Madras High Court
Rainbow Restaurant vs The Assistant Commissioner (Ct) on 15 March, 2021
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 15.03.2021
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016
and
W.M.P.(MD)Nos.3777, 3778, 3779, 3780, 3781, 3782, 3783 and 3784 of 2016
W.P.(MD)No.4238 of 2016:-
Rainbow Restaurant,
Represented by its Proprietor,
K.R.Ramanathan. ... Petitioner
Vs.
The Assistant Commissioner (CT),
West Veli Street Circle,
Madurai. ... Respondent
Prayer : Writ Petition filed under Article 226 of the Constitution of India,
praying this Court to issue a Writ of Certiorari, to call for the records on the file
of the respondent herein in TIN 3356 5022 395/2007-08 dated 06.01.2016 and
quash the same.
For Petitioner : Mr.N.Inbarajan
For Respondent : Mr.G.Arjunan,
Government Advocate.
http://www.judis.nic.in
1/15
W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016
COMMON ORDER
Heard the learned counsel for the petitioner and the learned Government Advocate for the respondent. The jurisdictional assessing officer namely., Ms.S.Muthu Rathi also appeared before this Court through video conferencing and assisted the Court.
2.M/s.Rainbow Restaurant is the petitioner in these writ petitions. The assessment years pertain to 2007-2008 to 2014-15. The petitioner has registered itself as a dealer with the respondent. It is a proprietary concern. It is a restaurant carrying on its business at the premises bearing Door No.109, West Perumal Maistry Street, Madurai. The petitioner had opted to pay tax at the compounded rate under Section 8 of the Tamil Nadu Value Added Tax Act. The petitioner's returns had also been finalized on deemed assessment basis. Whileso, there was an inspection of the petitioner's business premises by the Enforcement Wing Officials on 17.04.2015 and 21.04.2015. Certain discrepancies were noticed. Based on the same, the respondent issued pre-revision notices on 14.10.2015. The petitioner offered their objections in response thereto on 14.11.2015. Thereafter, personal hearing was conducted. The respondent rejected the stand of the petitioner and passed the impugned http://www.judis.nic.in 2/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 orders levying tax and interest for the assessment years 2007-08 upto 2013-14 for the assessment year 2014-15, apart from levying tax and interest, penalty was also imposed. Questioning the same, these writ petitions came to be filed.
3.The learned counsel for the writ petitioner raised four fold contentions:-
(a) The case of the respondent is that the petitioner had wrongly filed its monthly returns in Form L and paid tax at 2% under Section 7(1)(b) of the Tamil Nadu Value Added Tax Act, 2006, while it should have paid at higher rate under 7(1)(a) of the Act. According to the petitioner's counsel, the petitioner would come under Section 7(1)(a), only if it is a star restaurant by itself. In the case on hand, it is only Rathna Residency that was recognized as a star hotel and the petitioner at no point of time was recognized as star hotel. Therefore, the respondent erred in treating the petitioner as a star restaurant and bringing the petitioner under the purview of Section 7(1)(a) of the Act.
(b) His second contention is that the higher rate of tax prescribed in Section 7(1)(a) of the Act can be levied only on the items mentioned in the said provision ie., food articles, non alcoholic drinks and beverages. In the case on hand, the assessing officer had levied the higher rate tax on the entire turn over http://www.judis.nic.in 3/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 of the petitioner. This was clearly wrong and suffers from non-application of mind.
(c) The respondent is a quasi judicial authority and he ought to have independently decided the issue. Instead the respondent had chosen to go by what transpired during the inspection conducted by the Enforcement Wing Officials. According to the petitioner's counsel, the respondent had acted under dictation of Enforcement Wing Officials and did not decide the issue independently.
(d) The question of paying interest will arise only from the date of demand. The respondent could not have levied interest from the date of order of original assessment.
4.The respondent has filed a detailed counter affidavit. The learned Government Advocate took me through the averments set out therein. The learned Government Advocate would point out that as against the impugned orders, the petitioner could as well have filed statutory appeals. He therefore wants this Court to sustain the impugned orders and dismiss the writ petitions. http://www.judis.nic.in 4/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016
5.I carefully considered the rival contentions and went through the materials on record.
6.I first wanted to examine, if there has been any violation of the principles of natural justice. The assessing officer pointed out that after issuing pre-revision notices, the objections of the assessee were received. Thereafter, the personal hearing notice was issued on 09.12.2015. Personal hearing was held on 18.12.2015. On the said date the petitioner's representative appeared and his statement was also recorded in writing by the assessing officer. Only thereafter the impugned orders were passed on 06.01.2016. I am therefore satisfied that the principles of natural justice were complied with in the instant case.
