items which were purchased from the local registered dealers, the matter was remanded to the revisional authority to verify about the second sales and to pass appropriate orders in accordance with law. Pursuant to which, the revisional authority has passed the order under Section 21(2) of the Act on 16.08.2014 allowing the exemption on the second sales to certain extent with respect to the bakery items. Aggrieved by the said order, the assessee preferred STA No.2196/2014 before the Tribunal which came to be dismissed.
Hence, the present revision petition by the assessee raising the following questions of law:- “1. Whether, on the facts and circumstances of the case, the Tribunal was right
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in coming to the conclusion that, the sale of food in the canteen is a taxable under Entry 6(a) of the V Schedule to the KST Act. 2. Whether, on the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that, the earlier order has reached the finality. 3. Whether, on the facts and circumstances of the case, the earlier order of the Tribunal, remanding the case is a open remand or restricted remand. 4. Whether, on the facts and circumstances of the case, the order of the assessing authority is erroneous and prejudicial to the interest to the Government Revenue, when the order is passed in view of the High Court Judgment. 5. Whether, on the facts and circumstances of the case, the Tribunal was right in non discussing any other issues raised before the KAT. 6. Whether, on the facts and circumstances of the case the Revisional authority was right in relying on the advance ruling authority order LR.CLR.CR,-34/3/2001 dated 21.01.2001.
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Whether, on the facts and circumstances of the case, the order of the advance ruling authority LR.CLR.CR.-34/3/2004 dated 21.01.2004 is prospective in nature or retrospective in nature. 8. Whether, on the facts and circumstances of the Tribunal was right in conforming the order of the First Appellate Authority (FAA) and Assessing Auhority (AA), dated on 07.03.2019. 9. Whether, on the facts and circumstances of the case, if the basic facility like building, water, electricity and vassals are provided by the contractee such transaction is taxable under the KST Act. 10. Whether, on the facts and circumstances of the case, the reimbursement of ESI, PF, Bonus is taxable under the KST Act.”
The learned counsel for the assessee has raised four fold submissions. Firstly, the revisional authority has passed the order exercising the powers under Section 21(2) of the Act based on the finding of the Advance Ruling Authority. The Advance Ruling Authority had no competency to give any ruling when
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the revisional proceedings were initiated by the revisional authority as per the SMR notice dated 06.09.2003. Learned counsel argued that as per sub- section (5) of Section 4 of the KST Act, the Advance Ruling Authority has no competency to adjudicate upon the application where the clarification sought in the application was already pending before any officer or authority of the Department or Appellate Tribunal or any Court. The matter was already pending before the revisional authority, as such, the Advance Ruling Authority ought not to have issued the ruling on 21.01.2004.
Secondly, it was argued that the finding of the Advance Ruling Authority is prospective. The Assessing Authority has applied the Advance Ruling Authority dated 21.01.2004 for the assessment year 2000-01 retrospectively which is impermissible in law. Thirdly, it was submitted that the sales of food and
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drink made by the assessee to the canteen squarely falls under the Item No.6(a) of the Fifth Schedule and is exempted from tax under Section 8 of the KST Act. Fourthly, it was argued that the invoices raised by the assessee includes expenses of Bonus, PF and ESI etc., As such, total turnover on the basis of the invoices computed is unjustifiable. It was submitted that once the Assessing Officer has passed the assessment order placing reliance on the judgment in the case of Vikrant Tyres, Mysore, supra, the revisional authority exercising suo-moto revisional powers is untenable and is not maintainable in terms of the judgment of this Court in the case of State of Karnataka vs. Vasavadatta Cements reported in 57 KLJ Page 65. Reference is also made to the judgment of this Court in Mangalore Minerals (Private) Limited vs. State of Karnataka reported in 2010 (68) Kar.L.J. 668 and Durga Projects Ing., Bangalore vs. State of
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Karnataka and another reported in 2012 (74) Kar.L.J. 273.
Learned AGA appearing for the respondent - State submits that the assessee is challenging the correctness of the order of the Advance Ruling Authority in this revision petition in the guise of challenging the impugned order of the Karnataka Appellate Tribunal. As such, the ground urged by the assessee is wholly untenable. The Tribunal has critically analysed the material on record and has arrived at a finding that the items of food and drinks sold by the assessee was not exempted to tax under Entry 6(a) of the Fifth Schedule and was liable to tax under Section 5 of the Act. The matter was remanded to the revisional authority only to examine the acceptability of tax with respect to bakery items, the same being second sales. It was not an open remand and on such direction issued by the Tribunal, the revisional authority has examined whether the sales
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of the bakery items by assessee is second sales and exempted from tax and after such verification, relief was granted with respect to certain second sales of bakery items. After passing of the said orders, the assessee has filed the appeal before the Tribunal. The Tribunal has rightly dismissed the appeal observing that all the issues raised by the assessee were considered and answered in the first round of litigation and the same having reached finality, no further adjudication on the said issue is warranted. Accordingly, sought for dismissal of the revision petition.
We have heard the learned counsel appearing for the parties and perused the material on record.
