Karnataka High Court
M/S. Sangeetha Bar & Restaurant vs State Of Karnataka on 22 December, 2021
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
1
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 22ND DAY OF DECEMBER 2021
BEFORE
THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION No.10403/2021
C/W
WRIT PETITION Nos.54008/2018, 56813/2018,
11816/2019, 12167/2020, 5406/2021, 16166/2021,
20929/2021 (T-RES)
IN W.P.NO.10403/2021
BETWEEN:
M/S ALANKAR BAR AND RESTAURANT
NO. 50, KANAKAPURA MAIN ROAD,
SARAKKI
BANGALORE -560 064
(REPRESENTD BY ITS PROPRIETOR
SHRI. M.KRISHNAPPA)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGALURU- 560 001
2. STATE OF KARNATAKA
REPRESENTED BY REVENUE SECRETARY
KARNATAKA STATE EXCISE DEPARTMENT
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGALURU 560 001
3. THE COMMISSIONER OF
COMMERCIAL TAXES,
VANIJE THERIGE KARYALAYA-1,
2
KALIDAS ROAD, GANDHI NAGAR
BENGALURU 560 009
4. THE JOINT COMMISSIONER
OF COMMERCIAL TAXES (ADMINISTRATION)
DGSTO-3, TTMC 2ND FLOOR
BMTC BUILDING, SHANTHINAGAR
BANGALORE 560 027
5. THE COMMERCIAL TAX OFFICER (AUDIT) 3.2
DVO-3, II FLOOR, TTMC BMTC BUILDING
SHANTHINAGAR
BANGALORE 560 027
6. THE MANAGING DIRECTOR/COMPANY SECRETARY
KARNATAKA STATE BREWERIES CORPORATION
4TH FLOOR, TTMC, A BLOCK,
BMTC BUILDING, KH ROAD,
SHANTHINAGAR
BENGALURU 560 027
...RESPONDENTS
(BY SRI.HEMAKUMAR K., AGA FOR R1 TO R5
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R6)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE
ISSUED, U/S 63A OF THE KVAT ACT, DATED 27.02.2020 ISSUED
BY THE R4 FOR THE ASSESSMENT PERIOD / YEAR 2014-15,
PRODUCED AT ANNEXURE-Q IN SO FAR AS THE PETITIONER IS
CONCERNED AND ETC.
IN W.P.NO.54008/2018
BETWEEN:
M/S. MANJUNATHA ENTERPRISES
AKSHAYA SPIRITS BAR & RESTAURANT
26, OPP:WHEEL & AXLE
DODDABALAPUR MAIN RAOD
YELAHANKA BANGALORE TOWN
BANGALORE-560 064
(REPRESENTED BY ITS
MANAGING PARTNER
SRI K.HOMBA HANUMAIAH)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
3
AND:
1. STATE OF KARNATAKA
REPRESENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGALURU- 560 001
2. STATE OF KARNATAKA
REPRESENTED BY REVENUE SECRETARY
KARNATAKA STATE EXCISE DEPARTMENT
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI
BENGALURU-560 001
3. THE COMMISSIONER OF
COMMERCIAL TAXES
VANIJE THERIGE KARYALAYA-1
KALIDAS ROAD, GANDHI NAGAR
BENGALURU-560 009
4. THE ASSISTANT COMMISSIONER OF COMMERCIAL
TAXES (AUDIT) 5.10
DGSTO-5, VTK-2
100 FEET ROAD, VIVEKNAGAR POST
KORAMANGALA
BEGNALURU-560 047
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BEWERAGES
CORPORATION LIMITED
4TH FLOOR, TTMC, A BLOCK
BMTC BUILDING, KH RAOD
SHATNTINAGAR
BENGALURU-560 027
...RESPONDENTS
(BY SRI.HEMA KUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
ASSESSMENT ORDER DTD.31.8.2018 PASSED BY THE R-3 THE
PERIOD 2013-14 BEARING CAS ORDER NO.284555280
PRODUCED ANNEXURE-L, IN SO FAR AS THE PETITIONER IS
CONCERNED AND ETC.
