Expenditure tax collected by hoteliers is not part of turnover for sales tax, so reassessment based on its exclusion failed.

Expenditure tax collected by a hotelier under the Expenditure Tax Act, 1987 is not part of the sale price or turnover for sales tax under the Bengal Finance (Sales Tax) Act, 1941 and the West Bengal Sales Tax Act, 1994. The tax is levied on chargeable expenditure incurred by the customer; the hotelier merely acts as the statutory collecting and remitting agent, so the amount recovered in the bill does not become part of the consideration for food or drinks. On that basis, exclusion of the amount from turnover in the returns could not justify reopening deemed assessments under section 11E(2) of the 1941 Act, and the reassessment action was invalid.

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Issues: Whether expenditure tax collected by hoteliers under the Expenditure Tax Act, 1987 forms part of the sale price or turnover for the purpose of sales tax under the Bengal Finance (Sales Tax) Act, 1941 and the West Bengal Sales Tax Act, 1994, and whether reassessment proceedings based on exclusion of such tax from turnover were valid.

Analysis: The taxing scheme under the sales tax laws makes the levy depend upon turnover, and turnover is the aggregate of sale prices. The Expenditure Tax Act, 1987, however, taxes chargeable expenditure and casts on the hotelier only a statutory duty to collect and remit the tax. The statutory machinery requiring collection by the hotelier, payment to the Central Government, and consequences for default does not make the hotelier the substantive person liable to bear the tax. The customer who incurs the expenditure is the person on whom the incidence falls, while the hotelier acts only as the collecting agency. The collection is therefore not part of the valuable consideration for the sale of food or drinks, nor does it become a component of turnover merely because it is recovered in the bill. The exclusion of this amount from turnover in the returns did not furnish a basis for reopening the deemed assessments under section 11E(2) of the 1941 Act.

Conclusion: Expenditure tax collected by the hotelier is not includible in turnover and is not exigible to sales tax; the reopening and consequential assessment actions were invalid.

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