K.G. HOSPITAL DIET CANTEEN Vs. STATE OF ANDHRA PRADESH
SALES TAX TRIBUNAL
K.G. Hospital Diet Canteen
STATE OF ANDHRA PRADESH
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M. Seetharama Murti, Chairman -
(1.) THIS is an appeal against the revisional orders dated 14.05.2004 of the Additional Commissioner (CT) (Legal), A.P. at Hyderabad ('Revisional Authority' for short) in Reference No. LV(3)/931/2003 whereby the revisional authority while exercising the powers under Section 20(2) of the A.P. General Sales Tax Act, 1957 (for short, 'Act') had set aside the orders dated 20.03.2003 of the Appellate Deputy Commissioner of Commercial Taxes, Visakhapatnam ('ADC for short) made in Appeal No. VSP.108/2002 -2003 and restored the original assessment orders dated 11.06.2002 of the Commercial Tax Officer, Kurupam Market Circle ('CTO') for short) made in Assessment No. Nil/1997 -1998 under the Act for the year 1997 -98. The facts leading to the present appeal and the facts of the case of the appellant, in brief, are as follows: - "M/s. K.G.H. Diet Canteen, Visakhapatnam ('appellant' for short), a proprietary concern, was a dealer on the rolls of the Assistant Commercial Tax Officer, Jalaripeta ('ACTO' for short). One Mr. Reddy Surya Rao was the proprietor of the said proprietary concern. The CTO had observed in his orders dated 11.06.2002 that the appellant was deemed to have been assessed for the year 1997 -98 under Section 14(E) of the Act on the basis of Form AA9 returns filed by the appellant before the ACTO as required under Rule 15D(1) of the APGST Rules, 1957. However, the CTO had noticed that the appellant had received an amount of Rs. 27,29,080/ - from the Superintendent of K.G. Hospital, Visakhapatnam during that year towards supplies of diet to the said hospital and that the said turnover was not disclosed by the appellant in the annual return in Form AA9. Therefore, the CTO had observed that the said turnover had escaped assessment. The CTO had further noticed that the appellant had received an amount of Rs. 9,44,628/ - from the Superintendent of Government Hospital for Chest and C.D. Visakhapatnam and the said turnover was also not disclosed by the appellant in the annual return in Form AA9 and that the said turnover was also not disclosed in the revised A2 return filed on 04.09.2000 and, therefore, the said turnover had escaped assessment. The CTO, therefore, had proposed to add the above mentioned turnovers also to the turnover and had finally determined the turnovers as follows: -
The said net turnover was held to be exigible to tax at 9% and a tax of Rs. 3,40,306/ - was levied. Aggrieved of the said final assessment orders of the CTO, the appellant had preferred an appeal before the ADC and the ADC had allowed the first appeal accepting the contention of the appellant that the sale of the food is eligible for exemption in terms of G.O.Ms. No. 1091 dated 10.06.1957. However, the revisional authority while exercising the powers of revision vested in him under Section 20(2) of the Act had revised the said orders and had finally set aside the orders of the ADC and restored the original orders of the CTO. Consequent to the said orders of the revisional authority the CTO had passed revised assessment orders dated 21.06.2004 in G.I.No.Nil/1997 -1998 (R.C. No. 703/1999 A2) giving effect to the revisional orders of the revisional authority."
(2.) AGGRIEVED of the orders of the revisional authority, the appellant had preferred the instant appeal. The appellant had raised certain contentions besides the grounds that are urged in the memorandum of appeal. The said contentions and the grounds of appeal are as follows: -  The appellant is a proprietary concern and Mr. Reddy Surya Rao was the proprietor of the said proprietary concern. The appellant is a diet contractor and had supplied diet to the in -patients and the duty doctors of the K.G. Hospital and the Government Hospital for Chest CD. ('Government Hospitals'). The appellant had supplied goods to the superintendent of the hospital as per the specification given by the Common Diet Committee, Director of Medical and Health Services, Hyderabad. The cost of diet articles was fixed at Rs. 15/ - per patient and at Rs. 40/ - per Doctor. The above cost has to be reimbursed by the superintendent of the hospital weekly or monthly and no extra charges are permitted to be recovered from the superintendent of the hospital.  Such reimbursement of charges shall not be exigible to tax under the Act.  As per agreement between the superintendent of the hospital and the diet contractor, the Director of Medical and Health had given directions to supply the diet ingredients, such as rice, oil, vegetable, mutton, etcetera, as per the schedules fixed by the Common Diet Committee, Director of Medical and Health Services. The above ingredients of diet articles were received by the RMO and were supplied to the in -patients for their consumption within the hospital. The staff of the hospital and the staff of the contractor had assisted in cooking and supply. No service charges were paid for the service rendered by the said staff.  The hospital staff also had not taken charges for supply of water, electricity etcetera.  The appellant had supplied food to in -patients and doctors as per the specifications of the Director of Medical and Health Services.  The Government have permitted the diet contractor to collect Rs. 15/ - per patient and Rs. 40/ - per doctor for breakfast, lunch and dinner as per diet committee's specifications without payment of sales tax. Therefore, the same shall be treated as service charges.  As per G.O.Ms. No. 1091 (Revenue), dated 10.06.1957 the supplies of food to in -patients and duty doctors are exempt from tax.  The contractor is an agent of the superintendent of the hospital, who is the principal. The liability is co -terminus with the liability of the principal.  Since the Government of A.P. is not liable to tax the appellant is also not liable to pay tax. While fixing the diet charges the Government did not include the sales tax component therein and hence, if at all the supplies attract tax under the Act, the said tax is to be paid by the Health Department of the Government. The levy of tax on the supplies of diet to the in -patients and the duty doctors of Government hospitals is illegal, arbitrary and against the Principles of Natural Justice. Arguments of the learned AR and the learned SR were heard. The learned SR supported the impugned orders. The contentions of the learned AR are already adverted to supra.
(3.) THE points for determination herein are: -
(1) Whether the appellant is an agent of the Government of A.P., in the transactions of supply of diet to the in -patients and the duty doctors of the Government Hospitals at Visakhapatnam?
(2) Whether the turnover related to the supplies of diet to the inpatients and the doctors of the Government hospitals is exigible to tax under the Act?
(3) To what relief?;
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