4
IN W.P.NO.56813/2018
BETWEEN:
M/S. SANGEETHA BAR & RESTAURANT
NO.3680: 3369
RAMANAGARAM ROAD, MEGALA BEEDI
KANAKAPURA TOWN-562 117
DIST: RAMANAGARA
(REPRESENTED BY ITS PROPRIETOR
K JAGANNATH)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY ITS
FINANCE SECRETARY,
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, DR AMBEDKAR VEEDHI
BENGALURU-560 001
2. THE COMMISSIONER OF COMMERCIAL TAXES
VANIJE THERIGE KARYALAYA-1
KALIDAS ROAD, GANDHI NAGAR
BENGALURU-560 009
3. THE COMMERCIAL TAXES OFFICER
(AUDIT-2.4) DVO-2
DGSTO-2, R.R NAGAR,
BENGALURU-560 098
4. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES
LVO-152, BMTC BUILDING,
4TH FLOOR, YESHWANTHPUR
BANGALORE-560 022
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BEVERAGES
CORPORATION LIMITED,
4TH FLOOR, TTMC, A BLOCK,
BMTC BUILDING, K.H.ROAD
SHANTINAGAR,
BENGALURU-560 027
...RESPONDENTS
5
(BY SRI.HEMA KUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
RECTIFICATION ORDER U/S 69(1) OF THE KVAT ACT, DTD
24.07.2018 PASSED BY THE R-4 FOR THE PERIOD 2014-15 VIDE
ANNX-J AND QUASH THE RE-ASSESSMENT ORDER U/S 39(1) OF
THE KVAT ACT, DTD 31.07.2018 PASSED BY THE R-3 FOR THE
PERIOD 2015-16 VIDE ANNX-L IN SO FAR AS THE PETITIOENR IS
CONCERNED AND ETC.
IN W.P.NO.11816/2019
BETWEEN:
M/S MANJUNATHA ENTERPRISES
AKSHAYA SPIRITS BAR AND RESTAURANT,
26, OPP. WHEEL AND AXLE,
DODDABALAPUR MAIN ROAD,
YELAHANKA BANGALORE TOWN,
BANGALORE-560 064
(REP BY ITS MANAGING PARTNER
K.HOMBA HANUMAIAH)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REP BY ITS FINANCE SECRETARY,
GOVERNMENT OF KARNAAKA,
VIDHANA SOUDHA,
BENGALURU-560 001.
2. STATE OF KARNATAKA
REP. BY REVENUE SECRETARY,
KARNATAKA STATE EXCISE DEPARTMENT,
GOVERNMENT OF KARNATAKA,
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGALURU-560 001.
3. THE COMMISSIONER OF
COMMERCIAL TAXES,
VANIJE THERIGE KARYALAYA-1,
KALIDAS ROAD, GANDHI NAGAR,
BENGALURU-560 009.
6
4. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES (AUDIT) 5.10,
DCSTO-5, VTK-2,
100 FEET ROAD, VIVEKNAGAR POST,
KORAMANGALA, BENGALURU-560 047.
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BREWERIES CORPORATION,
4TH FLOOR, TTMC,
A BLOCK, BMTC BUILDING,
KH ROAD, SHANTINAGAR,
BENGALURU-560 027.
...RESPONDENTS
(BY SRI.HEMA KUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI.S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RE-
ASSESMENT ORDER DTD 27.11.2018 PASSED BY THE R-4 FOR
THE PERIOD 2015-16 VIDE ANNX-J AND QUASH THE DEMAND
NOTICE DTD 27.11.2018 ISSUED BY THE R-4 FOR THE
ASSESSMENT YEAR 2015-16 VIDE ANNX-K, IN SO FAR AS THE
PETITIOENR IS CONCERNED AND ETC.
IN W.P.No.12167/2020
BETWEEN:
M/S AISHWARYA BAR AND RESTAURANT
NO.290-HALAGEWADERAHALLI
RAJARAJESHWARI NAGARA
BANGALORE-560 039.
(REPRESENTED BY ITS PROPRIETOR,
SHRI H. GOPALRAJU)
...PETITIONER
(BY SRI. ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI
BENGALURU-560 001.
7
2. STATE OF KARNATAKA
REPRESENTED BY REVENUE SECRETARY
KARNATAKA STATE EXCISE DEPARTMENT
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI
BENGALURU-560 001.
3. THE COMMISSIONER OF COMMERCIAL TAXES
VANIJE THERIGE KARYALAYA-1
KALIDAS ROAD, GANDHI NAGAR
BENGALURU-560 009.
4. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT)2.3, DGSTO-02,
NO.642, PIONEER PLAZA
GROUND FLOOR,
KENCHENAHALLI MAIN ROAD
RAJA RAJESHWARINAGARA
BANGALORE-560 098.
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BREWERIES CORPORATION
4TH FLOOR, TTMC A BLOCK
BMTC BUILDING, KH ROAD, SHANTINAGAR
BENGALURU-560 027.
...RESPONDENTS
(BY SRI. HEMAKUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
ENDORSEMENT DATED 31.01.2020 ISSUED BY THE R-4 FOR THE
ASSESSMENT YEAR 2015-16, PRODUCED AT ANNEXURE-K AND
QUASH THE RE-ASSESSMENT ORDER DATED 22.05.2019
ISSUED BY THE R-4 FOR THE ASSESSMENT YEAR 2015-16, AT
ANNEXURE-G IN SO FAR AS THE PETITIONER IS CONCERNED
AND ETC.
IN W.P.NO.5406/2021
BETWEEN:
M/S MANJUNATHA BAR AND RESTAURANT
NO.1437/D, GANDHI NAGARA,
EXTENTIONYELAHANKA YEALAHANKA
8
BENGALURU TOWN-560 064
(REP BY ITS PROPRIETOR
SRI HANUMAIAH HOMBA)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1 STATE OF KARNATAKA
REP BY ITS FINANCE SECRETARY,
GOVERNMENT OF KARNATAKA,
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGALURU-560 001.
2. STATE OF KARNATAKA
REP BY REVENUE SECRETARY,
KARNATAKA STATE EXCISE DEPARTMENT,
GOVERNMENT OF KARNATAKA,
VIDHANA SOUDHA, AMBEDKAR VEEDHI,
BENGLAURU-560 001.
3. THE COMMISSIONER OF COMMERCIAL TAXES
VANIJE THERIGE KARYALAYA-1,
KALIDAS ROAD, GANDHI NAGAR,
BENGALURU-560 009.
4. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES (AUDIT) 5.10,
DGSTO-5, VTK-2, B-BLOCK
6TH FLOOR, 606 KORAMANGALA,
BENGALURU-560 047
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY,
KARNATAKA STATE BREWERIES CORPORATION
4TH FLOOR, TTMC, A BLOCK, BMTC BUILDING,
KH ROAD, SHANTINAAR,
BENGALURU-560 027.
...RESPONDENTS
(BY SRI HEMAKUMAR K., AGA FOR R1)
SRI.A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RE-
ASSESSMENT ORDERS DATED 2.03.2019 PASSED BY THE R-4
9
FOR THE PERIOD 2013-14 PRODUCED AT ANNEXURE-G AND
QUASH THE RE-ASSESSMENT ORDERS DATED 02.03.2019
PASSED BY THE R-4 FOR THE PERIOD 2014-15 PRODUCED AT
ANNEXURE-H, IN SO FAR AS THE PETITIONER IS CONCERNED
AND ETC.
IN W.P.No.16166/2021
BETWEEN:
M/S SREE RANGA BAR AND RESTAURANT
NO.204/2, KATTIGENAHALLI, 1ST MAIN ROAD
DWARAKANAGAR, BAGALUR MAIN ROAD
YELAHANKA, BENGALURU-560063.
(REPRESENTED BY ITS PROPRIETOR,
SHRI H GOPINATH)
...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1 STATE OF KARNATAKA
REPRESENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA
AMBEDKAR VEEDHI
BENGALURU-560 001.
2. STATE OF KARNATAKA
REPRESENTED BY REVENUE SECRETARY
KARNATAKA STATE EXCISE DEPARTMENT
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA
AMBEDKAR VEEDHI
BENGALURU-560001.
3. THE COMMISSIONER OF COMMERCIAL TAXES
VANIJE THEIRGE KARYALAYA-1,
KALIDAS ROAD
GANDHI NAGAR
BENGALURU-560009.
4. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES
(AUDIT) 5.9,DGSTO-05
6TH FLOOR, B BLOCK, VTK-2,
KORAMANGALA,
BANGALORE-560047.
10
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BREWERIES CORPORATION
4TH FLOOR, TTMC A BLOCK
BMTC BUILDING, KH ROAD
SHANTINAGAR
BENGALURU-560 027.
