Taxpayer not required to include turnover of alcoholic liquor sold in its restaurant for calculation of Taxable Turnover: HC

The specific case of the petitioner in these Writ Petitions is that there is no case made out for clubbing the turnover of alcoholic liquor sold from the licenced bar of the petitioner. It is submitted that the sales turnover of alcoholic liquor sold from the bar attached to the petitioner’s hotel, for which, the petitioner was given a bar licence under the provisions of the Tamil Nadu Prohibition Act, 1937 read with Rules made thereunder, cannot be included into the taxable turnover of food and drinks. It is submitted that the sale of alcoholic liquor was separately liable to tax only at the first point of sale at the rate prescribed in the VI Schedule and Part J of the I Schedule to the TNGST Act, 1959.

It is submitted that as per charging Section 3-D under the TNGST Act, 1959, tax is chargeable on the “total turnover” of a registered dealer. It is submitted that the turnover which has already been suffered tax at the first point of sale cannot be taxed again. It is further submitted that the petitioner has also not collected tax on sale of alcoholic liquor.

The learned counsel for the petitioner further submitted that the petitioner also cannot be made liable to penalty under Section 12(3)(b) of the Act in the light of the decision of Division Bench of this Court in Appollo Saline Pharmaceuticals (P) Ltd. Vs. Commercial Tax Officer (FAC) and others, [2002] 125 STC 505.

On the other hand, the learned Special Government Pleader (T) for the respondents defends the impugned common order of the Tribunal and submits that these Writ Petitions filed by the petitioner are devoid of merits inasmuch as Section 3-D of the TNGST Act, 1959 is a separate charging Section for taxes to be paid by Hotels, Restaurants and Sweet Stalls. It is submitted that the aforesaid provision starts with non- obstante clause and therefore the first sale exemptions which are applicable to those transactions which are liable to tax under Section 3 of the TNGST Act, 1959 are not relevant.

It is submitted that as per Sub-Section (2) to Section 3-D, a dealer liable to tax under Sub-Section (1) cannot collect any amount by way of tax or purporting to be way of tax on the sale of food and drinks.

Hence, it is submitted that the impugned common order of the second respondent Tribunal is not required to be interfered with.

It is submitted that since the petitioner had failed to include the turnover pertaining to the sale of alcoholic liquor on the strength of bar licence issue to the bar attached to the petitioner’s Hotel, the petitioner was liable to penalty under Section 12(3)(b) of the TNGST Act, 1959. In this connection, the learned Special Government Pleader (T) for the respondents drew attention to the decision of the Tamil Nadu Taxation Special Tribunal in Hotel Ranjith Vs. Commercial Tax Officer, Valluvarkottam Assessment Circle, Chennai, [2001] 124 STC 571.

It is submitted that though the aforesaid decision was passed in the context of validity of Section 3-D / 3-E(1) and Part A or Part B of the IX Schedule to the TNGST Act, 1959, the Tamil Nadu Taxation Special Tribunal has categorically held that the taxable turnover for the purpose of Additional Sales Tax Act is taken as the “turnover assessed” under Section 3-D of the TNGST Act, 1959.

It is submitted that Section 3-D is an independent charging section and authorises levy of tax on the “total turnover” and therefore the question whether there was a second sale or subsequent sale or whether the goods have already suffered tax is of no relevance.

Relevant Text:

33. The sales turnover of alcoholic liquors were taxable under Part I & J of the First Schedule to the TNGST Act, 1959 during the period between 17.07.1996 and 26.03.1998 and later in Part J & K of the First Schedule to the TNGST Act, 1959 during the period between 27.03.1998 and 11.11.1999. Such turnover cannot be included in the sales turnover of “food and drinks” under Section 3-D of the TNGST Act, 1959 read with Entry in Sl.No.20 in Part-C of the Fist Schedule to the TNGST Act, 1959. Alcoholic liquors specified in Part I & J and in Part J & K of the First Schedule to the TNGST Act, 1959 during the respective period were liable to be taxed only at the first point of sale. They cannot be taxed again.

34. However, for sale of alcoholic liquors purchased within the State, the petitioner would have been liable to pay tax at 30% between 17.07.1996 to 26.03.1998 and for the period starting from 27.03.1998 ending with 11.11.1999, the petitioner would have been liable to pay tax at 40% and thereafter, between 12.11.1999 and 31.11.2001, at 50% under the Sixth Schedule to the TNGST Act, 1959. In other words, if the petitioner had sold alcoholic liquor manufactured in the State, the petitioner would have been liable to tax on the second sale effected from its bar attached to its restaurant independently.

35. The facts on record do not reveal that the petitioner has paid tax on alcoholic liquors sold in its return at 30% for the period between 17.07.1996 and 26.03.1998, at 40% for the period between 27.03.1998 and 11.11.1999 and at 50% for the period between 12.11.1999 and 31.11.2001 as specified in the Sixth Schedule to the TNGST Act, 1959.

36. Prima facie the petitioner appears to have evaded tax on sale of alcoholic liquor sold which were manufactured in the State at the rate specified in the Sixth Schedule. As both the Appellate Assistant Commissioner and second respondent Appellate Tribunal have failed to look into the same, we are of the view that the petitioner is liable to pay tax.

37. We however accept the contention of the petitioner that the petitioner is not required to include the turnover relating to the sale of alcoholic liquor sold in its restaurant into the turnover of foods and drinks as sale of alcoholic liquor are separately liable to tax as specified in the Part I & J and Part J & K of the First Schedule and Sixth Schedule to the TNGST Act, 1959. At the same time, the petitioner is required to pay tax on the sale of alcoholic liquor sold in its restaurant in terms of the Sixth Schedule to the TNGST Act, 1959, content of which has been extracted above.

38. We therefore set aside the impugned order and remit the case back to the original authority namely, Commercial Tax Officer / the first respondent, for re-determination of the tax liability of the petitioner on sale of alcoholic liquor at the rate specified in the Sixth Schedule to the TNGST Act for the alcoholic liquor purchased within the State of Tamil Nadu, within a period of six months from the date of receipt of a copy of this order.

39. The petitioner shall produce records to substantiate its case regarding the sale of alcoholic liquor locally procured and manufactured within the State of Tamil Nadu which were sold in its restaurant as the second sale and had suffered sales tax under the Sixth Schedule to the TNGST Act, 1959. In case, the petitioner fails to produce the same, the assessment shall be completed based on the principles of best judgment as is contemplated under the provisions of the TNGST Act, 1959.

40. Accordingly, these Writ Petitions are disposed of by way of remand. No cost. Consequently, connected Miscellaneous Petition is closed.

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