Composite service contracts cannot tax food and beverage sale value again where VAT or sales tax has already been paid.

In a composite convention service contract, the value attributable to food and beverages could not be included again in the service tax base where that component had already suffered VAT or sales tax. Applying the distinction between sale and service components, and the principle of mutual exclusivity under Article 366(29A) of the Constitution and Notification No. 12/2003-ST, the Tribunal held that double taxation on the same value was impermissible. The demand of service tax on the food and beverages component was therefore not sustainable, and the consequential penalties also failed.

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Issues: Whether the value of food and beverages supplied in the course of rendering convention service could be included in the taxable value for service tax, and whether the demand and penalties were sustainable.

Analysis: The taxable service was examined in the context of Article 366(29A) of the Constitution of India, which recognises that supply of food and other consumables in a service contract may involve a deemed sale. The Tribunal applied the principle that the sale component and service component in a composite contract are distinct, and that once VAT or sales tax has been discharged on the food and beverages component, the same value cannot again be subjected to service tax. The decision also relied on the exemption framework under Notification No. 12/2003-ST and the principle of mutual exclusivity between sales tax and service tax.

Conclusion: The demand of service tax on the value attributable to food and beverages was not sustainable, and the consequential penalties also could not survive.

Final Conclusion: The appeal succeeded and the impugned demand and penalties were set aside.

Ratio Decidendi: In a composite service contract, the value attributable to the sale of food and beverages cannot be included again in the service tax base where that sale component has already suffered VAT or sales tax.

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