...RESPONDENTS
(BY SRI.HEMA KUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
ENDORSEMENT DATED 05.03.2020 ISSUED BY THE R4 FOR THE
ASSESSMENT YEAR 2015-16 PRODUCED AT ANNEXURE-K AND
QUASH THE RE-ASSESSMENT ORDER DATED 31.05.2019
ISSUED BY THE R4 FOR THE ASSESSMENT YEAR 2015-16 AT
ANNEXURE-G IN SO FAR AS THE PETITIONER IS CONCERNED
AND ETC.
IN W.P.No.20929/2021
BETWEEN:
M/S RANGANATHA BAR AND RESTAURANT
NO. 43/3-1, KODIGEHALLI
SAHAKARANAGAR POST
BENGALURU 560 092
(REPRESENTED BY ITS PROPRIETOR
SRI.B.K. SOMASHEKHAR) ...PETITIONER
(BY SRI ATUL KRISHNA RAO ALUR, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRSENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA
AMBEDKAR VEEDHI,
BENGALURU 560 001
2. STATE OF KARNATAKA
REPRESENTED BY REVENUE SECRETARY
KARNATAKA STATE EXCISE DEPARTMENT
GOVERNMENT OF KARNATAKA
11
VIDHANA SOUDHA
AMBEDKAR VEEDHI,
BENGALURU 560 001
3. THE COMMISSIONER OF COMMERCIAL TAXES
VANIJYA THERIGE KARYALAYA -1
KALIDAS ROD, GANDHI NAGAR
BENGALURU 560 009
4. THE DEPU7TY COMMISSIONER OF
COMMERICIAL TAXES (AUDIT)5.9
DGSTO-05, 6TH FLOOR,
B BLOCK, VTK-2
KORAMANGALA
BANGALORE 560 047
5. THE MANAGING DIRECTOR/
COMPANY SECRETARY
KARNATAKA STATE BEVERAGES
CORPORATION LIMITED
4TH FLOOR, TTMC, A BLOCK
BMTC BUILDING, KH ROD,
SHANTINGAR
BENGALURU 560 027
...RESPONDENTS
(BY SRI.HEMA KUMAR K., AGA FOR R1 TO R4
SRI A.SHANKAR, SENIOR COUNSEL FOR
SRI S.ANNAMALAI, ADVOCATE FOR R5)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RE-
ASSESSMENT ORDER DTD 25.03.2021 ISSUED BY THE R-4 FOR
THE ASSESSMENT YEAR 2016-17 VIDE ANNX-G AND QUASH
THE DEMAND NOTICE DTD 25.03.2021 ISSUED BY THE R-4 FOR
THE ASSESSMENT YEAR 2016-17, BEARING DEMAND
NO.158807717 VIDE ANNX-H IN SO FAR AS THE PETITIONER IS
CONCERNED AND ETC.
THESE W.Ps. COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP THIS DAY, THE COURT MADE THE FOLLOWING:-
12
ORDER
The petitioners in all these writ petitions are carrying on business of liquor and are running Bar and Restaurants having obtained the requisite CL-9 licences under the provisions of the Karnataka Excise Act, 1965 (for short 'the Excise Act'). The petitioners are also registered under the provisions of the Karnataka Sales Tax Act, 1956 (for short 'the KST Act') as well as the Karnataka Value Added Tax, 2003 (for short 'the KVAT Act').
2. The petitioners contend that earlier liquor was taxable under the KST Act in addition to attracting payment of duty under the Excise Act. Liquor was taxable under Section 5(1-A) of the KST Act, which is similar to the provisions of the KVAT Act. As per the said provision, liquor was taxable from the stage of manufacturing to the last sale; Section 5(1-A) was omitted by Act No.5 of 2000 w.e.f.01.04.2000. It is contended that on account of various hurdles and difficulties faced by the State Government in recovering sales tax for sale of liquor under the KST Act, the State Government proposed to collect the 13 KST at the manufacturing stage itself or collect sales tax as an additional duty / countervailing duty; in this back ground, the State Government announced merger of sales tax in the Excise Act as additional duty in view of sales tax and this intention on the part of the State Government can be discerned from the Budget Speech for the period 2000-01, in particular, paragraph-193 of the said Speech. The State Government considered levy and collection of additional duty at the point of manufacturing / import of liquor in lieu of sales tax leviable at all points of its sale, since such levy would ensure timely collection of tax at the point of sale itself with no scope for any revenue leakage at a later point. Accordingly, from 16.02.2001, in view of the merger of sales tax with excise duty, by virtue of the amendment to the KST Act and Excise Act by inserting Section 23(aaa) and Section 63A in the Excise Act, a Notification dated 15.02.2001 came to be issued under Section 8A of the KST Act exempting sales tax on sale of liquor w.e.f 16.02.2001.
