2015 (12) TMI 240 - HC - VAT and Sales Tax

Court Upholds 14.5% Turnover Assessment for Branded Food Sales under TNVAT Act

Tvl. Zaitoon Multi Cuisine Family Restaurant Versus The Assistant Commissioner (CT), Thiruvanmiyur Assessment Circle, Chennai

The court upheld the respondent's decision to assess the petitioner's turnover at 14.5% for selling branded food, considering the registration under the ... Assessment of turnover tax - petitioner got trade mark registration and the sale of branded food is taxable at 14.5% and since the petitioner paid 2% on the total taxable turnover - Held that:- provisions of the Trade Marks Act, 1999 as well as Rules thereof would apply to the petitioner. The Fourth Schedule of the Trade Marks Rules, 2002 envisages ‘Classification of Goods and Services-Name of the Classes”, wherein, though Item Nos.29 and 30 would refer to food items, however, they are not prepared and served in the restaurants. Item 35 to 45 would refer ‘services’, which, as per the Act, they are trademark services and Item 43 specifically mentioned as “Services for providing food and drink; temporary accommodation”.Therefore, as rightly contended by the learned counsel for the respondent, the trade mark registration is meant for the restaurant as well as the products manufactured by it and when the activity of service for providing food and drink is considered as a trade mark under the Act, the food items also are to be considered as ‘branded items’ and therefore, levy of tax on such branded food and drink items would be at 14.5% as prescribed under Section 7(1)(a) of the TNVAT Act, 2006 and the respondent has rightly passed the impugned assessment order. It is brought to the notice of this Court that by mistake, the above said provision has been wrongly mentioned, however, in the notice, dated 3.12.2014, the respondent has mentioned that it was proposed to revise the assessment under Section 25(1) of the TNVAT Act, 2006, as per which, the authority is empowered to determine the tax payable by the dealer to the best of its judgment.Therefore, as per Section 3(2) of the TNVAT Act, 2006, the petitioner is liable to pay tax at 14.5%. - No illegality or irregularity in the impugned order, dated 5.1.2015 passed by the respondent in order to interfere with the same - Decided against assessee. Issues:1. Assessment of turnover at 14.5% for selling branded food.2. Interpretation of the term 'Zaitoon' as a house mark or brand name.3. Validity of the impugned order passed by the respondent.4. Applicability of tax rates under Section 7(1)(a) of TNVAT Act, 2006.5. Alternative remedy for the petitioner.Analysis:1. The petitioner, a restaurant, reported a total turnover and paid VAT at 2%. The respondent alleged that the petitioner sold branded food, taxable at 14.5%. The petitioner argued that 'Zaitoon' is a house mark, not a brand name, and the registration was for services, not products. The respondent contended that the food sold falls under branded items. The court found the registration under the Trade Marks Act applicable to both the restaurant and its products, leading to a levy of 14.5% tax.2. The petitioner claimed 'Zaitoon' was a house mark, not a brand name. However, the court held that since the restaurant exclusively served food prepared by them under the registered trademark, it constituted branded food. The court emphasized that the registration for services provided by the restaurant extended to the food items sold, making them branded under the TNVAT Act, 2006.3. The court reviewed the impugned order and found no irregularities. The respondent followed due process by issuing notices and considering objections. The court upheld the respondent's decision to assess the turnover at 14.5% for selling branded food, dismissing the petitioner's contentions regarding the nature of the registration and the classification of food items.4. Section 7(1)(a) of the TNVAT Act, 2006 mandates a tax rate of 14.5% on the sale of unbranded food and drinks by recognized establishments. The court clarified that the petitioner's exclusive preparation and service of food under the registered trademark qualified as branded items, attracting the prescribed tax rate. Despite the petitioner's arguments on the nature of the services provided, the court upheld the tax assessment.5. The petitioner argued that the impugned order violated principles of natural justice, justifying the writ petition. The court, however, found the order lawful and denied any illegality. The petitioner's contentions regarding the applicability of sales tax laws and constitutional amendments were dismissed, upholding the respondent's assessment and denying relief to the petitioner.