Court rules VAT payable on full food amount despite additional services; penalty upheld.

The Court found in favor of the revenue, ruling that VAT must be paid on the entire amount charged for food despite additional services provided by the restaurant and resort. The Court held that the practice of separating charges for food and other services was a deliberate attempt to evade tax. It rejected the argument that the dominant supply was entertainment, emphasizing that VAT should be levied on the full amount paid by customers for food. The Court upheld the levy of penalty, quashing the Tax Board's decision and disposing of any pending applications.

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Issues Involved:
1. Whether the Rajasthan Tax Board was justified in holding that the expenses charged are separate from the food charges despite only one coupon of composite amount issued at the entry by the respondent.
2. Whether the Rajasthan Tax Board was justified in deleting the tax and interest without appreciating the provisions pertaining to "Sale" under Section 2(35) and "Sale Price" under Section 2(36) of the RVAT Act.

Summary:

Issue 1:
The revenue argued that the assessee, engaged in the business of restaurants and resorts, was issuing entry coupons to customers, charging Rs. 350 per adult and Rs. 175 per minor, adjustable against food. However, the assessee was paying VAT only on Rs. 250 (adults) and Rs. 125 (children), with the remaining amount recorded under 'Charges for generation of Cultural Receipts, Staff, Maintenance, Adm. Expenses'. The revenue contended that VAT should be payable on the entire amount as per Section 2(35) and Section 2(36) of the RVAT Act, citing the Supreme Court judgments in K. Damodarasamy Naidu and Bros. and Idea Mobile Communication Ltd.

The assessee countered that the coupons were for administrative convenience and invoices were issued separately, reflecting charges for food and entertainment services. The Tax Board noted that invoices were indeed issued, and the coupon phrase 'adjustable in food only' was to prevent misuse. The assessee argued that their business was primarily entertainment, with food being a secondary component, and thus the charges should be split.

The Court found that the assessee's practice of bifurcating the amount charged from customers into separate entries was deliberate window dressing to evade tax. The definition of 'Sale' and 'Sale Price' under the RVAT Act made it clear that VAT must be paid on the entire amount charged for food, even if additional services were provided. The Court cited the Apex Court judgment in K. Damodarasamy Naidu and Bros., which established that the price paid by the customer for food in a restaurant includes the cost of services provided and must be taxed accordingly.

Issue 2:
The Court rejected the assessee's argument that the dominant supply was entertainment/service, noting that entry was not allowed solely for cultural experience and the assessee charged separately for services inside the premises. The Court also dismissed the reliance on the judgment in Kota Eye Hospital and Research Foundation, as the primary supply in that case was medical service, unlike the present case where the assessee was not providing a bundled supply of services.

Conclusion:
The Court answered the questions of law in favor of the revenue, quashing the Tax Board's order and maintaining the levy of penalty. The STRs were allowed, and any pending applications were disposed of.

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