The State Of Ap. Rep.By State Representative Before Stat vs. M/S N.F.C. Canteen, Hyderabad.
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The State of Andhra Pradesh (now Telangana) filed a Tax Revision Case (TREVC) under Section 22(1) of the APGST Act, 1957, challenging an order dated February 19, 2009, passed by the Sales Tax Appellate Tribunal (STAT). The STAT had allowed appeals filed by the respondent, NFC Canteen, Department of Atomic Energy. The STAT's decision was based on its earlier ruling that the NFC Canteen was not a business entity and that the sale of foodstuffs to its own employees did not constitute a business activity. The State sought to revise this order. The tax period is not explicitly stated, but the dispute arises from the STAT's order in T.A.No. 634 of 2006.
Held
The Court held that the sale of foodstuffs by the NFC Canteen to its employees does not constitute a business activity exigible to tax under the APGST Act, 1957. The reasoning was that the canteen's operations were for the benefit of its own employees, and such transactions were not undertaken with a profit motive or in the course of trade, thus not fitting the definition of 'business' under the Act. The Court found the STAT's original order, which was followed in the impugned case, to be passed after considering the factual matrix and the nature of operations. The Court acknowledged that the STAT's earlier decision was upheld by the High Court and later dismissed by the Supreme Court, though the latter on a technicality. The TREVC was rejected as devoid of merits. No specific operative directions were issued beyond rejecting the revision.
Key Issues
1. Whether the sale of foodstuffs by the NFC Canteen to its own employees constitutes a business activity exigible to tax under the APGST Act, 1957, as per Section 2(1)(d) of the Act? The Petitioner (State) argued that the STAT erred in holding that the canteen's activities did not amount to business. The Respondent (NFC Canteen) contended that it was not a business entity and its transactions with employees were not business activities. The Court noted that the STAT's earlier decision, relied upon in this case, was upheld by the High Court in T.R.C.No.67 of 2008, and subsequently dismissed by the Supreme Court in Civil Appeal No.5317 of 2010, albeit on the ground of low tax effect, leaving the question of law open.
Sections Cited
Section 22(1), Section 2(1)(d)
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Cause title — parties, addresses and appearances
The Court delivered the following: Judgment
.- ri: lra*tr-*tt'l ..1, THE HONOURABLE SRI.IT]S'I'ICE P.SANI I.iOSHY ANI) TIIE HONOURABLE SRI .IUST'ICE ST,I)OAT,,T CHALAPATtII ItA() TREVC No.l8,l Ol- 2009 .lUDGMEN'l'. /['er Hon h\c ,\ri.Justita 1, ,\rtnt Krrsit.r.t Ileard lVlr. T. Chaitanya Kiran, leantt-.1 1\:jsistant (iovcrnmcnt Pleader reprcsenting Mr. Sr,,aroop Oo-i ila. Icanrccl Special Govemnrent Pleader for thc Statc Tax lor tr() pctitiolrcr. and Mr-. B.Narasrmha Sanna, lcarncd Additional Soli,:i.or ( icneral o[' India along with Ms. L.pranathi Iteddy, Icar n,:d (]cntral Govemment Standing Counscl for the r.espondent. [,er.rrs,:d thc record. assailing the ordel in T.A.No.634 o12006. decided on I .).01 1009 l. Vide the irnpugned order, thc lcarned Sates I a < Aprpellatc 'l'ribunal (Sli\T) relying upon its orvn carlier dcc sion dated 01.05.2007 in Tribunal Appeat Nos. 1569 ol' 1999 a,rcl barch had taken a specific stand that the respondent/NFC Clanle:n is, not a busincss entity and that the sale of lood stutf to its orr n emplovees cannot be said to be a business activity. The ap rr:als ol the 2. Ihe present tax revision casc has heen filcrl l:r, the Statc
ll 2 respondent were allowed sctting aside the order passed by the Appellate Deputy Comrnissioner (C'l ) and also tl.rat passed by the Assessinp Officer.
Today, when the matter is taken up lor hearing, it has been brought to the notice ofthe Bench that the order relied upon by the learned STAT in dcciding the impugned ordcr was subjected to challenge before the I-ligh Court under Section 22(l) of the Andhra Pradesh Goods and Services Tax Act. 1957 in T.R.C.No.67 ol 2008. The said tax revision casc \\ras disrnissed upholding the order of the Tribunal vidc judgment dated 26.06.2008 and the matter was also subsequently challenged in a special leave petition before the Hon'blc Suprcrne Court rl'here it \\'as registcrcd as Civil Appeal No.53 l7 of 2010 which again has been disrnissed. However, the dismissal was taking iuto consideration the low tax effect involved, lcaving open the qucstion of law
Considering the ordcr passed by the learned STAT in its original order in Tribunal Appeal Nos.l569 ol' 1999 and batch matters decided on 01.05.2007 and the reasons assigned therein, we find that the tindings so given by the Tribunal which have been ,:;. rl-
subsequcrltly firllowcd in the course of deciding th!' insrrurt ctse to be onc r'r'hich lras been passed alicr considcrltior I' 1lL.: lactr-ral matrir o1'thc case ancl 1he naturc of- operations cilr i()d oltt bv the canteen and th,: benellciaries ol thc said cilntcci, rrre ,.rnlr the cttrployecs o1'thc departnrent concerned and, thetcli,:.- n,e are also ol thc consiilclcd opirriorr that such salc o[' Iir,rii ircnts L'r\' 1he canteeu cannot bc sairl to be a business activity crrr,ilinrl tht-' tax undcr the n PGS I Iaw as it then was (r. The ta:i ti'r'i5i6p case, Ibr the afbrcsaicl luctir:r irratr ir. be iltg cicvoid ol- nteliis, deselves to be and is, accordirr.lr,. rcjccted. There shall be n,r order as to costs Conserluently, ntiscellaneous petitions pcltdin!,. i i'any. shall stand closcd A, r'.S.S.C.S.M.SARMA JOINT REGISTRAR //// SiECTION OFFICER 1 The Sales Tax Appellate Tribunal, Andhra Pradesh, Hydr:rabad (With records, if any) 2 Two CCs to SRI SWAROOP OORILLA, SPECIAL GP for tre state tax, High Court for the State of Telangana at Hyderabad (OUT)
One CC to SRI B NARASIMHA SARMA , ADDITIONAL I]OLICITOR GENERAL OF lNDlA, Advocate [OPUC]
The Appellate Deputy Commissioner (CT) ,Hyderabad F ural Division, Hyderabad.
The Commercical Tax Officer, Nacharam, Hyderabad. 6 Two CD Copie:; To, /- /lL ADK/psl
HIGH COURT DATED:0611012025 JUDGMENT TREVC.No.184 of 2009 REJECTING THE TREVC WITHOUT COSTS llmg ,Ia t o 1nC Sr4.t R It: li i \ '4. l! * otisflATC1 -!9-C 6 il il ,( /t;\ thr t.
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.