Judgment:
(Prayer: These STRPs are filed u/Sec. 65(1) of K.R.Act, against the judgment and order dated 21.06.2013 passed in STA.1192 to 1248/2010 on the file of Karnataka Appellate Tribunal at Bengaluru, dismissing the appeals u/Sec.63(l) of KVAT Act.)
Dilip B. Bhosale, J.
1. These sales tax revision petitions under Section 65(1) of the Karnataka Value Added Tax Act, 2003 (for short 'the Act'), are directed against the judgment dated 21st June 2013 rendered by the Karnataka Appellate Tribunal, Bangalore (for short *the Tribunal") in STA Nos.1192 to 1243/2010, pertaining to the period commencing from April 2005 to December 2009. By the judgment dated 21st June 2013, the Tribunal dismissed all appeals filed by the petitioner-M/s.Manipal University (for short the University').
"1.1. The appeals before the Tribunal were directed against the order dated 12-05-2010 passed by the Joint Commissioner of Commercial Taxes (appeals), Mangalore (for short 1the Appellate Authority') disposing of the Appeal Nos.KVAT/AP/1084 to 1140/09-10 whereby the Appellate Authority confirmed the order dated 12-03-2010 passed by the Assistant Commissioner of Commercial Taxes, (Enf-1), Mangalore (for short the Assessing Authority') under Section 39 of the Act by which the balance tax payable had been determined. By this order (12-03-2010), the Assessing Authority also levied interest under Section 36 and penalty under Section 72(2) of the Act."
2. Briefly stated the facts leading to these revision petitions are that, the Assessing Authority on 13.01.2010 visited the petitioner's premises and collected sales particulars of prospectus and application forms for the period between April 2005 to December 2009 (for short the relevant period) and also collected other particulars with which we are not concerned in the present petitions. After verification, the Assessing Authority found that the University had not declared the sales of application forms and prospectus and offered tax in the form VAT 100 filed by them. In view thereof, a pre- assessment notice under Section 39(1) of the Act was issued and after getting reply from the University, an order under Section 36(1) of the Act was passed on 12-03-2010. The Assessing Authority also levied penalty under Section 72(2) of the Act vide order dated 25-03-2010. As stated earlier, the order of the Assessing Authority was thereafter confirmed by the Appellate Authority and so also by the Tribunal.
3. The petitioner is a registered dealer, both under the provisions of the Act and Central Sales Tax Act, 1956 (for short 'CS7 Actr). The certificate issued under the Act was in Form VAT 7 under Rule 9(1) of the Karnataka Value Added Tax Rules, 2005 (for short the Rules). The TIN Number issued to the petitioner was 29040451525, both for the Act and CST Act. In the Form VAT 7, which is a prescribed form of the certificate, it is clearly stated that "M/s. Manipal University has been registered as a dealer under Section 22 of the Act and its principal place of business is Manipal E.D.U., Madhava Nagar, Manipal-576104". The certificate further mentions the additional places of business.
4. It is against this backdrop, the following questions of law fall for our consideration:
"(i) Whether on the facts and in the circumstances of the case and in taw, the Tribunal was justified in upholding the view taken by the authorities below that the University is engaged in the activity of the sale of prospectus and application forms so as to attract levy of VAT under the provisions of the Act. ?
(ii) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in not treating the activity of sale of prospectus and application forms, being an activity failing under Entry 11 of the First Schedule and/or holding that it falls under Entry 71 of the Third Schedule of the Act?
4.1. At this stage, we make it clear that though the petitioners formulated four questions of law in the memorandum of revision petitions, we have with the assistance of the learned counsel for the parties reformulated the questions of law as above and then, by consent proceeded to hear them on merits at the stage of admission."