7.The next question that arises for consideration is whether the respondent erred in applying Section 7(1)(a) of the Act. Section 7(1) of the Act reads as follows:-
“7. Levy of taxes on food and drinks - (1) Notwithstanding anything contained in this Act, but subject to the provisions of this Act,-
(a) every dealer shall pay tax on the sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages served in or catered indoors or outdoors by star hotels recognized as such by Tourism Department of the State http://www.judis.nic.in 5/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 Government or Government of India and restaurants attached to such hotels at the rate of 2[fourteen] and half per cent of the taxable turnover; and
(b) every dealer other than those mentioned in clause (a) 3[whose total turnover is not less than rupees ten lakhs for a year], shall pay tax on the sale of ready to eat un-branded foods including sweets, savouries, un-branded non-alcoholic drinks and beverages served in or catered indoors or outdoors by hotels, restaurants, sweet-
stalls, clubs, caterers and any other eating houses, at the rate of 4[five] per cent of the taxable turnover.
Explanation I.- For the purpose of computing the total turnover under this sub-section, the purchase turnover liable to tax under section 12 of this Act, shall be added to the sales turnover.
Explanation II.- For the purpose of computing the total turnover under this sub-section, the sales turnover of all business units in a common premises sharing the common kitchen or common employees shall be added to the sales turnover of the business unit having higher turnover.
(2) The dealer, who pays tax under clause (a) of sub-section (1) shall be entitled to input tax credit on the goods specified in the First Schedule purchased by him in the State.”
8.Section 7(1)(a) of the Act will apply on sale of the items mentioned therein, if they have been served in or catered indoors or outdoors by star hotels recognized as such by Tourism Department of the State Government or Government of India and restaurants attached to such hotels. The assessing officer would point out that Rathna Residency is very much a star hotel http://www.judis.nic.in 6/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 recognized by the State Government. Rathna Residency is carrying on its business at Door No.109, West Perumal Maistry Street, Madurai. Rainbow Restaurant is also carrying on its business in the very same premises ie., Door No.109, West Perumal Maistry Street, Madurai. She also drew my attention to paragraph 6 of the affidavit filed in support of the writ petition in which it has been stated that a star hotel is also functioning in the very same premises.
9.Her submission is that the petitioner should also be treated as a restaurant attached to Rathana Residency. Of course, the learned counsel for the petitioner would place reliance on an advance ruling rendered in Ref.ACAAR No.042/2014-15 (Acts Cell-II/21576/2014), dated 29.09.2014. The said advance ruling reads as under:-
“Rate of tax on sale of “Ready to eat Unbranded Foods and Drinks, including sweets, savouries and non-alcoholic beverages” in their restaurant located on ECR road at Panaiyur village:
The applicant-dealer have sought for clarification regarding rate of tax on sale of “Ready to eat Unbranded Foods and Drinks, including sweets, savouries and non-alcoholic beverages” in their restaurant located on ECR road at Panaiyur village, which is away from their Star Hotel at their principal place of business. There is no specific Entry of the Description, “Unbranded Foods and Drinks” in either of the Parts A and B of First Schedule to the Act. Section 7 provides for levy, collection and payment of tax on the sale of unbranded foods and drinks including sweets and savouries in Hotels, Restaurants and Sweets stalls http://www.judis.nic.in 7/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 including outdoor catering. Section 7 reads as extracted belos:
7. Levy of taxes on food and drinks -
(1) Notwithstanding anything contained in this Act, but subject to the provisions of this Act,-
(a) every dealer shall pay tax on the sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages served in or catered indoors or outdoors by star hotels recognized as such by Tourism Department of the State Government or Government of India and restaurants attached to such hotels at the rate of 2[fourteen] and half per cent of the taxable turnover; and
(b) every dealer other than those mentioned in clause (a) 3[whose total turnover is not less than rupees ten lakhs for a year], shall pay tax on the sale of ready to eat un-branded foods including sweets, savouries, un-branded non-alcoholic drinks and beverages served in or catered indoors or outdoors by hotels, restaurants, sweet-stalls, clubs, caterers and any other eating houses, at the rate of 4[five] per cent of the taxable turnover.
