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Whether the applicant conducting various
management programmes and providing accommodation to students and delegates is
a hotelier liable to pay tax u/s 3 of the Maharashtra Tax on Luxuries Act,
1987?
Transaction Date: 21-1-2003. Held: The dealer is a hotelier
liable to pay tax
Facts in issue
The applicant is a training and research institute
registered under the Companies Act, 1956. It is promoted by various trusts of
a Private Limited Company’s employees to attain the object of the company.
The applicant company is imparting management education in
a variety of specialized fields of world class standard under the control and
supervision of their faculty. The company also provides lodging and boarding
facilities on the campus premises.
As an educational institution, the applicant buys a variety
of goods and services to run the institution. It also earns income from
rendering and making available services.
The applicant would like to know if his activities are
covered under the definition of ‘hotelier’ under section 2(f) of the
Maharashtra Tax on Luxuries Act, 1987.
Submissions of the applicant and case laws relied upon
The applicant contended that the definition of ‘hotelier’
under section 2(f) of the Maharashtra Tax on Luxuries Act, 1987 would not be
applicable to it since the applicant was an educational institution.
The applicant also submitted that the definition of ‘hotel’
under section 2(e) of the Maharashtra Tax on Luxuries Act, 1987 included "a
residential accommodation, a club, a lodging house, an inn, a public house or
a building or a part of a building where residential accommodation is provided
by way of business". The ‘hotelier’ is defined under section 2(f) to mean the
owner of the hotel and includes the person for the time being in charge of the
management of the hotel.
The institute imparts management education and while
running the institution, provides residential accommodation to students and
delegates but not by way of business. It is just like IIM which also is an
educational institute imparting management education.
The applicant contended that it would not be a ‘dealer’
under the Luxuries Tax Act. Alternatively, if it is determined that it is a
hotelier, the determination order be given a prospective effect.
Case laws relied upon
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TMA Pai Foundation and Others vs. State of Karnataka
and Others.
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State of Tamil Nadu and Anr vs. Board of Trustees of
Court of Madras.
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State of Bombay vs. Ahmedabad Education Society (7 STC
497)
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Sai Publication Fund vs. Commissioner of Sales Tax.
Views of the Department
The Commissioner referred to the determination order in the
applicant’s own case in order No. DDQ-11/2003/Adm-5/18/B-3, Mumbai dated
14-9-2006. Under that order, the applicant fulfilled all the criteria of a
dealer i.e.,
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carrying on business.
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receiving valuable consideration.
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sales and purchases of goods.
The Commissioner examined the relevant definitions under
the Maharashtra Tax on Luxuries Act, 1987 and concluded that the receipts of
the applicant were for providing the luxury in a hotel as per section 2(g) of
the Act and as per section 3(2) of the Luxury Tax Act, the levy was attracted.
Also the applicant’s bills referred to making available the
premises, facilities such as catering, laundry, housekeeping, transport,
pantry, liner/crockery, magazines and newspapers, video shooting and
photography, which were all for a consideration.
The applicant was also registered both under the BST Act,
1959 as well as under the Luxury Tax Act, 1987.
Thus, the activities of the applicant got covered by the
definition of ‘business’ under the Maharashtra Tax on Luxuries Act, 1987.
As for the grant of prospective effect, the Commissioner
observed that the provisions of the Act were clear and there was no ambiguity
in the language of the provisions and therefore rejected the plea of the
applicant on the ground of no statutory misguidance.
Held
The Commissioner held that the applicant was a hotelier
liable to pay tax under section 3 of the Maharashtra Tax on Luxuries Act, 1987
and rejected the plea of the applicant for prospective effect of the
determination order.
{M/s. North Point Training and Research Pvt. Ltd. DDQ. No.
11/2003/ Adm-5/19/B-1 dated 20-2-2007}
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Whether the applicant can pay tax at the
schedule rate on the sale effected by way of Works Contract after making
deduction of 40% to 50% on account of process loss or after making the
deduction of 20% as provided in the Table in rule 58?
Transaction Date : 22-9-2005 Held: Question does not
survive as the transaction is a sale and not a Works Contract
Facts in issue
The applicant is a laboratory engaged in the making of
prostheses as per the prescription received from the different Prosthodontist
or dental surgeons.
The initiation of the activity starts when the patient
visits the dental surgeon for replacing lost teeth/tooth structure. The
surgeon makes an impression of the dental arches. The impression is then
poured in either plaster or the stone plaster to make the master model, which
is sent to the applicant.
The applicant then carries out the process of fabrication
of dental prostheses.
The applicant has been paying tax under the Works Contract
Act on the above activity after making deductions as per rule 58. The
applicant wishes to know as to what would be the sale price of goods?
Submissions of the applicant
The applicant submitted that the activity carried on by him
was a works contract as held by Commissioner in DDQ No. WCT-1491/DDQ-2 /
Adm-12/B-113 dated 20-3-2001 in the case of Sai Dantakala Ceramic.
During the process of making the prostheses, the entire
material is not transferred. There is a process loss to the extent of 40% to
50%. Certain materials are consumed during the process of fabrication of the
prostheses. The actual transfer is related to only 40% to 50% of the alloy and
ceramic material.
The applicant further submitted that there was an already
existing DDQ which had determined the said activity as a works contract.