5. We have heard learned counsel for the parties and with their assistance gone through the entire records placed before us for our consideration and so also the judgments of the Supreme Court and High Courts relied upon by them in the course of arguments,
6. Smt.Vani, learned counsel appearing for the University, at the outset submitted that the University is not carrying on any business in order to attract the levy of tax under the Act The University is a deemed University engaged in imparting education and for this purpose they print and sell prospectus along with application forms for admission to various courses, so as to recover the expenditure incurred for printing the same. She submitted that though the University is a registered dealer, it got registered for sale of medicines and other equipments in the hospital and medical shops attached to their medical colleges and not for the sale of prospectus and application forms. She submitted that, in any case, the main activity of the University is to impart education and, therefore, the sale of prospectus and application forms cannot be treated as incidental or ancillary to the "business" but it is incidental and ancillary to educational activities. In other words, it was submitted that the sale of prospectus and application forms is incidental/ancillary to the main activity of education and not the business for which they got registered as a dealer under Section 22 of the Act. She submitted that the University is not in the business of printing and selling of prospectus and application forms. In support of these contentions, she placed reliance upon the judgments of the Supreme Court and other High Courts in STATE OF TAMIL NADU AND ANOTHER v/s BOARD OF TRUSTEES OF THE PORT OF MADRAS (1999) 114 STC 520 (SC), COMMISSIONER OF SALES TAX v/s SAI PUBLICATION FUND (2002) 126 STC 228(SC), MORARJI BROTHERS (IMPORT AND EXPORT) PVT. LTD. v/s STATE OF MAHARASHTRA (1995) 99 STC 117 (Bom), STATE OF GUJARATH v/s M/S.RAIPUR MANUFACTURING COMPANY LTD (1967) 019 STC 0001 (SC) and MAH ATM A GANDHI KASHI VIDYAPEETH v/s STATE OF U.P AND OTHERS (2013) 64 VST 271 (All).
6.1. In the alternative, she invited our attention to Entry 11 of the First Schedule to contend that sale of prospectus and application forms is exempted from tax under sub-Section (1) of Section 5 arid, therefore, it is not liable to be taxed. Further, she invited our attention to Entry 71 in the Scnedule to contend that printing and selling of prospectus, in any case would not fall under Entry 71 which speaks about printed material other than the books meant for reading and stationery articles mentioned therein. She submitted that the prospectus are books meant for reading, and therefore, would not fall under this entry.
7. On the other hand, Smt.Sujatha, learned Government Advocate submitted that after having registered as a dealer under Section 22 of the Act and under the provisions of CST Act, it is not open to the University to claim that they are not carrying on any business or not liable to pay tax on the sale of prospectus and application forms. She submitted that having regard to the figure of receipts during the relevant period, it is clear that the University was making profit out of the sale of prospectus and application forms. She further submitted that it is not the case of the University that they print and sell the prospectus and application forms at cost. She submitted that during the relevant period the University sold prospectus and application forms for Rs.500/- each and thereby made huge profit/surplus. It was submitted that having regard to the manner in which the University print and publish the prospectus, it would amount to carrying on business of selling prospectus which has continuity and regularity. Then, she submitted that even if the University is mainly involved in imparting education and even if it is assumed that sale of prospectus and application forms is incidental or ancillary to the activities of education, it is always open to the Revenue to find out whether it had intention to conduct business and whether it would fall under Entry 71 of the Third Schedule. The Revenue has accordingly considered all these aspects in proper perspective to hold that the receipts out of the sale of prospectus and application forms are exigible to tax. She placed reliance upon certain observations made by the Supreme Court in the judgments relied upon by learned counsel for the petitioner-University. In addition, she placed reliance upon the judgment of the Supreme Court in Board of Revenue V/S A.M.Ansari (1976) 38 STC 577 (SC).
8. It is net in dispute that the University is a registered dealer under the Act. They run medical colleges and hospitals attached thereto. Admittedly, they pay and paid during the relevant period tax on the sale of medicines in the hospitals maintained by them and so also in the medical shops attached thereto. The registration Certificate issued in form VAT-7 by the authority clearly certify that the University whose principal place of business is at Manipal-E.D.U, Madhava Nagar, Manipal-576 104 has been registered as a dealer under Section 22 of the Act, subject to the provisions of the said Act and Rules made there under. It further mentions the additional places of business showing the name of University as a trader. Though the University in their application Form-VAT-1 under Rule 4(i) of the Rules mentioned certain items/goods for which they sought registration, from plain reading of the provisions of the Act and in particular Rule 9(1), it cannot be stated that the registration certificate was granted for sale of any particular commodities/items/goods.
9. Section 2(12) defines 'dealer', which means any person who carries on the business of buying, selling and supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and it includes several other categories as mentioned in this provision. Section 2(34), defines 'taxable turnover' to mean that the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover, and in such manner as may be prescribed. 'Total turnover' is defined by Section 2(35) to mean the aggregate turnover in all goods of a dealer at all places of business in the State. Section 2(36) defined 'turnover' to mean the aggregate amount for which goods are sold or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (29) by a dealer. Charging provision in the KVAT Act is Section 3, which provides that the tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered under the provisions of the Act. Section 4 provides that every dealer who is or is required to be registered shall be liable to pay tax on his taxable turnover. Section 22 of the Act speaks about liability to register. Under this provision, every dealer requires to get himself register if he is falling within the categories of dealers mentioned therein.
