1963 (12) TMI 19 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of the establishment as a hotel or dhaba.
2. Validity of the assessment period under the amended Punjab General Sales Tax Act.
3. Retrospective withdrawal of sales tax exemption for dhabas.

Detailed Analysis:

1. Classification of the Establishment as a Hotel or Dhaba
The petitioner, proprietor of Bhagwan Hotel, contested the assessing authority's classification of his establishment as a hotel rather than a dhaba. The petitioner argued for the benefit of the tax exemption under item 49 of Schedule B of the Punjab General Sales Tax Act, 1948, which exempts "Indian food preparations ordinarily prepared by tandoorwalas, lohwalas and dhabas: when sold by persons running tandoors, lohs and dhabas exclusively." The assessing authority, however, determined that the establishment was a hotel, thus not qualifying for the exemption.

2. Validity of the Assessment Period Under the Amended Act
The petitioner challenged the assessment for the year 1959-60, arguing that it was barred by the original three-year period stipulated under sub-section (4) of section 11 of the Punjab General Sales Tax Act, 1948. The amendment via Punjab Act 2 of 1963 extended this period to four years, effective from 23rd March, 1963. The court found that the assessment order dated 24th June, 1963, fell within the extended four-year period and was therefore valid. The court rejected the petitioner's argument that the period should be split, affirming that the quarterly period cannot be divided and must be counted from the end of each quarter as per Madan Lal Arora v. Excise and Taxation Officer, Amritsar.

3. Retrospective Withdrawal of Sales Tax Exemption for Dhabas
The petitioner argued against the retrospective withdrawal of the sales tax exemption for dhabas, which was initially granted under item 49 of Schedule B. The Punjab General Sales Tax (Amendment) Act, 1962 (Punjab Act 8 of 1962), removed this exemption effective from 1st April, 1959. The petitioner cited Sewak Hotel v. Excise and Taxation Officer, Bhatinda, which held that exemptions enjoyed up to the date of the amendment could not be retrospectively withdrawn unless explicitly stated. However, the court clarified that the withdrawal of an exemption is not equivalent to imposing a new tax but rather revives the dormant charging provision. The court emphasized that the Legislature has the power to grant and withdraw exemptions retrospectively, as established in Union of India v. Madan Gopal Kabra and Tata Iron & Steel Co. Ltd. v. State of Bihar. The court concluded that the retrospective withdrawal of the exemption was valid and applicable from 1st April, 1959.

Conclusion
The court dismissed the petition, affirming the assessing authority's classification of the establishment as a hotel, validating the assessment period under the amended Act, and upholding the retrospective withdrawal of the sales tax exemption for dhabas. The parties were directed to bear their own costs.