Relying upon this determination, the applicant was treating its own activity
as works contract.
The applicant contended that in case the transaction was
treated as a sale, then prospective effect be given to the determination
order.
Views of the Department and case laws relied upon
The Commissioner observed that the issue before him was
whether the transaction could be considered a sale or a Works Contract and if
it was a Works Contract, how the tax would be quantified.
The Commissioner referred to the DDQ order in the case of
Sai Dantakala Ceramic and observed that the concept of works contract had to
be examined afresh.
Under the new law, the provisions contained in sub-section
(4) of section 56 declared that, if a question arose from any order passed
earlier, then, the application could not be entertained afresh.
In order to qualify as a works contract, the contract must
fulfil two basic conditions.
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There has to be a works contract.
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There has to be a transfer of property in goods in some
form or the other.
In the applicant’s case, it cannot be said that it is a
works contract as there is no accession or accretion on pre–existing property.
The denture prepared by the laboratory in consultation with the dentist is
itself chattel and the completed chattel is delivered to the dentist by the
dental laboratory and as such, the contract is thus a contract for sale. Even
though the denture prepared is customized for an individual and has no
marketability, the transaction cannot be considered as works contract.
Caselaws
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140 STC 22(SC) = M/s Kene Elevators.
The test to be applied to is: When and how the property
of the dealer in a transaction passes to the customer. Is it by transfer at
the time of delivery of the finished article as a chattel or by accession
during the procession of work on fusion to the movable property of the
customer? If it is former, it is a ‘Sale’, if it is the latter, it is a
‘Works Contract’.
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24 STC 349 (SC) State of Rajasthan vs. Man Industrial
Corporation Ltd.
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35 STC 522 (Bom) M/s Studio Ratan Batra P. Ltd.
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55 STC 314(SC) M/s Hindustan Aeronautics Ltd.
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95 STC 595 (SC) Andhra Pradesh Electricity Board.
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86 STC 426 (Kar) M/s Klick & Co.
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21 MTJ 390 M/s Unique Blocks vs. State of Maharashtra.
Thus, if thing to be delivered has any individual existence
before delivery, as the sole property of the party who is to deliver it, then
it is sale. The impugned supply of dental prostheses is nothing but a ‘sale’.
Since the impugned transaction is a ‘sale’ there arises no
question of tax computation as a ‘works contract’ under the MVAT Act, 2002.
As regards grant of prospective effect, since the law laid
down by the earlier determination order has been followed over the years any
departure from it would cause inconvenience and hardship. Therefore, it is
prudent to make the present order prospective.
Held
The question of determination of sale price under works
contract does not survive in light of the impugned transaction being a sale
and not a works contract.
{M/s Katara Dental Private Limited. DDQ No.
DDQ-11-2005/Adm-5/100/B-2 dated 20-2-2007}
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The applicant applied for rectification of
determination order dated 27-3-2006. Whether the order can be rectified?
Transaction Date: 5-5-2005
Held: The order to be rectified.
Facts in issue
The question for determination in the earlier order related
to rate of tax applicable to the product "Dyed Terry Towel".
The Commissioner held the product to be covered by Schedule
Entry E-1 attracting tax at 12.5% for the period
1-4-2005 to 30-4-2005.
Submission of the applicant
The applicant submits that for the period 1-4-2005 to
30-4-2005, the product ‘Towel’ would be covered by Schedule entry C-81
attracting tax at 4%. The product would be covered by Sr. No. 5 of the
notification dated 1-4-2005 issued for the purposes of Schedule entry C-81.
The applicant thus requested for rectification of the
determination order dated 27-3-2006.
Views of the Department
The Commissioner observed that the determination order
passed in respect of the product ‘Terry Towel’ was as follows:
| E-1
|
1-4-2005 to 30-4-2005 |
12.5% |
|
A-51 (vii) |
1-5-2005 to 31-3-2006
|
NIL% |
| E-1 |
1-4-2006 onwards |
12.5% |
As for the period 1-4-2005 to 30-4-2005, under the
notification entry 5 to Schedule Entry C-81 dated 1-4-2005 under Chapter
heading 6304 other furnishing articles were notified. ‘Terry Towel’ was
covered by excise heading 6304 9250. Since the main heading under Central
Excise was taken in its entirety for the purposes of the notification, the
sub-heading also got covered by the notification.
Hence the product ‘Terry Towel’ got covered by Schedule
entry C-81 during the period 1-4-2005 to
30-4-2005 attracting tax at 4%.
Thus the determination order dated 27-3-2006 would require
a rectification as regards the schedule entry and rate of tax for the period
1-4-2005 to 30-4-2005.
As for the period 1-5-2005 to 31-3-2006, the product got
covered by Schedule entry A-51(vii) and the order did not require
rectification. Also, for the period 1-4-2006 onwards, the product got covered
by Schedule entry E-1 and the order did not require rectification.
Held
The Commissioner held that the order would be rectified to
cover the product for the period 1-4-2005 to 30-4-2005 under Schedule Entry
C-81 attracting tax at 4% and not Entry E-1 with 12.5% rate of tax.
[M/s Century Textiles & Industries Ltd. DDQ No.
DDQ11/2005/Adm-5/20 / B-1 dated 3-3-2007.]
