Kerala HC: College Canteen Run by Trust Liable for Registration under KVAT Act, 2003

The Kerala High Court ruled that a college providing food through its canteen, despite being managed by an educational trust, must register under the KVAT Act.

From the taxpayer, the bench does not agree that even if it is presumed that the sales in the canteen are discoverable to be assessable under the provisions of the Value Added Tax (VAT), it comes within the threshold limit, and hence, the taxpayer could not be compelled to take registration.

The Division Bench comprising of Justices A.K. Jayasankaran Nambiar and Easwaran S opined that it can be legitimate that the sales on the counter in the canteen may be under the threshold limit; however, that by itself shall not allow the taxpayer to argue that it is not forced to take the registration under the provisions of the KVAT Act.

The applicant is a Dental College, operated by an education trust, named Annoor Educational Trust, to establish and conduct charitable educational institutions.

U/s 67(1) of the Kerala Value Added Tax Act, 2003, the proceedings have been started against the taxpayer for not taking registration under the said Act.

The taxpayer, dissatisfied with the assessment orders, submitted a plea before the Deputy Commissioner (Appeals), which permitted the appeal.

The State, dissatisfied with the order of the appellate authority, approached the Kerala Value Added Tax Appellate Tribunal, arguing that the taxpayer cannot escape the obligatory condition of registration under the KVAT Act, as they are supplying food to students via a canteen.

It was concluded by the Tribunal that though the mess fees could not be regarded as sales if the sales of the canteen are regarded as mess fees, then these exemptions are not permissible and hence discovered that the taxpayer is obligated to take the registration under the provisions of Sections 15 read with 6 of the Act.

It was asked by the tribunal that the taxpayer take the registration and ask the assessing authority to complete the assessment u/s 25(1) of the Act.

Taxpayer furnished that the main activity of the taxpayer is imparting education, any ancillary business performed via it under the cited avocation could not be construed as a business, and hence the taxpayer shall not come under the description of the term dealer.

The bench, after directing to the definition of “business” and “dealer” under the KVAT Act said that “the definition is inclusive enough to cover each and every activity done by a person, other than in due course of his business, the assessee cannot contend that he will fall otherwise.”

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To verify the question as to whether the canteen sales are being termed as mess fees, the tribunal has only remanded the case back to the authorities. The obligation to file the tax would lean upon the verification ordered to be conducted by the tribunal, as cited.

The bench in the aforesaid view has dismissed the revision petition.