3. Petitioners contend that in pursuance of the aforesaid notification, they were getting certificates from the 14 Excise Department and producing the same before the sales tax authority and accordingly, assessment orders were passed declaring the turn over as 'NA' (Not Applicable) and reassessments under the KVAT Act were done only on the sale of food from the year 2001 to 2005. Prior to coming into force of the KVAT Act which was implemented from 01.04.2005, a white paper on State Level Value Added Tax by the committee constituted by the Ministry of Finance, Government of India, extensively spoke about the Value Added Tax (for short 'the VAT') including keeping liquor out of the KVAT Act. Accordingly, when KVAT Act was introduced w.e.f. 01.04.2005, liquor was kept out of the VAT regime and followed by the State Government also. Under the KVAT Act, liquor was brought under the category 'Exempted commodity' as per Entry No.34 of Schedule I to the KVAT Act.
4. Petitioners contend that earlier liquor was sold through MSIL, a State Government agency. However, after the aforesaid amendment dated 16.02.2001, the entire liquor trade was shifted to the Karnataka State Breweries 15 Corporation Limited (for short 'KSBCL'), which is also arrayed as the respondent in these petitions and accordingly, all manufacturing units and distilleries have to sell all type of liquor to KSBCL, which was the authorised dealer in liquor. The manufacturer / distilleries were collecting additional duty on sale of liquor, which was permitted by the State Government. After purchasing liquor from the manufacturers / distilleries, KSBCL started selling liquor to all licence holders through its outlets and KSBCL being a Government company registered under the KVAT Act, the petitioners were mandated to purchase liquor from KSBCL only in bottles and sell liquor in small quantities / pegs in their respective Restaurants and petitioners were prohibited from purchasing liquor from any one else other than KSBCL.
5. Petitioners contend that though levy of tax on liquor was specifically exempted under the KVAT Act vide KVAT (Amendment) Act, 2014, Entry No.59-A in the III Schedule to the KVAT Act was inserted thereby levying tax on liquor at the rate of 5.5% sold by Bars and Restaurants 16 operating in urban areas and by clubs, lodging houses and star hotels. In pursuance of the said amendment, Notification dated 28.02.2014 was issued exempting tax payable on sale of liquor by dealers except persons mentioned in the said Notification. Subsequently, vide Notification dated 21.04.2014, it was clarified that the categories of persons mentioned therein are subjected to VAT w.e.f. 01.03.2014 and 21.04.2014. As per the said Notification dated 21.04.2014, certain types of liquor licencees were exempted from VAT. It is contended by the petitioners that pursuant to the aforesaid amendment to the KVAT Act, VAT is sought to be imposed upon the petitioners who are carrying on business as Bar and Restaurant selling liquor. Petitioners contend that the aforesaid alleged liability to pay VAT under the KVAT Act by the petitioners was in force upto July, 2017 till introduction of the GST regime, under which, GST on liquor was exempted in respect of the petitioners and accordingly, the subject matter of the dispute in all the petitions is for the period 2014 -17.
17
6. It is contended by the petitioners that they have properly and regularly maintained Books of Accounts and had filed monthly returns by claiming all exemptions and deductions under the KVAT Act and Rules and discharged the taxes on the admitted value of the value addition in relation to the liquor sold by them. The respondents had accepted the Returns and assessment proceedings were concluded. However, subsequently, Notices under Section 39(1) of the KVAT Act were issued to the petitioners proposing to take up reassessment proceedings in relation to the aforesaid period; the petitioners having submitted replies, the respondents proceeded to pass the reassessment orders which were followed by Demand Notices issued by the respondents to the petitioners.
