TMI Blog1986 (1) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... these transactions as sales in his orders dated 21st November, 1974, 28th August, 1975, and 7th August, 1975, for the assessment years 1973-74, 1974-75 and the broken period in 1975-76. The assessees went in appeal in all these cases. The Appellate Assistant Commissioner applying the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC) held by his orders dated 18th March, 1980, in all these cases that the supply of food and drinks for those customers who consume the eatables inside the premises cannot be held to be sale liable to be taxed under the provisions of the Tamil Nadu General Sales Tax Act, 1959. However, packet or parcel sales effected by the assessees are liable to be taxed. Since the bills issued to the customers did not make any difference between the packet or parcel sales and those cases where the customers consume eatables inside the premises, the Appellate Assistant Commissioner said that the packet or parcel sales can be reasonably fixed at 5 per cent of the total turnover. The assessment orders were revised on those basis. The Appellate Assistant Commissioner also found that the assessees have collected the tax and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal not enhancing the taxable turnover to the full extent prayed for. These tax cases related to Sree Annapoorna. Similar tax cases were filed relating to Sree Gowrisankar and they are T.C. Nos. 965, 101, 1060 and 116 of 1982. While these petitions were pending, Sree Annapoorna filed W.P. Nos. 9081 to 9083 of 1985 and Sree Gowrisankar filed W.P. Nos. 9084 to 9086 of 1985. In all these cases they prayed for a writ of certiorarified mandamus calling for the records in G.O. Ms. No. 1187, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, and quash para 8(i) which provided that waiver shall apply only to cases where the final assessments are kept pending and not to cases where assessments have become final as being discriminatory and quash the same as illegal and directing the Commercial Tax Officer, Coimbatore, to apply G.O. Ms. No. 1187 dated 22nd October, 1982, and grant waiver for the years 1973-74, 1974-75 and 1975-76 and pass such further or other directions as this Court may think fit. These writ petitions were dismissed at the admission stage on the ground that the waiver in the Government order was subject to the condition that the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees have collected tax, they could not also claim the benefits of the said Government Order. He also supported the distinction based on pendency or finality of the assessment proceedings. Before considering these respective contentions, it is necessary to trace the development of the law and the legislative changes made. In State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC), the Supreme Court has held that the expression "sale of goods" as used in the entries in List II of Schedule VII has the same meaning as in the Sale of Goods Act, 1930, and the widened definition of "sale" in the Madras General Sales Tax Act (Act 9 of 1939) including in it a transfer of property in goods involved in the execution of a works contract was ultra vires. By a series of subsequent decisions on the ratio of the decision in the said case, the Supreme Court and the various High Courts held various other transactions which resembled this to be not liable to sales tax. In State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC), the Supreme Court held that the transaction between a hotelier and the visitor to the hotel is one essentially of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." Section 6 dealt with validation and exemption and it reads as follows: "6. Validation and exemption.-(1) For the purposes of every provision of the Constitution in which the expression 'tax on the sale or purchase of goods' occurs, and for the purposes of any law passed or made, or purporting to have been passed or made, before the commencement of this Act, in pursuance of any such provision, (a) the said expression shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied or collected at that time; or (b) where such supply, not being any such supply by any restaurant or eating house (by whatever name called), has been made at any time on or after the 4th day of January, 1972, and before the commencement of this Act and the aforesaid tax has not been collected on such supply on the ground that no such tax could have been levied or collected at that time: Provided that the burden of proving that the aforesaid tax was not collected on any supply of the nature referred to in clause (a) or, as the case may be, clause (b), shall be on the person claiming the exemption under this subsection. (3) For the removal of doubts, it is hereby declared that, (a) nothing in sub-section (1) shall be construed as preventing any person- (i) from questioning in accordance with the provisions of any law referred to in that sub-section, the assessment, reassessment, levy or collection of the aforesaid tax, or (ii) from claiming refund of the aforesaid tax paid by him in excess of the amount due from him under any such law; and (b) no act or omission on the part of any person, before the commencement of this Act, shall be punishable as an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther transactions resemble, in substance, transactions by way of sales to be not liable to sales tax and as the result of those decisions. Similarly, the Objects and Reasons referred to decisions relating to hire-purchase agreements in respect of which it was held that there is sale only when the purchaser exercises the option to purchase at a much later date and therefore only the depreciated value of the goods involved in such transaction, at the time the option to purchase is exercised, becomes assessable to sales tax. Similarly it referred to the distinction made in the decision that while sale by a registered club or other association of persons (the club or association of persons having corporate status) to its members is taxable, sales by an unincorporated club or association of persons to its members is not taxable as such club or association, in law, has no separate existence from that of the members. Difference of opinion relating to taxability of transfer of controlled commodities in pursuance of a direction under the Control Orders and the