M/s.Hotel Saravana Bhavan v. The Commercial Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 06-10-2009Coram: THE HONOURABLE MR.JUSTICE M.JAICHANDREN W.P.No.28805 of 2007M/s.Hotel Saravana BhavanRepresented by its Managing Director,Mr.P.Saravanan,No.19, Vadapalani Andavar Koil Street,Chennai-26... Petitioner. VersusThe Commercial Tax Officer,Vadapalani-I Asst. Circle,Chennai-600 106... Respondent.PRAYER: Petition filed seeking for a Writ of Certiorari to call forthe records of the impugned notice of the respondent in TNGSTNo.1460553/2000-2001, dated 30.7.2007, and quash the same.For Petitioner : Mr.P.RajkumarFor Respondent : Mr.R.Tholgappian Government Advocate (Taxes)O R D E RHeard Mr.P.Rajkumar, the learned counsel appearing for thepetitioner and Mr.R.Tholgappian, the learned Government Advocateappearing for the respondent. 2. The petitioner is a registered dealer registered under theprovisions of the Tamil Nadu General Sales Tax Act, 1959. Variousfood items and drinks are served in the hotels and restaurants, inthe name of the petitioner, namely, M/s.Hotel Saravana Bhavan. Outdoor catering is also undertaken by the petitioner. It also preparesand serves ready to eat food items like idly, dosai, vadai, noodles,fried rice, meals, cold and hot beverages, soft drinks, ice creams,mineral water, etc. Generally, the food items and drinks are madeready and served, based on the orders placed by the customers. Onlyitems like packaged bottled drinks and ice creams, purchased fromlocal dealers, are kept in ready form. https://hcservices.ecourts.gov.in/hcservices/

3. While so, the respondent had issued the impugned notice,dated 30.7.2007, with regard to the levy of tax, under Section 7-A ofthe Tamil Nadu General Sales Tax Act, 1959, which is as follows:"Tvl.Saravana Bhavan, Foods and Drinks, No.19,Vadapalani Andavar Koil Street, Vadapalani, Chennai, werefinally assessed on a total and taxable turnover ofRs.68,92,81,882/- and Rs.65,71,73,259/-, respectively inthe proceedings cited.2. The place of business was inspected by theEnforcement Wing Officers, (North), Chennai, and noticedthe following facts:i) The dealers had purchased edible oil from thelocally registered dealers in 2000-2001 to the tune ofRs.2,30,97,197/- and consumed them in the preparation offoods, sweets, savories etc., During the said year, thesale of edible oil was covered under the conditionalexemption upto 100 crores granted by the Government as perG.O.Ms.No.109, CT & RE Department, dated 7.4.1998, witheffect from 27.3.1998 and extended upto Rs.300/- crores perannual from 1.4.1999 in G.O.Ms.92 CT Department, dated2.6.2000. This conditional exemption was withdrawn by theGovernment in G.O.Ms.No.110 CT Department, dated30.11.2001. Therefore the vegetables oils, which werepurchased from locally registered dealers and used in themanufacturing of sweets, savories, bakery items and othergoods items did not suffer any tax in the year ofassessment 2000-2001. Such purchase of vegetable oil wouldattract liability under Section 7-A of the TNGST Act. Further the dealers had purchased pulses, grams,chillies, coriander tamarind, jaggery, turmeric andasafetida from the local dealers and used the goods in thepreparation of food items. Such items are also exemptedfrom tax (i.e. conditional exemption – the sales turn overdoes not exceed Rs.300/- crores in a year] under entry 81[a][b][c] and [d] in part-B of III Schedule to the TNGSTAct, 1959, with effect from 17.7.1996. The tax not sufferedsuch goods used in the preparation of foods items by thedealers are liable to tax under Section 7-A of the TNGSTAct. 