7. Aggrieved by the same, petitioners filed rectification applications under Section 69 of the KVAT Act inter alia contending that there was an error apparent on the face of the record which requires rectification since VAT was sought to be levied on the entire turn over and not in respect of only the value addition that occurred on the sale 18 of liquor by the petitioners. The said contention of the petitioners was accepted by the respondents who issued rectification orders in favour of the petitioners.
8. It is the grievance of the petitioners that despite the aforesaid rectification orders passed by the respondents which were correct, legal and proper, the revisional proceedings under Section 63-A of the KVAT Act were initiated by the respondents and the same having been contested by the petitioners, respondents proceeded to pass the impugned orders followed by the impugned notices levying and demanding VAT at 5.5% on the entire sales turn over. Under these circumstances, the petitioners are before this Court by way of the present petitions.
9. Heard the learned counsel for petitioners, learned AGA for the State and learned Senior counsel for KSBCL.
10. In addition to reiterating the various contentions urged in the petitions and referring to the documents produced on record, learned counsel for the petitioners submits that the sales tax which was hitherto payable on 19 sale of liquor having merged with excise duty w.e.f. 01.04.2001, coupled with the fact that initially petitioners were exempted from paying VAT from 01.04.2005 up to 01.03.2014, the impugned levy of 5.5% VAT on the petitioners was illegal and arbitrary, since sales tax had already stood merged with excise duty and consequently, it was impermissible in law to circumvent the same and impose tax on sale of liquor in the form of VAT. It is further contended that the petitioners are liable to pay VAT only on the value addition and not on the total turn over and the impugned reassessment orders are vitiated and deserve to be quashed. It is also contended that KSBCL was liable to pay the VAT sought to be imposed upon the petitioners and give input tax credit to the petitioners in this regard. It is therefore contended that the petitioners are entitled to the reliefs sought for in the respective petitions.
11. Per contra, learned senior counsel for the KSBCL as well as the learned AGA, in addition to reiterating the various contentions urged in the statement of objections 20 submit that there is no merit in the petition and that the same is liable to be dismissed.
12. I have given my anxious consideration to the rival contentions and perused the material on record.
13. The material on record discloses that initially, the levy on liquor for human consumption was in the form of State excise as well as sales tax. Both these levies came to be merged w.e.f 16.02.2001. The sales tax hitherto came to be collected at source as Additional Excise Duty. This was done apparently to improve administrative efficiency in tax collection and plug revenue leakage. On the implementation of additional levy under the Excise Act as above, an exemption Notification dated 15.02.2001 was issued under Section 8-A of the KST Act exempting sales tax on liquor. This position of exemption under the sales tax levy continued upto February 2014. It may be noted that even when KVAT Act, 2003 was implemented w.e.f. 01.04.2005, liquor continued to be exempt. It was one of the commodities which was placed in First Schedule to the KVAT Act at Entry No. 34.
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14. Subsequently, levy of VAT at 5.5% on retail sale of liquor by certain class of licence holders was introduced on 01.03.2014 which includes the petitioners. These license holders are entitled to charge more than MRP for the sale of liquor. Under the prevailing regime of taxation under State Excise Act, the excise duty and additional excise duty is levied only on the declared price or MRP. Thus, it was proposed to levy a lower rate of 5.5% on liquor sold by bar and restaurants in urban areas. At this juncture, it may be noted that the policy of the State to tax liquor is always at very high rates as was the case of about 115% under KST Act just before the levy under that Act was merged with Excise Act. In view of the above, the exemption Entry No.34 in First Schedule of the KVAT Act was omitted and Entry No. 59-A in Third Schedule was inserted w.e.f 01.03.2014. For better clarity, it is submitted that First Schedule contains commodities which are exempt. Third Schedule contains commodities liable to tax at lower rate of tax (which is 5.5%). Simultaneous with the above amendment, Notification dated 28.02.2014 was issued. This notification generally exempts sale of liquor 22 from VAT; however exception is carved out in so far as certain class of licence holders as listed out therein and in effect, liquor sold by bar & restaurants in urban areas were brought to tax. Thereafter, another notification dated 21.04.2014 was issued which expanded the scope of the levy to further class of license holders.
