Sanchayita Lahkar

The High Court of Kerala Division Bench of Justice Dr. A.K. Jayasankaran Nambiar and Justice Easwaran S. dismissed revision petitions filed by a dental college against the Kerala Value Added Tax Appellate Tribunal’s direction to take registration under the KVAT Act, 2003. The Court upheld the Tribunal’s remand order requiring verification of canteen sales treated as mess fees and held that no substantial question of law arose. It confirmed that ancillary commercial activities such as sales of student kits and canteen services brought the institution within the definition of a “dealer” under the Act, requiring registration.

The revision petitions were filed by M/s. Annoor Dental College, represented by its Director, challenging the common order passed by the Kerala Value Added Tax Appellate Tribunal in T.A. (VAT) Nos. 33/2019 and 34/2019, dated 06.11.2024. The Tribunal had partly allowed the State’s appeal and directed the college to obtain VAT registration while remanding the matter for factual verification.

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The proceedings originated from penalty orders issued under Section 67(1) of the Kerala Value Added Tax Act, 2003, for the assessment years 2013–14 and 2014–15. The department alleged that the institution, despite exceeding the threshold turnover, failed to register under the KVAT Act or remit VAT for sales conducted during those periods.

The Deputy Commissioner (Appeals) had earlier set aside the penalty orders and allowed the college’s appeal. The State of Kerala, aggrieved by that decision, preferred appeals before the VAT Appellate Tribunal. The Tribunal reviewed financial documents submitted by the institution, including its income and expenditure statements. It identified income from the sale of record books, student kits, uniforms, and revenue from snack bar and mess facilities.

The Tribunal found that the college, while being an educational institution managed by a charitable trust, also engaged in commercial activities incidental to its primary purpose. It specifically recorded that the sale of food and goods to students could not be excluded from the definition of business under Sections 2(ix) and 2(xv) of the KVAT Act.

The Tribunal distinguished between mess fees and canteen sales, observing that if the canteen’s services were incorrectly treated as mess fees to evade tax liability, such categorization would not preclude taxation. It therefore directed the assessing officer to verify the actual nature of the charges collected.

Aggrieved by the Tribunal’s direction to register under the KVAT Act and submit to further assessment under Section 25(1), the petitioner moved the High Court through OT Rev. Nos. 4 and 5 of 2025.

The petitioner’s counsel argued that the college’s principal activity of imparting education was not a commercial enterprise. Relying on a decision of the Uttarakhand High Court in Scholors Home Senior Secondary School v. State of Uttarakhand, the petitioner contended that incidental business activities undertaken in furtherance of educational purposes could not render the institution liable as a dealer under VAT laws.

The State, represented by the Senior Government Pleader, submitted that the Tribunal had only remanded the matter for factual verification and had not conclusively fastened liability. The State maintained that the Tribunal's direction was aligned with the statutory provisions governing VAT and did not warrant interference.

The Division Bench considered the legal and factual submissions advanced by both sides and recorded the scope of the Tribunal’s directive:

“A reading of the order impugned in these revision petitions shows that the tribunal has not decided any question against the assessee, but, in fact, had directed the authority to verify as to whether the mess fees are collected for the purpose of canteen sales.”

The Court noted that the Tribunal’s approach was investigative, not adjudicatory:

“Therefore, essentially, the tribunal wanted the authority to ascertain a particular fact, which would enable the authority to proceed in accordance with the provisions of the Act.”

Addressing the petitioner’s argument regarding the charitable nature of its operations, the Court stated:

“Although the learned counsel for the revision petitioner contends before us that the primary activity of the revision petitioner being imparting education, any ancillary business done by it in pursuance to the said avocation cannot be construed as a business... we are not in agreement.”

On the petitioner’s reliance on the Uttarakhand High Court decision, the Bench stated:

“We have perused the decision... and are of the view that the said decision has to be understood as rendered on the particular facts of the case and also construing the provisions of the Uttarakhand Value Added Tax Act, which substantially varies from the provisions of the KVAT Act, 2003.”

The Court then examined the statutory definitions of "business" and "dealer" under Sections 2(ix) and 2(xv) of the KVAT Act:

“When we read the definition ‘business’ juxtaposed with the definition of a dealer, which, according to us, is inclusive enough to cover each and every activity done by a person, other than in due course of his business, the petitioner cannot contend that he will fall otherwise.”

Responding to the petitioner’s argument that turnover remained below the taxable threshold, the Court recorded:

“It may be true that the sales across the counter in the canteen may be within the threshold limit, but however that by itself will not enable the revision petitioner to contend that it is not bound to take registration under the provisions of the KVAT Act.”

Reaffirming the limited scope of the Tribunal’s directive, the Court stated:

“In fact, we noticed that the tribunal has only remanded the matter back to the authorities to verify the question as to whether the canteen sales are being termed as mess fees.”

The Court concluded that the case did not involve any debatable legal issue warranting interference:

“We are of the considered view that the revision petitions have to fail primarily on the ground that no substantial question of law arises for consideration before us.”

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Concluding its findings, the Division Bench issued the following operative order:

“As an upshot of these discussions, we are of the view that no substantial question of law arises for consideration in the present revision petitions. We find no merit in the revision petitions. They are accordingly dismissed. No order as to costs.”

Advocates Representing the Parties

For the Petitioners: P.N. Damodaran Namboodiri, Advocate; Hrithwik D. Namboothiri, Advocate

For the Respondent: Smt. Resmitha Ramachandran, Government Pleader; Sri V.K. Shamsudheen, Senior Government Pleader

Case Title: M/s. Annoor Dental College v. State of Kerala

Neutral Citation: 2025:KER:31073

Case Number: OT Rev. Nos. 4 and 5 of 2025

Bench: Justice Dr. A.K. Jayasankaran Nambiar, Justice Easwaran S.

[Read/Download order]