Little Star Recreation Club Vs State Tax Officer
Date: June 24, 2024
Subject Matter
Unreasoned order on Liquor Supply by Club sent for reconsideration
Summary
The petitioner, a Club registered under the Tamil Nadu Societies Registration Act, challenges an assessment order dated 29.01.2024 concerning the assessment year 2023-24. The Club holds a FL-II license for supplying liquor to its members and guests, claiming that this supply is not liable to tax. - The petitioner references a Supreme Court ruling (State of West Bengal v. Kolkata Club) in support of its position, arguing that the supply does not warrant taxation. - The Government Advocate contends that the Supreme Court's ruling only applies when liquor is supplied to Club members, not to the general public. - The impugned order did acknowledge the petitioner’s reply but did not adequately consider or respond to the arguments made. It concluded that the proposed tax recovery of 14.5% on the Club's sales turnover of alcoholic liquors during the previous year would proceed. - The court found the order to be unreasoned and unsustainable, leading to the decision to set it aside and remand the matter for reconsideration. The Court mandates that the petitioner be given a reasonable opportunity, including a personal hearing, to present their case before a new determination is made, while also ordering the lifting of any bank attachment related to the matter.
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.