CINIPLEX PVT. LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The assessee has preferred this appeal against the order passed by the Additional Commissioner of Commercial Taxes under section 64(1) of the Karnataka Value Added Tax Act, 2003 (for short, hereinafter referred to as "the Act"). The assessee is running a canteen in the cinema theatre and he sells food articles, snacks and beverages. He is a dealer registered under the provisions of the Act, He has opted for composition scheme with effect from May 1, 2006 and the same has been granted by the authorities. At the time of audit of books under section 39, the assessing authority found that during November 2006, the assessee has effected sale of certain equipments other than the food and beverages. The assessee had furnished debit notes issued on November 25, 2006 to the tune of Rs. 1,06,612. The goods sold are used equipments, viz., metal detector, water coolers and lockers. They were not reflected in the VAT return filed by the assessee. Therefore, the assessing authority issued a show-cause notice dated January 9, 2008 proposing to reassess the turnover for the tax period November 2006. The assessee contended that since he has opted for composition and since the charging section 15(1) does not provide for a separate rate with regard to sale of equipments or other materials, the assessee is liable to pay tax at four percent. However, the assessing authority levied tax at 12.5 percent on the sale turnover of Rs. 1,06,612 and levied penalty at ten percent under section 72(2) along with interest at 1.25 percent under section 36 of the Act. Aggrieved by the said order, the assessee preferred an appeal to the Joint Commissioner of Commercial Taxes (Appeals). The appellate authority held that the turnover relating to sale of used equipment also forms part of the total turnover and therefore, under section 15(1), the assessee is liable to pay tax at four percent on the total turnover. Accordingly, the appellate authority reduced the tax rate applicable to the assessee from 12.5 percent to four percent and consequently, the interest as well as the penalty levied was also reduced. The revisional authority in a purported exercise of power issued a notice dated July 5, 2010, under section 64(1) of the Act proposing to restore the order of the assessing officer and to set aside the order of the appellate authority. The revisional authority confirmed the proposition by holding the objections as untenable. The revisional authority proceeded to confirm the levy of penalty under section 72(3) on the ground that there was a failure to declare the impugned turnover in the return. The revisional authority directed the assessing authority to levy penalty from the date of filing the return till the date of reassessment order. Aggrieved by the aforesaid order, the assessee is before this court.

(2.) Apart from other grounds, the learned counsel for the assessee assails the impugned order on the ground that the assessee was not in the business of purchase and sale of used equipments, viz., metal detectors, water coolers and lockers. Therefore, it was a one-time sale of discarded goods and as such he was not liable to pay tax under the Act. Though this point was not urged before the lower authorities, this being purely a question of law, which could be decided based on the admitted material on record, it was contended that the very initiation of proceedings is void ab initio.

(3.) The learned counsel for the Revenue supporting the impugned order and contended that the assessee has opted for composition scheme under section 15 of the Act. The assessee was only a caterer, i.e., he sells only food articles. The goods, which are now sold, are not part of the aforesaid business. Therefore, the consideration received for sale of the aforesaid articles cannot form part of the total turnover for the purpose of calculating tax and availing of the benefit and therefore, he submits that the order passed by the revisional authority is valid and does not call for interference.