15. The first contention urged on behalf of the petitioners is that since the sales tax stood merged with excise duty w.e.f. 16.02.2001, pursuant to which, additional excise duty was imposed in lieu of sales tax, it was not open for the State Government to impose VAT on the petitioners for sale of liquor which is nothing but re- imposition of sales tax in the form of VAT. In this context, it is relevant to state that imposition of VAT at 5.5% as per the Notifications dated 28.02.2014 and 21.04.2014 was the subject matter of challenge before the Division Bench of this Court in the case of M/s.Heaven Inn (Bar Attached) vs. State of Karnataka & Others - W.A.No.1425/2016 & connected matters dated 04.07.2016, which was followed by subsequent Division Bench in the case of 23 M/s.Renukamba & Others vs. State of Karnataka & Others - W.A.No.1431/2016 & connected matters dated 22.03.2016. In the said decisions, this Court upheld the validity of levy of VAT under the KVAT Act on retail sale of liquor from March, 2014 up to implementation of the GST regime w.e.f. 01.07.2017. Under these circumstances having regard to the fact that the validity of imposition of VAT on persons identically situated as the petitioners has been upheld by this Court and the same having attained finality, I am of the considered opinion that the contention of the petitioners that they are not liable to pay VAT on sale of liquor cannot be accepted. It is also significant to note that in the light of the validity of levy of VAT under the KVAT Act upon the petitioners for retail sale of liquor having been upheld and confirmed and the same having attained finality, merely because sales tax was merged with additional excise duty in 2001, resulting in cessation of the liability to pay sales tax under the KST Act, the said circumstance cannot be made the basis by the petitioners to contend that they are not liable to pay VAT under the KVAT Act. Under 24 these circumstances, the first contention urged on behalf of the petitioners cannot be accepted.
16. The second contention urged by the petitioners is that they are liable to pay VAT only on the value addition and not the entire sale consideration. In this context, petitioners placed reliance on the Budget Speech while introducing levy of VAT in Budget, 2014. This issue with regard to liability of the petitioners to pay VAT only on the value addition and not the entire sale consideration is also squarely covered by the decision of the Division Bench in the case of M/s.Balaji Bar & Restaurant vs. State of Karnataka - STRP No.101/2018 dated 08.04.2021 and in the case of M/s.Sri Giri Bar & Restaurant vs. State of Karnataka - STRP No.2/2020 dated 02.09.2021. Under these circumstances, even this contention urged on behalf of the petitioners cannot be accepted.
17. The third contention urged on behalf of the petitioners is that the KSBCL is a Distributor which has collected tax from the manufacturer / distributor and consequently, the petitioners who are purchasing liquor 25 only from KSBCL are entitled and eligible to set off input tax and obtain input tax credit. This contention also cannot be accepted in view of the Notification dated 21.04.2014, which clearly indicates that the KSBCL being a distributor holding CL-11 licence is not subjected to imposition of VAT under the said Notifications; merely because CL-11 licence holders such as the KSBC are not exempted from payment of VAT, the said circumstance cannot lead to an inference that they are subjected to imposition of VAT in the absence of such imposition being contained in the Notifications dated 28.02.2014 and 21.04.2014. In fact, the exemption available to the KSBCL is also confirmed by the Division Bench in the aforesaid decisions referred to supra and consequently, even this contention urged on behalf of the petitioners cannot be accepted.
18. As rightly contended by the learned Senior counsel for the KSBCL, the prayers sought for against the respondent No.5 are not maintainable, in as much as the petitioners have no locus standi to seek these reliefs. It is a settled position that reliefs claimed in a writ can only in 26 exercise of any legal right of the petitioners. The petitioners have neither established nor demonstrated as to which statutory or legal right of the petitioners is infringed by the claim of exemption by respondent No.5 in the present case. The taxation in the hands of KSBCL is something purely between the State and KSBCL and the petitioners have no locus standi whatsoever to interfere in this, more so when the State is in complete agreement with KSBCL in so far the interpretation of the Notification in question and the resultant position in law.
19. Learned Senior counsel for KSBCL is also correct in his submission that the claim of the petitioners that the Notification dated 21.04.2014 does not confer exemption on respondent No.5 is plainly erroneous and misconstrued and liable to be rejected, especially when a plain reading of the said Notification clearly indicates that KSBCL which holds CL-11 License is not subjected to VAT under the said Notification dated 21.04.2014. The exemption available to KSBCL is also confirmed by the Hon'ble Division Bench in M/s Balaji Bar and 27 Restaurant's case and M/s Giri Bar and Restaurant's case(supra).
