2014 (4) TMI 543 - HC - VAT and Sales Tax

Taxation of Mineral Water in Restaurants: Legal Ruling on Classification

The Court concluded that mineral water sold in restaurants can be taxed under Schedule Entry CII-14 as a non-alcoholic drink, despite also falling under ... Whether Tribunal was correct in holding the sales of mineral water by way of service in the restaurant as the sales of non-alcoholic drinks falling under Schedule Entry C-II-14, when there is a specific Schedule Entry C-II-17 for mineral water - Mineral water - Classification – Interpretation of Statute - Sales by way of service as the sales of non-alcoholic drinks in the restaurant – Held that:- Mineral water does fall under entries C-II-17 - However, it also falls under entry C-II-14 for mineral water is undoubtedly a non-alcoholic drink - Qua mineral water entry C-II-14 is a specific entry, deals with mineral water not generally but mineral water served for consumption inter-alia at or in the immediate vicinity of any public restaurant or in any club or supplied by a public restaurant or club. Firstly, this contention was not even raised before Tribunal - As noted in the order of Tribunal, no reason whatsoever was given for denial of the benefit as far as mineral water was concerned - The notification entry A-13(3) was applicable inter-alia in respect of non-alcoholic drinks served in restaurants - Had the issue been raised before the authorities under the BST Act, the respondent may well have furnished an answer to the same. It would be unfair to the respondent to permit such a contention to be raised in a reference u/s 61, although it was not raised before Tribunal - Secondly, there is no material on record to establish that in common parlance mineral water would not be included within the ambit of the words 'non-alcoholic drinks' - It is not Revenue`s case that mineral water served by the respondent was an alcoholic drink - Revenue admits that it was non-alcoholic drink - That the plain meaning of the words 'non-alcoholic drinks' includes mineral water is not and indeed cannot be denied - Thus absent any material, it is not possible to uphold the contention on the basis of the common parlance test - matter, therefore, does not raise a substantial question of law – Application dismissed – Decided against Revenue. Issues:1. Interpretation of Schedule Entry CII-14 and C-II-17 of the Bombay Sales Tax Act 1959 regarding sales of mineral water in restaurants.Analysis:The appellant sought a direction for the Maharashtra Sales Tax Tribunal (MSTT) to refer a question of law regarding the classification of sales of mineral water in restaurants under Schedule Entry CII-14 or C-II-17. The respondent, registered under the Bombay Sales Tax Act and Central Sales Tax Act, operated restaurants serving both alcoholic and non-alcoholic drinks. The dispute arose from the assessment of sales tax for the financial year 1997-1998. The respondent argued that mineral water served at their restaurants should be taxed under entry C-II-14 at 10%, contrary to the appellant's position that it falls under entry C-II-17. The MSTT ruled in favor of the respondent, prompting the appellant to challenge the decision specifically concerning mineral water.The crux of the matter revolved around the interpretation of Schedule Entry CII-14 and C-II-17. While mineral water technically fell under C-II-17, the Court opined that it also qualified under C-II-14 as a non-alcoholic drink served in restaurants. The appellant's argument based on common parlance was dismissed as it was not raised before the MSTT and lacked substantial evidence. The Court highlighted that the plain meaning of 'non-alcoholic drinks' encompassed mineral water, and without concrete proof to the contrary, the common parlance test was deemed insufficient. Consequently, the Court concluded that the issue did not present a substantial question of law, leading to the dismissal of the application challenging the classification of mineral water for taxation purposes.In summary, the judgment delves into the nuanced interpretation of statutory entries to determine the taxation classification of mineral water sold in restaurants under the Bombay Sales Tax Act. The Court's analysis emphasizes the specific provisions of Schedule Entries CII-14 and C-II-17, ultimately concluding that mineral water can be taxed under CII-14 as a non-alcoholic drink served in restaurants, despite also falling under CII-17. The dismissal of the application underscores the importance of raising relevant contentions before the appropriate authorities and substantiating claims with concrete evidence in tax-related disputes.