Case Law Details
Little Star Recreation Club Vs State Tax Officer (Madras High Court)
The recent case of Little Star Recreation Club Vs State Tax Officer brings to the forefront the taxability of liquor supplied by clubs to their members and guests under the Tamil Nadu Value Added Tax (TNVAT). The Madras High Court, in its judgment dated 29.01.2024, remanded the matter back for reconsideration, highlighting significant aspects of tax law and its application to club supplies. This article delves into the details of the case, the arguments presented, and the implications of the court’s decision.
Background of the Case:
The petitioner, Little Star Recreation Club, a registered society under the Tamil Nadu Societies Registration Act, 1975, holds an FL-II license to supply liquor to its members and guests. The issue arose when the State Tax Officer issued a show cause notice dated 28.11.2023, proposing to levy tax on the supply of liquor under TNVAT for the assessment year 2023-24. The Club, in its reply dated 20.12.2023, contended that such supplies are not taxable, relying on the Supreme Court’s judgment in the State of West Bengal v. Kolkata Club (2019) 19 SCC 107.
Petitioner’s Arguments:
The petitioner’s senior counsel argued that the supply of liquor by the Club to its members and their guests is not liable to tax, referencing the Supreme Court’s decision. The counsel pointed out that the tax proposal was confirmed without considering these submissions, making the impugned order unreasoned and unsustainable.
Respondent’s Arguments:
Mrs. K. Vasanthamala, the learned Government Advocate for the respondents, argued that the Supreme Court’s ruling would only apply if the liquor was supplied exclusively to members and not to the general public. The assessment order issued by the State Tax Officer proposed to recover tax at 14.5% on the sales turnover of Rs.10,25,47,838/- for the year 2022-23, along with interest under Section 42(3) of the TNVAT Act, 2006.
Court’s Observations:
The Madras High Court, upon examining the impugned order, noted that although the petitioner’s reply was referred to, its contentions were not addressed. The court found the impugned order to be completely unreasoned as it merely stated that the reply was not accepted without providing a rationale. Consequently, the court deemed the order unsustainable and set it aside.
Judgment:
The court remanded the matter back to the State Tax Officer for reconsideration, directing that a fresh order be issued after providing a reasonable opportunity for the petitioner to present its case, including a personal hearing. The court ordered the respondent to issue the new order within three months from the date of receipt of the court’s order. Additionally, the court lifted the bank attachment and stated that no recovery or other proceedings should be initiated pending the fresh assessment.
Conclusion
The Madras High Court’s decision in the case of Little Star Recreation Club Vs State Tax Officer underscores the importance of reasoned orders in tax assessments and the necessity of considering all relevant submissions before confirming tax proposals. By remanding the matter back for reconsideration, the court has ensured that the principles of natural justice are upheld. This case serves as a significant reference for similar disputes regarding the taxability of supplies made by clubs to their members and guests under the TNVAT.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this writ petition, an order dated 29.01.2024 in respect of assessment year 2023-24 is challenged.
2. The petitioner is a Club registered as a Society under the Tamil Nadu Societies Registration Act, 1975. The Club possesses a FL-II licence for supply of liquor to its members and their guests in accordance with the rules of the Club. Upon receipt of show cause notice dated 28.11.2023, the petitioner submitted a reply dated 20.12.2023. In such reply, the petitioner asserted that the supply of liquor by the Club to its members and their guests is not liable to tax. In support of this submission, the petitioner relied upon the judgment of the Hon’ble Supreme Court in State of West Bengal v. Kolkata Club (2019) 19 SCC 107. The impugned order was issued in these facts and circumstances on 29.01.2024.
3. Learned senior counsel for the petitioner referred to the petitioner’s reply and pointed out that the petitioner expressly relied upon the judgment of the Hon’ble Supreme Court. Without taking such submissions into consideration, he contends that the tax proposal was confirmed.
4. Mrs. K. Vasanthamala, learned Government Advocate, accepts notice for the respondents. She submits that the the order of the Hon’ble Supreme Court would come to the aid of the petitioner only if the liquor is supplied to members of the Club and not to customers in general.
5. On examining the impugned order, it is evident that the petitioner’s reply was referred to. Upon referring to such reply, the following conclusions were recorded:
“A notice was issued to the dealers in the reference 5th cited. The reply was furnished by the dealer on 22.12.2023 was not accepted. Again a personal hearing issued to them in the reference 6th cited and an opportunity of being heard was also offered. In spite of this opportunity the dealer have utilized and produced already submitted documents.
In this regard, carefully examined their connected documents. But their reply not accepted and not correct. Hence, it is proposed to recover the Tax @ 14.5% on the actual sales turnover of alcoholic liquors for Rs.10,25,47,838/- during the year 2022-23 as per the second schedule of TNVAT Act 2006 along with interest Under section 42(3) of the TNVAT Act 2006.”
The above extract discloses that the reply was referred to but the contentions in the reply were not dealt with. Instead, it is recorded in the impugned order that the reply was not accepted. It is thus clear that the impugned order is completely unreasoned and consequently unsustainable.
6. For reasons set out above, the impugned order dated 29.01.2024 is set aside and the matter is remanded for reconsideration. After providing a reasonable opportunity to the petitioner, including a personal hearing, the respondent is directed to issue a fresh order within three months from the date of receipt of a copy of this order. In view of the assessment order being set aside, the bank attachment is raised and it is made clear that no recovery or other proceedings may be initiated.
7. W.P.No.16617 of 2024 is disposed of on the above terms without any order as to costs. Consequently, the connected miscellaneous petition is also closed.
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