Outdoor catering taxability limited to deemed sale element; separately identifiable service charges cannot be subjected to VAT twice.

Outdoor catering contracts with separately identifiable food and service components are taxable by the State only on the deemed sale element under Article 366(29A)(f); the service component remains outside VAT when invoices and billing separately disclose the charges and service tax is paid on services. The legal position distinguishes composite contracts from indivisible contracts and requires segregation where the elements are distinct. The Court also held that the existence of a statutory appeal did not bar consideration of the writ appeal in the circumstances, because the dispute raised a pure constitutional issue on the State's levy power. The impugned assessments were set aside and relief was granted to the assessee.

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Issues: (i) Whether an outdoor catering contract, where the invoices separately disclose the value of food and the value of services and service tax is paid on the service component, can be subjected to VAT on the entire consideration including the service component. (ii) Whether the writ appeal could be entertained despite the availability of a statutory appeal.

Issue (i): Whether an outdoor catering contract, where the invoices separately disclose the value of food and the value of services and service tax is paid on the service component, can be subjected to VAT on the entire consideration including the service component.

Analysis: Outdoor catering falls within the constitutional scheme under Article 366(29A)(f) of the Constitution of India, which treats supply of food or drink by way of or as part of any service as a deemed sale only to the extent of the goods element. The service element remains within the parliamentary field for service tax. The applicable legal position distinguishes composite contracts from indivisible contracts and requires segregation of the service and sale components where both are separately identifiable. The invoices and billing arrangement showed separate charges for food and for handling, transportation and allied services, and separate tax treatment had been adopted accordingly. In such a situation, the State could levy VAT only on the sale aspect and not on the service component, as doing so would amount to taxing services twice.

Conclusion: VAT could not be levied on the service component of the outdoor catering contract. The levy was confined to the deemed sale element only, and the assessee succeeded on this issue.

Issue (ii): Whether the writ appeal could be entertained despite the availability of a statutory appeal.

Analysis: The right of appeal is statutory and cannot be altered by judicial creation of a different appellate route. However, the matter involved a pure constitutional issue already bearing on the State's levy powers, and the Court considered it appropriate to decide the issue finally instead of relegating the assessee to the statutory remedy. The availability of alternate remedy therefore did not preclude examination of the merits in the circumstances of the case.

Conclusion: The Court entertained the appeal despite the alternate remedy and rejected the objection based on availability of statutory appeal.

Final Conclusion: The contract was held to be a composite outdoor catering contract with separable service and sale elements, so the State could tax only the deemed sale portion and not the service component. The impugned assessments and the order under challenge were set aside and relief was granted to the assessee.

Ratio Decidendi: In an outdoor catering contract where the service and sale components are separately identifiable, VAT can be imposed only on the deemed sale element under Article 366(29A)(f) of the Constitution of India, while the service element remains outside the State's sales tax power.

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