desirability of putting the matter beyond doubt in regard to sale was one of the other reasons given. The problem encountered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drinks in a hotel or restaurant and that if any definition of "sale" in a State law included those transactions it would be ultra vires on the ground of want of legislative competence. Therefore if any State sales tax law had included any transaction of works contract, hire-purchase, supply of food and drinks in a hotel or transfer for consideration of controlled commodities in the definition of "sale ", then such a provision, though lacked legislative competence at the time when it was enacted, shall stand validated by the Constitution (Forty-sixth Amendment) Act so that the levy and collection of tax under those provisions would become legally valid. The definition of "sale" in the Tamil Nadu General Sales Tax Act, 1959, as it stood prior to the amendment of the same by Madras Act 19 of 1960 read as follows: "'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of business for cash or for deferred payment or other valuable consideration and includes a transfer of property in goods involved in the execution of a works contract but does not include a mortgage, hypothecation, char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases during the relevant assessment years 1973-74, 1974-75 and 1975-76 the definition of "sale" did not specifically include food and drinks supplied to customers in hotels and restaurants. The State wanted these transactions to be taxed only relying on the word "sale" as including normally those transactions as well, but in view of the decision of the Supreme Court, supply of food and drinks in a hotel or restaurant is not a sale. The main part of the definition of "sale" could not be said to have included those transactions and therefore the turnover relating to the same was not liable to sales tax. A Division Bench of the Andhra Pradesh High Court in the case reported in Hotel Dwaraka, Hyderabad v. Union of India [1985] 58 STC 241 took a similar view in respect of the argument that section 6 of the Constitution (Forty-sixth Amendment) Act authorised the taxing authorities to levy and collect tax on supply of food and drinks served in the restaurant and the learned judges held thus: "A reading of the Statement of Objects and Reasons appended to the Amendment Act and the marginal note to section 6 leaves no doubt that the object of section 6 is only to remove the defect in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion; (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." We have therefore no doubt that if the food and drinks supplied to a customer were not specifically included in the definition of "sale", it could not have been taxed during the relevant assessment years. We have already noticed that the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC) was rendered on 7th September, 1978, and that in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC) on 4th January, 1972. In the light of those judgments in certain cases, the assessees had not collected tax on the supply of food and drinks in either a hotel or a restaurant respectively on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not collected any amount by way of tax or purporting to be tax or deposit or contingent liability or had not made any provision in the balance sheet to meet tax liability, be waived." There is no dispute that a similar order was issued in G.O. Ms. No. 437, Commercial Taxes and Religious Endowments Department, dated 27th April, 1981, covering the period from 21st December, 1979, to 5th October, 1980. On the same reasoning, the Government also issued G.O. Ms. No. 1186, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, exempting tax due on sale incidental or ancillary to the sale of food and drinks and purchase tax payable under section 7-A. It appears that the Commissioner of Commercial Taxes brought to the notice of the Government that there are assessments pending at various stages relating not only to the period 7th September, 1978, to 6th October, 1980, but also the period prior to 7th September, 1978, and such pending assessments included: 1.. Cases where no returns have been filed and no tax paid. 2. Cases where returns were filed but no tax was paid. 3. Cases where returns were filed and tax was paid for part of the period. 4.. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotels and restaurants on the sales of food and drinks, the tax due under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, the tax due on sundry sales incidental or ancillary to the sale of food and drinks and the additional sales tax and surcharge due, for the period up to 5th October, 1980, be waived subject to the conditions mentioned in para 8 above." The Government Orders referred to in para 9 are G.O. Ms. Nos. 436 and 437 dated 27th April, 1981. The learned counsel for the appellants contended that the conditions imposed for the waiver are discriminatory, illegal and unenforceable and they are also not liable under the law to pay sales tax in respect of the turnover relating to supply of food and drinks in the restaurants in respect of all the three assessment years. The validity of the first condition, namely, that the waiver shall not apply to cases where the assessments have become final is questioned on the ground that it is arbitrary and discriminatory. In fact the first condition seems to say that even pendency in appeal or revision is not enough to get the benefit of waiver. It is open to argument that only if as a result of the order in appeal or revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government proceeds thus on a wrong assumption that the levy was legal and the assessment orders are valid. That, in our opinion, makes the conditions not applicable if not illegal and unsustainable. The learned single Judge who dismissed the writ petitions held that a provision extending a waiver to cases other than those already concluded and which have become final must be held as valid classification and that otherwise it will lead to reopening of all concluded matters and the result would be catastrophic. Normally we would have taken a similar view but for the fact that in the case of supply of food and drinks in hotels and restaurants it was the subject-matter of dispute between the hoteliers and the Government right from 1970 