9.1. Rules 4 to 12 in the Rules deal with registration as a dealer under Section 22 of the Act. Under Rule 4, every dealer who is liable to be registered under Section 22 or any dealer who desires to register voluntarily under Section 23 is obliged to submit an application for registration in Form VAT-1. Rule 5 provides for application for registration of additional place of business. Rule 8 provides for rejection of application and demand of surety. Rule 9 provides for issue of registration certificate which states that the registered authority shall assign a registration number or tax payers identification number (TIN) to the dealer and issue a certificate of registration in Form VAT-7 or Form VAT-8 as the case may be to him, and also certified copies of such certificate for any additional place of business. We are not concerned with other rules.
9.2. Form VAT-1 under Rule 4(i) provides for several particulars to be furnished by the applicant. Col.6 thereof provides for furnishing type of business: manufacturer/ wholesaler/retailer/contractor/hotelier/others (specified). Col.7 provides for commodities dealt, obliging the applicant to specify all commodities. From bare perusal of Columns 6 and 7, it appears to us that an applicant is supposed to specify a list of all commodities he/it dealt. In the present case, merely because the University did not specify all the goods/commodities in the Form VAT-1, in particular, the prospectus, cannot claim that the registration certificate in Form VAT 7 was issued for the sale of only medicines or the commodities mentioned in the Form VAT-1.
9.3. From bare reading of the aforesaid provisions, it is clear that a registration certificate is not meant for carrying on business in buying or selling of any particular commodity or goods, but it is general in nature. Once a dealer obtains such certificate, he is obliged to file return in Form VAT 100 of the Act in respect of turnovers of all sales made by it/him. The dealer, on its/his own cannot decide to exclude sale of any particular commodity/item.
In the instant case, the University being a registered dealer, is liable to be taxed for all sales made by it. in other words, every transaction of sale should reflect in the return filed in Form VAT 100. It was not open to them to exclude "prospectus" from the return.
10. We have, as stated earlier, perused the definitions of 'business', 'dealer', 'sale', 'taxable turnover' and 'total turnover'. The definitions of these expressions in the Act and the Value Added Tax Act of several other States are similar, in particular Tamil Nadu General Sales Tax Act and Bombay Sales Tax Act. The Supreme Court in Board of Trustess of the Port of Madras (supra), had an occasion to deal with these definitions and other relevant provisions of the Tamil Nadu Government Sales Tax Act. In this judgment, the Supreme Court also considered the expression "carrying on business" and observed that whether a person carries on business in a particular commodity must depend upon volume, frequency, continuity and regularity of transaction of purchase and sale in a class of goods and transaction must ordinarily be entered into with a profit motive, which may, however, be statutorily excluded. The question in issue before the Supreme Court was whether the Port trust was established by statute to "carry on business''. It would be relevant to reproduce paragraphs 13 and 14 of the report for our purpose. Para-13 and 14 of the report read thus :
"13. New the definition of "business" in Section 2(d) and in most of the sales tax statutes is an inclusive definition and includes "trade or business or manufacture, etc.". This itself shows that the Legislature has recognized that the word "business" is wider than the words "trade, commerce or manufacture, etc.". The word "business" though extensively used is a word of indefinite import, in taxing statutes, it is normally used in the sense of an occupation, a profession-which occupies time, attention and labour of a person, normally with a profit-motive and there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure, (State of Andhra Pradesh v. H. Abdul Bakshi and Bros. [1964] 15 STC 644 (SC); AIR 1965 SC 531). Even if such profit-motive is statutorily excluded from the definition of "business" yet the person could be doing "business".
14. The word "carrying on business" requires something more than merely selling or buying, etc. Whether a person "carries on business" in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. [Board of Revenue v. A.M. Ansari [1976] 38 STC 577 (SC); (1976) 3 SCC 512]. Such profit-motive may, however, be statutorily excluded from the definition of ' business'' but still the person may be "carrying on business '.
