Introduction
The Kerala High Court has ruled that a college run by an educational trust must register under the Kerala Value Added Tax (KVAT) Act if it supplies food through its canteen. The court emphasized that even if the sales fall within the threshold limit, the institution cannot avoid mandatory registration.
Case Background
The petitioner, a Dental College managed by Annoor Educational Trust, ran a canteen for its students. The trust, claiming its primary objective was education, argued it did not qualify as a “dealer” under the KVAT Act. Proceedings were initiated under Section 67(1) of the KVAT Act, 2003, for failing to register.
The assessee challenged the assessment. The Deputy Commissioner (Appeals) ruled in its favor. However, the State filed an appeal before the Kerala Value Added Tax Appellate Tribunal, arguing that food sales through the canteen mandated registration.
Petitioner’s Stance
The college argued that its core function is to provide education, not engage in business. According to the petitioner, any ancillary services like running a canteen should not be treated as taxable business activities. Therefore, it should not fall under the definition of a “dealer” requiring registration.
Court’s Ruling
The Division Bench, comprising Justices A.K. Jayasankaran Nambiar and Easwaran S., rejected the assessee’s claims. The court clarified that the definition of “business” and “dealer” under the KVAT Act is broad. Even activities not done in the ordinary course of business fall under its scope.
The bench agreed that the canteen sales might be within the threshold limit. However, it stated that this alone does not exempt the institution from registration. Supplying food, even as part of a charitable trust, constitutes taxable activity under the law.
The Tribunal earlier found that if canteen sales are labeled as mess fees, such a label does not qualify for exemption. It directed the assessee to register under Sections 15 and 6 of the KVAT Act and asked the assessing authority to proceed under Section 25(1).
Final Verdict
The High Court upheld the Tribunal’s decision. It noted the Tribunal had merely ordered a verification to determine if sales were disguised as mess fees. The liability to pay tax would depend on that verification.
In conclusion, the court dismissed the revision petition. It affirmed that food supply through a canteen, even by an educational trust, requires registration under the KVAT Act.