3. It was therefore proposed to revise the assessmentfor the year 2000-2001 under TNGST and assess the turnoverwhich would attract liability under 7-A of the TNGST Act.Actual suppression on the purchase Turnover of edible oil consumed in the preparation of food by the dealers which would attract liability under Section 7-A of the TNGST ActRs.2,30,97,197/- - 4% https://hcservices.ecourts.gov.in/hcservices/ Actual suppression on the purchase turnover of chillies, coriander, turmeric, Tamarind and asafetida which would attract liability under Section 7-A of the TNGST Act Rs.2,10,10,436/- 4%-------------------Total of suppression noticedRs.4,41,07,635/---------------------4. Levy of tax under section 7-A on the purchaseturnover of edible oil (ie. Covered under the conditionalexemption at the time of purchase) which were used in themanufacturing activities was upheld by the Tamil NaduSpecial Tribunal by their judgment pronounced in the caseof Tvl. Ruchi Soya Industries Limited (reported in 10 TNCTJ2004-2005)5. It was also proposed to levy penalty under section16(2) of the TNGST Act at the appropriate rate on the taxdue of the taxable turnover proposed to be assessed abovedue wilful non disclosure of the assessable turnover.6. Further, verification of the notice revealed that aturnover of Rs.2,10,10,436/- was proposed to be assessed at4% which is not in order. The above purchase turnoverpertains to the purchases of pulses and grams; chillies,coriander, turmeric, Tamarind and asafetida. Of whichpulses and grams, being declared goods are liable to tax at4% and others viz., chillies, coriander, turmeric, Tamarindand asafetida, being not specified elsewhere in any of theschedule, are liable to tax at 12% as residuary item ofgoods. In response to the notice though the dealers filedtheir objections, they failed to furnish the break upfigures for the purchase pulses and grams and separatelyfor the purchases of chillies, coriander, turmeric,Tamarind and asafetida. In the absence such break upfigures, it is to be estimated at the proportionate ratioof 3:1 on pulses, grams and chillies, coriander, turmeric,Tamarind and asafetida.7. Thus in partial modification of this office notice,dated 19.1.2007, it is proposed to revise the assessmentfor the year 2000-2001 under TNGST and assess the turnoverwhich would attract liability under 7-A of the TNGST Act asshown below:Actual suppression on the purchase Turnover of edible oil consumed in The https://hcservices.ecourts.gov.in/hcservices/ preparation of food by the Dealers which would attract liability Under section 7-A of the TNGST ActRs. 2,30,97,197/- 4%Actual suppression on the purchase Turnover of pulse and grams which would attract liability Under section 7-A of the TNGST Act at the proportionate ratio as in para 6 above on Rs. 2,10,10,436/- Rs. 1,57,57,827/- 4%Actual suppression on the purchase Turnover of chillies, coriander, turmeric, Tamarind and asafetida which would Attract liability under section 7-A of the TNGST Actat the proportionate ratio as in para 6 above on Rs. 2,10,10,436/- Rs. 52,52,609/- 12%------------------------Total of suppression noticed Rs. 4,41,07,635/--------------------------8. It is also proposed to levy penalty under section16(2) of the TNGST Act at the appropriate rate on the taxdue of the taxable turnover proposed to be assessed abovedue willful non disclosure of the assessable turnover.9. The dealers may file their objections, if any, tothe above proposal to this office within 10 days of receiptof this notice, failing which final orders would bepassed." 4. Even though the prayer in the writ petition is for a largerrelief, at this stage of the hearing of the writ petition, thelearned counsel appearing on behalf of the petitioner had submittedthat it would suffice if the petitioner is permitted to file itsobjections before the respondent, within a specified time limit,based on which the respondent could pass appropriate orders onmerits. 5. In view of the request made by the learned counsel for thepetitioner and as there is no serious objection raised by the learnedcounsel appearing on behalf of the respondent, the petitioner ispermitted to file its objections before the respondent, with regardto the impugned notice, dated 30.7.2007, within a period of fourweeks from the date of receipt of a copy of this order and on receiptof the said objections, the respondent is directed to passappropriate orders thereon, on merits and in accordance with law. https://hcservices.ecourts.gov.in/hcservices/ Accordingly, the writ petition is disposed of, with theabove directions. No costs.csh Sd/- Asst.Registrar/True Copy/ Sub.Asst.RegistrarToThe Commercial Tax Officer,Vadapalani-I Asst. Circle,Chennai-600 106.+ 1 cc to Special Government Pleader (Taxes)+ 1 cc to Mr.K. Balasubramanian, Advocate SR.51668W.P.No.28805 of 2007KJI(CO)EU 30.11.2009.