Explanation I.- For the purpose of computing the total turnover under this sub-section, the purchase turnover liable to tax under section 12 of this Act, shall be added to the sales turnover.
Explanation II.- For the purpose of computing the total turnover under this sub-section, the sales turnover of all business units in a common premises sharing the common kitchen or common employees shall be added to the sales turnover of the business unit having higher turnover. (2) The dealer, who pays tax under clause (a) of sub-section (1) shall be entitled to input tax credit on the goods specified in the First Schedule purchased by him in the State.
As per section 7(1)(a), sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages http://www.judis.nic.in 8/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 served in or catered indoors or outdoors by star hotels recognized as such by Tourism Department of the State Government or Government of India and restaurants attached to such hotels is taxable at the rate of 14.5%. At the same time, sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages served in or catered indoors or outdoors by hotels, restaurants, sweet-stalls not attached to such star hotels is taxable at the rate of 5% as provided under Section 7(1)(b) of the Act. The rate of tax on sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic drinks and beverages under Section 7(1)(b) is reduced from 4% to 2% under Section 30 of the Act, vide Notification No.II(1)CTR/(a-14)2007 in G.O.Ms. No. 12, CT & R (B2) Department dated 01.01.2007, with effect from 01.01.2007. Following the substitution of expression “four” employed originally in section 7(1)(b) with the expression, “five” with effect from 10.03.2012, the reduced rate of 2% has been made to be continued in force, vide Notification No.II(1)CTR/(a-2)2012 in G.O.Ms.No.32, CT & R (B2) Department dated 10.03.2012. The restaurant stated to have been commenced at Panaiyur on the ECT road is not attached to their Star Hotel Premises at No.146, Dr.Radha Krishnan road, Mylapore, Chennai 600 004. It is located away from the star hotel and remains as a separate premises at Panaiyur. Therefore, sale of ready to eat unbranded foods and drinks including sweets, savouries, and non-alcoholic beverages would attract tax only at the rate reduced rate of 2% as per notifications in G.O.Ms. No. 12, CT & R (B2) Department dated 01.01.2007 and G.O.Ms.No.32, CT & R (B2) Department dated 10.03.2012 as aforesaid. With this legal backdrop, the request of applicant-dealer for clarification regarding rate of tax on sale of ready to eat unbranded foods and drinks, including sweets, savouries including non-alcoholic beverages may be considered http://www.judis.nic.in 9/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 and accordingly clarified as below: Sale of “Ready to eat Unbranded Foods and Drinks, including sweets, savouries and non-alcoholic beverages” at Farm House restaurant on ECR road, Panaiyur village is taxable at the reduced rate of 2% under Section 7(1)(b) of the TNVAT Act, read with Notification No.II(1)CTR/(a-14)2007 in G.O.Ms. No. 12, CT & R (B2) Department dated 01.01.2007 and Notification No.II(1)CTR/(a-2)2012 in G.O.Ms.No.32, CT & R (B2) Department dated 10.03.2012, as long if it is not classified as a star hotel.”
10.The assessing officer would point out that in the said advance ruling, the entity in question was running its business at a place away from the star hotel and it remained as a separate premise at Panaiyur. In the case on hand, Rainbow Restaurant is not being run at any separate premises; it is being run in the very same premises as that of Rathna Residency. On the said ground, the assessing officer would seek to distinguish the order dated 08.06.2018 made in W.P.Nos.26512 to 26514 of 2014 (M/s.Sakthi Hotels (Restaurant) Vs. The Commercial Tax Officer, Pollachi (West), Coimbatore District). In the said case also, the restaurant in question was carrying on its business at a place that was distinct. I concur with the said submission advanced by the assessing officer. Since Rainbow Restaurant is carrying on its business in the very same premises, the assessing authority rightly held that it is a restaurant attached to a star hotel and therefore, Section 7(1)(a) of the Act will apply. Section 7(1)(a) of the Act states that the higher rate of tax will be levied not only on the star hotel http://www.judis.nic.in 10/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 recognized by the Government but also on the restaurant attached to such star hotel. The expression “attach” has been defined in Black's Law Dictionary as to annex, bind or fasten. If something is part of another, it is said to be attached (Oxford Advanced Learner's Dictionary, New 9th Edition). “Attached to” connotes something different from mere ownership (P.Ramanatha Aiyar's Advanced Law Lexicon). That the petitioner is an independent assessee will not by itself take it out of the purview of Section 7(1)(a) of the Act. If the petitioner has been carrying on its business at a place distinct from that of the Star Hotel, then, Section 7(1)(a) of the Act cannot be invoked at all. But the petitioner – restaurant is in the very same building owned by the Star Hotel, namely, Rathna Residency. Therefore, the assessing authority was justified in holding that the petitioner is a restaurant attached to a Star Hotel and therefore would fall within the sweep of Section 7(1)(a) of the Act.