Section 4(5) with the proviso (i) and 4(8) of the KST Act reads thus:-
“4. Provision for Clarification and Advance Rulings.-
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(1) xxxx (2) xxxx (3) xxxx (4) xxxx (5) The Authority may, after examining the application and any records called for, by order, either, admit or reject the application; Provided that the Authority shall not allow the application where the question raised in the application.- (i) is already pending before any officer or authority of the Department or Appellate Tribunal or any Court; (ii) xxxx
(6) xxxx (7) xxxx (8) No officer or any other authority of the Department or the Appellate Tribunal shall proceed to decide any issue in respect of which an application has been made by an applicant under this Section and is pending.”
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The main ground of challenge in this revision petition now rests on the competency of the Advance Ruling Authority in issuing the clarification when the matter was pending before the Revisional Authority.
Section 24 of the Act reads thus:- “24. Appeal to High Court.- (1) Any assessee objecting to an order passed by the Commissioner or the Additional Commissioner under Section 22-A or a dealer aggrieved by the order of the Authority under Section may appeal to the High Court within sixty days from the date on which the order was communicated to him.”
It is thus clear that if the assessee was aggrieved by the clarification of the Advance Ruling Authority, the appropriate remedy available to him was to file an appeal under Section 24 of the KST Act challenging the correctness or validity of the Advance Ruling Authority’s Clarification. The assessee having allowed the Advance Ruling Authority’s clarification to
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attain finality, now precluded to challenge the same in the revision petition filed under Section 23(1) of the KST Act. As such, the ground now raised by the assessee cannot be entertained in the present revision proceedings. Thus, the arguments regarding the applicability of the Advance Ruling Authority’s clarification whether is prospective or retrospective would be academic. Moreover, as admitted by the learned counsel for the assessee, the SMR notice was issued in the year 2003, prior to the clarification issued by the Advance Ruling Authority on 21.01.2004 which would make it clear that the proceedings were initiated by the revisional authority not based on the clarification of the Advance Ruling Authority but having satisfied that the order of the assessing authority was erroneous and prejudicial to the interest of revenue. The revisional authority has not passed the order merely based on the Advance Ruling Authority’s clarification but on the request made by the assessee that the
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matter was seized off by the Advance Ruling Authority, the revisional authority awaited the said decision. Incidentally, the revisional authority has referred to the clarification of the Advance Ruling Authority dehorse examining the matter on merits independent of Advance Ruling Authority’s clarification. Thus, it cannot be held that the order of the revisional authority is merely based on the Advance Ruling Authority’s finding.
In the first round of litigation, the Tribunal has extensively examined the case on merits and has come to a conclusion that the there are three parties in the case namely, the employer, Employees and the outsourcing agent Prashanthi Affiliates who is a catering contractor and who has supplied articles of food and drinks on profit basis. On examining the agreement entered into between the assessee and the employers, it has been held that there is no clause in the agreement to indicate that the sale is made on a no
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profit basis. For ready reference the relevant portion of the finding of the Tribunal are quoted hereunder:-
“In this case, there are 3 parties the Employer MICO – Employees and the outsourcing agent Prashanthi Affiliates who is a catering contractors and has supplied articles of food and drinks on profit basis. Even as per the conditions in the contract agreement there is no clause to indicate that the sale is made on a no profit basis.
The contract agreement provides privacy of contract between the appellant and MICO and Toyota Kirloskar and there is no direct contract between the appellant and employees. Cause 16(b) of the contract provides as under:- “Clause 16(b): The contractor shall pay taxes and liabilities, if any as required under the Income Tax, Professional Taxes Act, Municipal/Panchayat Acts or any other Act as applicable.”
In view of the above facts it is not possible for us to accept the contention of the counsel that the appellant falls under entry 6(a) of the V Schedule to the KST Act.
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Hence, the first issue is answered in the Affirmative and against the appellant.
Thus in view of the above it is held that the appellant does not fall under Entry 6(a) of the V Schedule to the KST Act and is liable to pay tax on the sale of food and drinks under Section 5 of the Act. However the appellant is also eligible for exemption on the II Sales of biscuits, cakes etc., which are purchased from local Registered Dealers. This needs verification and quantification afresh. In view of which the Revision Order is hereby set aside and the case is remanded for fresh disposal to the Revisional Authority. The appellant is directed to appear before the Revisional Authority positively within a period of 8 weeks from the date of receipt of this order failing which the Revisional Authority is at liberty to pass orders in accordance with law and as per the material available on records and in view of the above direction.”
Thus, it is ex-facie apparent that the Tribunal having given a finding on the sales of food and
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drinks made by the assessee to the canteens would not fall under Entry 6(a) of Fifth Schedule, remanded the matter to the revisional authority only to examine the exemption of second sales with respect to bakery products sold by the assessee. The review petition was filed by the assessee against the order of the Tribunal which also came to be dismissed and the same has attained finality. The said finding having attained finality, after passing of the order by the revisional authority on the aspect of the second sales, now while challenging the said order before the Tribunal again re- adjudicating the issue already concluded amounts to rehearing the decided issue which is wholly impermissible under law. As such, the Tribunal has rightly held that the issue now raised by the assessee having attained finality, no further re-adjudication is required and dismissed the appeal. In this context, the judgments referred to, by the learned counsel for the assessee are not applicable to the facts of the case.
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Hence, we are of the considered opinion that no questions of law arises for our consideration in this revision petition. No exception can be found with the finding of the Tribunal.
In the result, the revision petition is dismissed.
Sd/- JUDGE
Sd/- JUDGE
PMR