and in fact, the hoteliers first succeeded before the Supreme Court in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC) and still when the Government sought to tax such transactions restricting the decision of the Supreme Court only to supply of meals to residents, they were fighting that issue again and in Northern India Caterers (India) Ltd. v Lt. Governor of Delhi [1978] 42 STC 386 (SC) they were able to persua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh there was no authority to levy the sales tax, the assessee has been subjected to a levy and merely on the ground that the assessment had not been questioned by way of appeal or revision, they cannot be denied the benefit of the decision of the Supreme Court. If the legislature had not intended to give benefit of the Supreme Court judgment to these assessees they shall have amended the Sales Tax Act retrospectively. The learned Additional Government Pleader then submitted that when a waiver or exemption is subject to certain conditions, the assessees could not claim the benefit without complying with the conditions. The waiver being conditional on the fulfilment of those conditions, if the conditions are to be treated as not enforceable, the waiver itself could not be given effect to. We do not see how this argument is open. If the transactions are taxable, then only the question of waiver arises and such waiver can also be subject to conditions. If they are not taxable, the conditions have no place, as the waiver gives effect only to what the assessee is entitled to under the law or what the law provides for him. Equally, the condition requiring the pendency of the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities to refund the tax collected from him. The learned single judge allowed the writ petition and directed refund. A special appeal filed by the department to a Division Bench of the same High Court was also dismissed. On a further appeal to the Supreme Court, the Supreme Court held: "We are of opinion that this interpretation put by their Lordships of the Privy Council on section 72 is correct. There is no warrant for ascribing any limited meaning to the word 'mistake' as has been used therein and it is wide enough to cover not only a mistake of fact but also a mistake of law. There is no conflict between the provisions of section 72 on the one hand and sections 21 and 22 of the Indian Contract Act on the other and the true principle enunciated is that if one party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party paying the money to recover it back from the party receiving the same." It may be pertinent to point out that in this decision also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineers were assessed under the Madras General Sales Tax Act, 1939, on their works contract for the years 1951-52 and 1952-53. The tanners were assessed to tax on their gross turnover of purchase including the sales to them from persons other than licensed dealers. After the decisions in Gannon Dunkerley v. State of Madras [1954] 5 STC 216 (Mad.); ILR (1955) Mad. 832 and Abdul Shukoor and Company v. State of Madras [1955] 6 STC 352 (Mad.) [FB]; ILR (1956) Mad. 1 (FB) both these assessees contended that the levy made on them was unlawful and that they were not liable to pay the amount. One of the contentions raised by the Government was that the assessments in their cases have become final, they have not preferred any appeal, reference or revision and that, therefore, the collection of the tax due under those assessments cannot be stayed or said to be prohibited from collecting the tax. Repelling this contention this Court observed that "if the officers employed to administer the law make mistakes in the exercise of their powers, the persons affected must ordinarily use the remedies of appeal, reference or revision as the case may be but where there is an absence of jurisdiction or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because both the original application for eviction as well as the appeal preferred against the order of the Rent Controller were disposed of long before the amending Act came into force and the application for a writ of certiorari is not a proceeding instituted under the Rent Control Act. It may be mentioned that the Madras Buildings (Lease and Rent Control) Act only provided for an appeal against the order of the Rent Controller and it did not provide for any further proceeding by way of revision or by way of a writ of certiorari to the High Court, Rejecting this contention, the learned Chief justice, Rajamannar, held thus: "........the appeal preferred to the Subordinate Judge must be deemed to be pending so long as the application to quash the order is pending in this Court. In Halsbury's Laws of England, Volume 9, page 838 (section 1420), the nature of a writ of certiorari is thus set out: 'The writ of certiorari issues out of a superior court and is directed to the Judge, or other officer of an inferior court of record. It requires that the record of the proceedings in some cause or matter pending before such inferior court shall be transmitted into the superior court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the matter cannot be said to have reached finality. Further the decision of the Tribunal in respect of 1975-76 was in favour of the assessee. Again when the writ appeals were admitted and notices had been issued, the finality attached to the orders of assessments is also set at large and the matter can be said to be only pending. In view of the rule nisi issued in writ proceedings and the pendency of the tax cases it cannot be said that the assessments had become final. The next condition related to cases where the dealer had collected tax which is equal to or in excess of the tax. This condition again, in our view, cannot be sustained. If the non-liability to pay tax was on the ground that the turnover relating to the supply of food and drinks was not sale, there could be no question of the State collecting any tax in respect of that turnover. Again if the assessment proceedings were pending either before the assessing officer or revisional authority or in this Court, for giving relief, the collection of tax would not be of any relevance. In fact, though the notification used the word "waiver", it is only in the nature of giving effect to the provisions of the Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