(emphasis supplied)
11. The Supreme Court in Sai Publication Fund (supra) also considered the definitions of words 'business, dealer and sale'. The question raised in the said case was whether the Trust-Sai Publication Fund, which had been set up by some devotees of Sai Baba of Shirdi for spreading his message, could be held to be a dealer, in respect of sale books, booklets, pamphlets, photos, stickers and other publications containing message of Sai Baba and the turnover on such publication could be assessed to sale tax under the Bombay Sales tax Act. The following observations made by the Supreme Court in this case in paragraph-11 are relevant for our purpose, which read thus :
"No doubt, the definition of "business" given in section 2(5A) of the Act even without profit- motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary activity is established, In such cases the onus of proof of an independent intention to carry on "business" connected with or incidental or ancillary sales will rest on the department. Thus, if the main activity of a person is not trade, commerce, etc., ordinarily incidental or ancillary activity may not come within the meaning on "business. To put it differently, the inclusion of incidental or ancillary activity in the definition of "business" pre-supposes the existence of trade, commerce, etc., The definition of "dealer" contained in Section 2(11) of the Act clearly indicates that in order to hold a person to be a "dealer", he must "carry on business" and then only he may also be deemed to be carrying on business in respect of transaction incidental or ancillary thereto. We have stated above that a main and dominant activity of the Trust in furtherance of its act is to spread message."
(emphasis supplied)
11.1. In that case (Sai Publication Fund), the object of the assessee-trust was to spread message of Sai Baba of Shirdi and it was not in dispute that the books and the literature containing message of Sai Baba were distributed by the trust to the devotees of the trust "at cost price". In view of the facts before the Supreme Court, it was observed that it cannot be said that the trust carried on the business of selling and supplying goods so as to fall within the meaning of dealer under Section 2(11) of the Bombay Sales Tax Act.
12. The Supreme court in A.M.Ansari (supra) also had an occasion to deal with the very same words/phrases. The observations made by the Supreme Court in the said report are relevant for our purpose which read thus:
"...whether a person carries on business m a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. The court further went on to observe that when a subsidiary product is turned out in the facicy of the assessee regularly and continuously and it is being sold from time to time, an intention to carry on business in such product may be reasonably attributed to the assessee. As the consideration of profit-motive cannot be regarded as an essential constituent of the term 'business' in view of the amendment introduced in the definition of the term 'dealer' in 1956, what we are left to consider is whether the other ingredients of the term "business", viz., volume, frequency, continuity and regularity of transactions of sale and purchase a re satisfied in the instant cases
(emphasis supplied)
13. The Allahabad High Court in Mahatma Gandhi Kashi Vidyapeeth after considering the definition of 'dealer' and 'business' on the facts of that case observed that the element of business, i.e., motive on the part of the University to indulge in any business activity was totally lacking and statutorily impossible. The University in that case was established under the U.P. State Universities Act, 1973 to impart education in various discipline of higher education and research. In that case, the High Court observed that, it was a matter of mere convenience for students and university to get the forms printed for a price and not more than that and thus, the University was not a 'dealer' within the meaning of Section 2(h) of the U.P. Value Added Tax Act and, its activities of printing and selling of admission forms to the students did not amount to business within the meaning of Section 2(e) of the Act.
14. It is well settled that if the main activity is not business, then the connected, incidental or ancillary activities of sales would not normally amount to business uniess an independent intention to conduct business in these connected, incidental or ancillary activities is established by the revenue. (See Board of Trustees of the Port of Madras). In such cases the onus of proof of an independent intention to "carry on ' business" connected with or incidental or ancillary sales would rests on the department. It is therefore necessary to find out whether the department has shifted the burden or that they have established an independent intention to conduct business in the connected, incidental or ancillary activity of sale of prospectus with application form.
15. It has come on record, and it is not in dispute that in 2005-06, total collection of the University from the sale of prospectus and application forms was Rs.2.55 crores, in 2006-07 Rs.5.62 crores, in 2007-08 Rs.4.46 crores, in 2008-09 Rsž4.27 crores and in 2009-2010 it was Rs.3.61 crores Insofar as the year 2009-2010 is concerned for the period between April 2009 to December 2009 the sale, was Rs.1.37 crores. The figures of receipts from the sale of prospectus clearly demonstrate that the University collect huge amounts every year from the sale of prospectus. As observed by the Supreme court whether a person "carries on business" in a particular commodity depends upon volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transaction must ordinarily be entered into with a profit motive. As a matter of fact, the profit motive, has now been excluded from the definition of 'business'. It is not in dispute that the University sell prospectus and application forms every month during every academic year. The volume, frequency, continuity and regularity of transaction of sale is not in dispute. They earn huge profits/surplus from the sale of prospectus/application forms. Therefore, looking at the price at which prospectus and application forms were sold and huge amounts were collected by the University during the relevant period, it cannot be stated that they were not "carrying on business". We have perused the figures of the receipts of every month during the relevant period, and we find the collection towards sale of prospectus and application forms during particular months was more than one crore. It is not the case of the University that they sale or sold the prospectus and application forms at cost. The price, as contended by learned counsel for the University, of the prospectus during the relevant period was ranging from Rs.350-Rs.500. We have perused the prospectus for the relevant period, which, in our opinion, was on the higher side. Therefore, it cannot be stated that there was no profit motive as claimed by the University. Merely because, the University was established for imparting education does not mean that it is not indulging in the business so as to make profit out of the sale of prospectus and application forms. Their intention to make profit is clear from the facts and figures placed on record.
