VAT on university prospectus sales upheld: regular printed material sales were treated as business, not exempt books.

Regular and substantial sale of prospectus and application forms by a university constituted business for VAT purposes because the transactions were continuous, frequent and commercial in character, even though the university's primary object was education. The sale was therefore liable to VAT under the Karnataka Value Added Tax Act, 2003. Prospectus and application forms were also not exempt as books because, on their ordinary meaning, a prospectus is a printed brochure and not a book, periodical or journal; they were accordingly classifiable as taxable printed materials under Entry 71 rather than exempt under Entry 11. The assessment and penalty orders were left undisturbed.

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Issues: (i) Whether the sale of prospectus and application forms by the University amounted to carrying on business so as to attract levy of VAT under the Karnataka Value Added Tax Act, 2003. (ii) Whether prospectus and application forms were exempt as books under Entry 11 of the First Schedule or fell within Entry 71 of the Third Schedule.

Issue (i): Whether the sale of prospectus and application forms by the University amounted to carrying on business so as to attract levy of VAT under the Karnataka Value Added Tax Act, 2003.

Analysis: The statutory scheme treated a dealer as a person carrying on the business of buying, selling or supplying goods, and tax was chargeable on sales by a registered dealer on taxable turnover. The University was already registered as a dealer under Section 22 of the Act, and the registration certificate was general in nature, not confined to any particular commodity. Applying the settled test that business depends on volume, frequency, continuity and regularity of transactions, the collection of substantial amounts every academic year from the sale of prospectus and application forms showed a regular commercial activity. The University's main educational object did not prevent the sale activity from amounting to business where the facts showed sustained sales and profit.

Conclusion: The sale of prospectus and application forms constituted business and was liable to VAT. This issue was decided against the University and in favour of the Revenue.

Issue (ii): Whether prospectus and application forms were exempt as books under Entry 11 of the First Schedule or fell within Entry 71 of the Third Schedule.

Analysis: Entry 11 exempted books, periodicals and journals including maps, charts and globe. Entry 71 brought to tax printed materials other than books meant for reading and specified stationery articles. On the ordinary meaning of the term, a prospectus is a printed document or brochure describing courses and facilities, not a book meant for reading. It also did not answer to the character of a periodical or journal. The forms and prospectus therefore could not claim exemption under Entry 11 and were properly classified as printed materials under Entry 71.

Conclusion: Prospectus and application forms were not exempt books and were taxable under Entry 71. This issue was decided against the University and in favour of the Revenue.

Final Conclusion: The revision petitions failed because the impugned sales were held to be taxable business transactions and not exempt educational books, leaving the assessment and penalty orders undisturbed.

Ratio Decidendi: Where a registered dealer engages in regular, continuous and substantial sale of printed material, the activity constitutes business for VAT purposes, and exemption entries for books must be strictly construed according to the ordinary meaning of the goods described.

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