20. The material on record also discloses that the contention of the petitioners that KSBCL has collected taxes is also not correct; KSBCL is a registered dealer under the KVAT Act with valid TIN and the reason for registration is that in addition to liquor sold to the petitioners, KSBCL also deals with taxable goods which are mainly rectified spirits, denatured spirits, etc., (which are not liquor for human consumption). In respect of such goods, KSBCL raises invoices in which VAT is collected and the same is also remitted to the State Government. The VAT collected and reflected in the VAT returns of KSBCL are of such nature of transactions and not on liquor for human consumption. In respect of sale of liquor for human consumption to parties such as the petitioners, invoice-cum-delivery challans are raised in which tax is not collected and this position is duly reflected in the monthly VAT returns filed by KSBCL in its annual accounts and also in its assessment order concluded by the VAT Authorities. 28
21. Insofar as the contention of the petitioners that directions are to be issued to the State Government to direct the KSBCL to grant input credit in favour of the petitioners is concerned, apart from the fact that no prejudice or hardship would be caused to the petitioners by paying VAT on the sale of liquor as per the impugned orders, particularly when the said VAT imposed on the petitioners can be ultimately passed on to the customers, the decision to direct KSBCL to grant input credit in favour of the petitioners is essentially a policy decision on the part of the State Government which cannot be the subject matter of the present petition warranting interference by this Court. Under these circumstances, even this contention urged on behalf of the petitioners cannot be accepted.
22. A perusal of the decision of the Division Bench in Giri Bar & Restaurant's case (supra), will indicate that the following substantial questions of law were framed by this Court;
"1. Whether on the facts and circumstances of the case, the Tribunal was right 29 to coming to the conclusion that, liquor can be levied on the KST Act and KVAT Act?
2. Whether on the facts and circumstances of the case the Tribunal was right for disallowing the ITC claimed by the petitioner?
3. Whether on the facts and circumstances of the case the Tribunal was right in coming to the conclusion that tax can be levied on the entire sales turnover?
4. Whether on the facts and circumstances of the case the petitioner is eligible to claim the deduction under 3[2][f] of the KVAT Rules?
5. Whether on the facts and circumstances of the case the KVAT has to be levied on the Value Addition or on the entire sales turnover?
6. Whether on the facts and circumstances of the case the petitioner is eligible for the tax deduction as per Rule-3 of the KST Rules?
7. Whether on the facts and circumstances of the case the Tribunal was right in levying the tax on the entire sale value/total turnover and not on the value addition/taxable turnover?30
8. Whether on the facts and circumstances of the case the Tribunal was right in confirming the order of the appellate authority and audit authority?
9. Whether on the facts and circumstances of the case the Tribunal was right in coming to the conclusion that there is no violation of principles of natural justice?
10. Whether on the facts and circumstances of the case the petitioner was right in relying on the notification published in the Departmental Website?
11. Whether on the facts and circumstances of the case the Tribunal was right in overlooking the order of the learned Single Judge in the case of M.Madhav Gowda V/s. State of Karnataka?"
23. After considering the various contentions urged on behalf of the petitioner - assessee in the said petition, this Court answered all the substantial questions of law against the assessee and in favour of the revenue by not only upholding the imposition of VAT under the KVAT Act upon the assessee but also coming to the conclusion that the assessee was not entitled to input tax 31 credit and that the assessee was liable to pay VAT on the entire sales turn over and not only the value addition. As stated supra, the said decision in Giri Bar & Restaurant's case (supra) is directly applicable to the facts of the instant cases also insofar as the petitioners are concerned and consequently, the petitioners are not entitled to any reliefs sought for in the present petitions.
24. In W.P.No.10403/2021, the petitioners got the petition amended interalia contending that during the pendency of the said petition, the revenue authorities have concluded the proceedings and issued demand notices which have also been assailed by way of amendment. However, having come to the conclusion that the petitioners are not entitled to any of the reliefs sought for by them in all the petitions, I am of the view that the petitioner in W.P.No.10403/2021 is not entitled to the amended reliefs also.
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25. In view of the aforesaid discussion, I do not find any merit in any of the petitions and the same are hereby dismissed.
SD/-
JUDGE Srl.