1984 (4) TMI 261 - HC - VAT and Sales Tax

Court upholds tax exemption for cooked food in Kerala Sales Tax Act, rejects bakery owners' challenge

Philips Smith Versus Additional Sales Tax officer

The court dismissed the bakery owners' challenge to the exemption scheme under the Kerala General Sales Tax Act, ruling that the exemption for cooked food ... - Issues:1. Challenge to the exemption scheme under the Kerala General Sales Tax Act, 1963.2. Allegation of violation of fundamental rights under articles 14 and 19(1)(g).3. Interpretation of the term 'cooked food' under item 12 of the Third Schedule.4. Alleged discrimination between bakery owners and owners of hotels and restaurants.5. Impact of exemption policy on bakery owners' business.6. Enforcement of tax laws and its impact on competition.7. Legislative policy regarding exemption of cooked food from sales tax.8. Application of article 19(1)(g) and article 14 to the case.9. Court's jurisdiction in directing legislative amendments to the Schedule.Detailed Analysis:1. The petitioners, bakery owners, challenged the exemption scheme under the Kerala General Sales Tax Act, arguing that the exemption for cooked food sold by hotel and restaurant owners but not by bakery owners violated their fundamental rights under articles 14 and 19(1)(g). They contended that the exemption policy favored hotel and restaurant owners, affecting their business adversely.2. The interpretation of the term 'cooked food' under item 12 of the Third Schedule was crucial to the case. The petitioners claimed that items like biscuits, puffs, jilabee, and ladoo fell under the category of cooked food. However, referencing a Supreme Court decision, the court noted that the term 'cooked food' did not necessarily include items like biscuits. The court highlighted that the exemption depended on how the food items were sold for immediate consumption, irrespective of the seller.3. The court addressed the alleged discrimination between bakery owners and hotel/restaurant owners, emphasizing that the exemption was based on the nature of the sale (service for immediate consumption) rather than the type of seller. It clarified that both bakery owners and hoteliers could avail the exemption if the food items were served for immediate consumption, not for consumption at a later time.4. The judgment also discussed the enforcement of tax laws and its impact on competition between bakery owners and hotel/restaurant owners. The court noted that issues related to tax evasion or undercutting prices were enforcement matters rather than validity concerns of the law.5. Regarding the legislative policy on tax exemption for cooked food, the court highlighted that the exemption was not applicable to all food items but specifically to cooked food served or sold for immediate consumption. The court clarified that the legislative policy did not put bakery owners at a special disadvantage compared to other food sellers.6. The court dismissed the argument of violation of article 19(1)(g) and article 14, stating that the exemption did not directly affect the business of the petitioners as the tax burden fell on the customers. It emphasized that if any violation of fundamental rights occurred, it would be on the customers, not the dealers.7. Finally, the court addressed the jurisdictional issue of directing legislative amendments to the Schedule. It clarified that the court's role was to interpret the law as per the legislative policy reflected in the statute and not to direct legislative changes based on external considerations. The court concluded that the original petitions lacked merit and dismissed them without costs.