11. Though I sustain the approach of the assessing office to this extent, I must necessarily uphold the contentions of the petitioner's counsel on the remaining two aspects. As rightly pointed out by the learned counsel for the petitioner, Section 7(1)(a) of the Act can be applied only in respect of the items mentioned therein. But in the case on hand, the entire turn over of the petitioner has been levied at the higher tax rate prescribed in Section 7(1)(a) of http://www.judis.nic.in 11/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 the Act. This is clearly incorrect. The learned counsel for the petitioner would point out that there are charging provisions which clearly mention that the entire turn over is liable to be taxed at a certain rate. Section 7(1)(a) of the Act on the other hand states that higher tax rate will be paid only on the items mentioned therein.
12.Likewise, the respondent is not justified in levying interest from the original assessment year. The assessing officer would call upon me to follow the order dated 18.01.2021 made in W.P.(MD)Nos.12995 to 12999 of 2012. There, the star hotel itself was selling the items mentioned in Section 7(1)(a) of the Act. But in the case on hand, Rathna Residency is not the petitioner before this Court. It is only Rainbow Restaurant that is the petitioner before this Court. Rainbow Restaurant is contending that it cannot be considered as “a restaurant attached to a star hotel”. Thus the petitioner was under a bonefide impression that they are not liable to pay tax at a higher rate. Therefore, as per Section 42 of the Act, only from the date on which the petitioner's liability is quantified, the question of paying tax would arise.
13.That apart as rightly pointed out by the learned counsel for the petitioner, the respondent appears to have been totally swayed by the report of http://www.judis.nic.in 12/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 the Enforcement Wing Officials. The respondent appears to have forgotten that the respondent is an independent quasi judicial authority. The learned counsel for the petitioner draws my attention to the order dated 02.03.2007 made in W.P.Nos.7784 and 7785 of 2007 (M/s.Amutha Metals Vs. The Commercial Tax Officer, Mannady (East) Assessment Circle, Chennai). While allowing the said writ petition, a learned Judge of this Court held as follows:-
“If the reasoning stated by the enforcement officials is taken as correct reason, there is no need for the assessing officer to be there to frame the assessment. The Enforcement Wing officials themselves would have framed the assessment. Under the statutory provisions, it is expected from the assessing officer to consider the objections and either accept or reject the same by giving valid reasons by applying his mind. The above extract of the reasoning given by the assessing officer is nothing than desperation to pass an order on the basis of D3 proposal. There are ever so many cases where D3 proposals have been deviated by the assessing officer after applying their mind. Hence, this Court is of the view that the assessment orders are passed without considering the objections and by taking note of the D3 proposal of the enforcement officers. Therefore, the orders of assessment have to be set aside and the same are set aside. The assessing officer is directed to consider each one of the objections raised by the petitioners and give reason, except the reason that they have admitted before the Enforcement Officer and given statement before them with reference to the material made available and with reference to their accounts.” http://www.judis.nic.in 13/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016
14.Therefore, on this ground also, I have to necessarily to interfere with the impugned orders. In the counter affidavit also, the respondent has fallen back on what transpired during the inspection held by the Enforcement Wing Officials. Therefore, on the last three grounds mentioned above, the orders impugned in the writ petitions are liable to be quashed. They are accordingly quashed. The writ petitions are allowed. The matters are remitted to the file of the respondent to pass orders afresh in accordance with law and in the light of what has been clarified above. No costs. Consequently, connected miscellaneous petitions are closed.
15.03.2021
Index : Yes / No
Internet : Yes/ No
ias
Note : In view of the present lock down owing to COVID-19 pandemic, a web copy of the order may be utilized for official purposes, but, ensuring that the copy of the order that is presented is the correct copy, shall be the responsibility of the advocate/litigant concerned.
To:
The Assistant Commissioner (CT), West Veli Street Circle, Madurai.
http://www.judis.nic.in 14/15 W.P(MD)Nos.4238, 4239, 4240, 4241, 4242, 4243, 4244 and 4245 of 2016 G.R.SWAMINATHAN, J.
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