TaxTMI 
TaxTMI 
2018 (4) TMI 374
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....f', the petitioner sales bakery products whereas in the outlet run under the brand name 'Wangs Kitchen', it is stated that they cater only to Chinese Cuisine. It is the contention of the petitioner that in both these outlets, no liquor is served to the customers. In the other two outlets i.e., 'Benjarong' which caters to Thai cuisine and 'Entekeralam' which caters to Kerala cuisine and 'Teppan' which caters to Japanese cuisine, alcohol is served. 3. It is the contention of the petitioner that the petitioner has opted for Composition Scheme in terms of Section 15(1) of the KVAT Act relating to only two types of outlets, namely 'The French Loaf' & 'Wangs Kitchen'. Registration certificate is said to have been issued to the said effect. The petitioner has been duly paying VAT at 14% and regularly filed monthly returns in Form VAT 120 in respect of these two outlets through the Department enabled e-portal filing option. The said Composition facility (COT) which was granted by the department was cancelled by the Assistant Commissioner of Commercial Taxes, L.V.O.-55 on 22.07.2015 on the ground that the petitioner is dealing in liquor either at the principal place of business or branch....
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.... Re-assessment and enhancing the tax liability assessing the entire turnover of the assessee in VAT scheme irrespective of the branches without canceling the composition certificate during the relevant period calls for interference by this Court. 6. Learned Additional Government Advocate appearing for the respondent placing reliance on the Division Bench judgment of this Court in the case of M/S. ASWATI INNS PRIVATE LIMITED V/S. THE STATE OF KARNATAKA AND ANOTHER, in S.T.A.NO.28/2009 (D.D 15.07.2010), submitted that the assessee having opted to pay tax under the scheme of composition under Section 15 of the KVAT Act, has effected inter-state purchases of raw material on the strength of 'C' Form. Further, the assessee has effected purchase and sale of liquor under the excise license CL- 9. The Composition Scheme under Section 15 of the KVAT Act read with Rules 135 to 141 of the KVAT Rules prescribes the condition of composite scheme whereby inter-state purchase and selling of liquor is totally prohibited. Different outlets of the assessee would not qualify for the composition, despite the admission of sale of liquor and the inter-state purchases. Composition Scheme is for ....
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....ing two lakh rupees for each crushing machine [per annum as may be notified by the Government]. (2) xxxxxxxxx (3) Any dealer eligible for composition of tax under sub-section (1) may report, to the prescribed authority, the exercise of his option and he shall pay such amount due and furnish a return in such manner as may be prescribed. (4) Any dealer opting for composition of tax [under this section] shall not be permitted to claim any input tax on any purchases made by him." 9. Form VAT 7 under the Rule 9(1) of the KVAT Act was issued to the petitioner permitting the petitioner to opt for payment of tax under the composition scheme under Section 15 under the category Hotelier / Restaurateur / Caterer / Sweet meat stall / Bakery/Ice- cream Parlour. The amendment certificate issued on 30.03.2014 is valid from 01.04.2014. In addition to the address No.11/1, Nandidurga Road, Bengaluru, shown in the VAT Form &, additional place(s) of business are noted as here under: Trader's Name Address ORIENTAL CUISINES PVT. LTD. No.5M-408, 5TH MAIN, HRBR LAYOUT, 2ND BLOCK, BANGALORE {15/04/2011} ORIENTAL CUISINES PVT. LTD. No.46, 9TH MAIN, 80 FT ROAD,....
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....15 and Rule 135 or from the date of contravention whichever is applicable. The notice dated 22.06.2015 issued by the Assistant Commissioner of Commercial Taxes reads thus: "NOTICE FOR CANCELLATION OF COMPOSITION SCHEME FACILITY GRANTED UNDER SECTION 15(1)(C) OF KVAT ACT 2003. Sub: Cancellation of composition scheme facility. Ref: Circular No.2/2015-16 dated 25/05/2015 of the Commissioner of Commercial Taxes, Bengaluru. * * * * * Referred to the above, you being a registered dealer as Hotelier business opted both VAT and COT tax payment schemes. Since, you are a PVT. Ltd. Company, dealing in liquor in either at the principle place of business or at one or more branches, you are not eligible to opt for payment of tax under composition scheme under Section 15(1)(c) of KVAT Act-2003. Therefore, it is proposed to cancel COT facility with immediate effect. You are hereby called upon to file objection if any within THREE DAYS". [Emphasis supplied] 12. The order of cancellation dated 22.07.2015 passed by the Assistant Commissioner of Commercial Taxes runs thus: "ORDER OF CANCELLATION OF COMPOSITION SCHEME ....
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.... 186 [Karn], the Division Bench of this Court has held thus: "As in the present case, the other contingencies for the eligibility are not to be considered, they need not be discussed, but in the present case, the status claimed by the respondent was as a works contractor, the tax at the rate of 5% was to be paid on the total consideration of the works contract. Rule 135 of the KVAT Rules, 2005 provides for the conditions of the scheme and Rule 136 would be relevant in the present case as the certificate has already been issued. Rule 137 reads as under:- "137. Issuing certificates:- The jurisdictional Local VAT officer or VAT sub- officer shall within a period of fifteen days from the date of receipt of Form VAT 1.- (1) if he considers that the Form VAT 1 submitted under Rule 136 is incorrect or incomplete or the dealer is ineligible for any other reason, after giving him the opportunity of showing cause in writing against rejection, issue a notice in 1Form VAT 9 informing the dealer that the Form VAT 1 is rejected and, where appropriate, demand any tax due; (2) if he is satisfied that the Form VAT 1 submitted under Rule 136 is correct an....
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...., to state the grounds and to call upon the assessee, who is holding certificate, as to why such certificate should not be cancelled. After the show-cause notice is issued and the opportunity is given to the dealer/assessee, the certificate may be cancelled, if such a case is made out. It is only thereafter, the intimation may be required to be given to the dealer in Form VAT-11. In view of the above observations and discussions, the following directions are given: "(1) As the certificate issued under rule 137 has not been cancelled, the dealer-respondent herein would be entitled to continue with the benefit under section 15 of the Act on composition of tax. (2) It is only after the certificate is cancelled by exercise of the power under rule 145 read with the observations made by us hereinabove, the assessment or reassessment can be made in respect of the dealer, who has opted for composition of tax. Hence, the order for reassessment and ultimate direction given for quashment of such reassessment shall remain but with the observation that if a case is made out, it would be open to the appellate authority to initiate the proceedings for cancellation of th....