Double taxation on restaurant service element impermissible after service tax treatment, with VAT confined to goods only.

Value Added Tax cannot be imposed on the service component of restaurant supplies once that component has already been brought within the service tax regime. The Court held that VAT applies to the sale of goods, not to the service element, and that treating 40% of the billed value for food and beverage service as taxable under service tax barred a second levy under VAT on the same portion. The rejection of the section 57 application proceeded on an erroneous view of taxability. The revision was allowed, the Tribunal and Commissioner orders were set aside, and the matter was remitted for fresh decision in line with this principle.

---

---

Issues: Whether Value Added Tax could be levied on the service element involved in restaurant supplies when that element had already been brought within the service tax regime.

Analysis: Value Added Tax is leviable on the sale of goods and not on the service component. Where the competent authority had, by notification dated 06.06.2012, treated 40% of the billed value for food and beverage supplied in a restaurant as liable to service tax, the same element could not again be subjected to Value Added Tax. The rejection of the application under Section 57 of the Uttarakhand Value Added Tax Act, 2005 proceeded on an erroneous understanding of the taxability of the service component.

Conclusion: The challenge succeeded, and the levy of Value Added Tax on the service portion was held impermissible.

Final Conclusion: The revision was allowed, the orders of the Tribunal and the Commissioner were set aside, and the matter was remitted for fresh decision in accordance with the stated legal position.

Ratio Decidendi: A State cannot levy Value Added Tax on that portion of a transaction which has been validly characterised and taxed as a service element under the service tax law.

---