1988 (4) TMI 418 - HC - VAT and Sales Tax

Court upholds tax exemption for pre-1983 food transactions, clarifying legal framework

The Rajasthan High Court upheld the exemption for transactions by restaurants, canteens, and eating houses serving food, snacks, and beverages before 2nd ... Exemption under section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982 - operation of a 'notwithstanding' clause - validation by section 6(1) of the Constitution (Forty-sixth Amendment) Act, 1982Exemption under section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982 - operation of a 'notwithstanding' clause - Application of the exemption in sub-section (2) of section 6 to supplies by restaurants, canteens and eating houses made prior to 2nd February, 1983 where tax was not collected - HELD THAT: - The court confined the controversy to sales of eatables by restaurants/canteens/eating houses for consumption therein prior to 2nd February, 1983. Sub-section (2) of section 6 grants exemption for such supplies made on or after 7th September, 1978 and before the commencement of the Amendment Act where the aforesaid tax was not collected, and it applies 'notwithstanding anything contained in sub-section (1)'. Consequently, even if validation under sub-section (1) could give rise to tax liability, the exemption in sub-section (2) removes liability in respect of tax not collected for the specified period and class of transactions. The Tribunal's order must be read in that light; so long as the statutory conditions for sub-section (2) are satisfied, the assessees are entitled to the exemption.For supplies by restaurants/canteens/eating houses prior to 2nd February, 1983 for which tax was not collected, exemption under section 6(2) applies and relieves the assessees of tax liability.Validation by section 6(1) of the Constitution (Forty-sixth Amendment) Act, 1982 - question whether State law formerly permitted levy - Whether it is necessary to decide if the pre-amendment State law permitted levy of sales tax on such transactions - HELD THAT: - The court observed that the larger question-whether the Rajasthan Sales Tax Act, prior to amendment, permitted levy of sales tax on these transactions-was not raised, considered or decided by the Tribunal and is unnecessary to resolve for the purposes of these revisions because sub-section (2) provides the determinative exemption for the stated period and transactions. The court left open the possibility that, in cases where the benefit of sub-section (2) is not available, the assessee may raise the question whether sub-section (1) or the pre-amendment statute relieves it of liability.The larger question whether pre-amendment State law permitted levy is not decided and remains open for consideration in appropriate cases.Final Conclusion: The revisions are dismissed. The Tribunal's common order must be understood to mean that supplies by restaurants/canteens/eating houses made between 7th September, 1978 and the commencement of the Forty-sixth Amendment (i.e., prior to 2nd February, 1983) for which the tax was not collected are exempt under section 6(2) of the Amendment Act; the broader question as to the pre-amendment permissibility of levy is left open. Issues:Validity of sales tax on transactions by restaurants/canteens prior to 2nd February, 1983 under the Constitution (Forty-sixth Amendment) Act, 1982.Detailed Analysis:The Rajasthan High Court addressed the issue of sales tax applicability on transactions by restaurants, canteens, and eating houses serving food, snacks, and beverages before 2nd February, 1983, under the Constitution (Forty-sixth Amendment) Act, 1982. The Tribunal's order stated that sales made before this date were not taxable unless tax was specifically collected from customers and deposited. The Department challenged this decision through various revisions against the common order of the Rajasthan Sales Tax Tribunal dated 14th April, 1986. The primary question revolved around the interpretation of sub-section (2) of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, which provided exemptions for certain supplies. The Tribunal's decision was limited to transactions by eateries before 2nd February, 1983, as per the Amendment Act's provisions.The Tribunal's order was based on the historical context of taxing sales by eateries, which had been a subject of debate and Supreme Court rulings. The Forty-sixth Amendment Act of 1982 aimed to address these challenges by amending relevant provisions of the Constitution. The Court highlighted the importance of sub-sections (1) and (2) of section 6, with the latter providing exemptions for specific types of supplies, including those by restaurants and eating houses before the enactment of the Amendment Act. The burden of proving tax exemption was placed on the claimant under this provision.The Court considered the arguments presented by the assessees' counsel, focusing on the impact of sub-section (2) of section 6 in relieving eateries from tax liabilities for transactions before 2nd February, 1983. The Court emphasized that the scope of the revisions was limited to pre-Amendment Act transactions by eateries serving food, snacks, and beverages. It clarified that sub-section (2) provided a clear exemption for such transactions, regardless of any potential tax liabilities under sub-section (1).In conclusion, the Court dismissed the revisions while acknowledging potential ambiguities in the Tribunal's order. It reiterated that the tax liability of each assessee should be determined based on the provisions of the Constitution (Forty-sixth Amendment) Act, 1982, specifically sub-section (2) of section 6. The Court's decision upheld the exemption for pre-2nd February, 1983 transactions by restaurants, canteens, and eating houses, as outlined in the relevant legal framework.