16. That apart, once having registered as a dealer under Section 22 of the Act the total turnover would mean aggregate turnover in all goods of a dealer at a place of business in the State, whether or not the whole or any portion of such turnover is liable to tax. The University cannot conveniently take a stand that they were registered as dealer and certificate issued by the concerned authority was only for the sale of medicines and equipments in the hospital and not for the sale of prospectus and application forms.
17. Next we would like to consider the second question of law. The First Schedule appended to the Act provides a list of goods exempted from tax under sub-section (1) of Section 5 thereto. Entry-11 read thus :
"Books, periodicals and journals including maps, charts and globe."
18. The Third Schedule under Section 4(l)(a)(ii) provides a list of goods taxable at 4% (at the relevant time). Entry 71 in this Schedule reads as under:
"71. Printed materials other than books meant for reading; stationary articles namely, Account books, paper envelopes, diaries, calendars, race cards, catalogues, greeting cards, invitation cards, humour post cards, picture post cards, cards for special occasions, photo and stamp album?, computer stationery."
19. In view of the language used in Entry-11 in the First Schedule, learned counsel for the University vehemently submitted that the prospectus being a booklet is liable to be exempted from tax under sub-section (1) of Section 5 of the Act. On the other hand, learned counsel for the State submitted that under any circumstances, the prospectus cannot be treated as a 'book' so as to attract Entry 11 in the First Schedule.
20. To resolve this controversy, we have perused meaning of the word 'prospectus'. The word 'prospectus' is explained in Chambers 20t,n Century Dictionary as follows :
"prospectus.- the outline of any plan submitted for public approval, particularly of a literary work or of a joint-stock concern: an account of organization of school."
20.1. The word "Prospectus" is from the Latin verb specere, "to look," which is combined with the prefix pro- forward " - giving us a verb meaning "to look forward" to something that is coming. In the Oxford English Dictionary, on historical principles, Vol.11, the word "Prospectus" is explained as follows: "a printed document giving advance notification of the chief features of a forthcoming publication, issue of shares for commercial enterprises, etc., also, a brochure or pamphlet detailing the courses facilities etc., of an educational institution". It is also explained to mean a printed booklet advertising a school or University or giving details of a share offer. Thus, the primary meaning of the word "Prospectus", for our purpose is a printed document listing courses offered by a college or university and the other relevant information about them. Even in common parlance, the word "prospectus" is understood to mean a written catalogue or brochure or printed document that offers a plan as of school/college courses to take. The idea of a prospectus is to offer a variety of options and the plan of action in order to attract a desired participation. In our opinion, 'prospectus' is not a book.
20.2. The word "book" fell for consideration of the High Court of Kerala at Ernakulam, in Swaraj Printers v. State of Kerala, (1973) 31 559. Kerala High Court considered the question "whether these 'books' are books meant for reading or for reference". The books in question were giving details regarding various blends of tea, estates from where they are available and the quantities available in each estate. While dealing with this question it was observed "in a taxing statute, particular words have to be given their ordinary meaning. When a person uses the word "book", an ordinary person understands by that expression a book meant for reading purposes. In the explanation referred to earlier, the object is made clear by expression meant for reading or reference. The object is further made clear by excluding account books, note books, diaries and the like. The words "and the like" take within their ambit books like "Tea Review, balance sheet and the catalogue '.
21. Thus, having regard to meaning of the word "prospectus", we have no doubt that the prospectus of the University cannot be treated as "book" or "book meant for reading" It is a printed document which could be called a brochure or a catalogue or a printed document detailing the courses, facilities etc. of their colleges. In any case, it cannot be treated as a book meant for reading as is known in common parlance. The prospectus of the University cannot be treated even as periodical or journal. In this view of the matter, the contentions urged on behalf of the University must be rejected. We are in agreement with the view taken by the Tribunal that the sale of prospectus and application forms would fall under Entry 71 of the Third Schedule. Thus, the questions raised in these revision petitions are answered against the petitioner- University and in favour of the respondent-State. The revision petitions are accordingly dismissed. However, there shall be no order as to costs.