2010 (7) TMI 174 - HC - VAT and Sales Tax

Food sales on trains subject to VAT, not service tax. Petitioner can claim refund.

INDIAN RAILWAYS CATERING & TOURISM CORPORATION LTD Versus GOVT OF NCT OF DELHI & ORS

INDIAN RAILWAYS CATERING & TOURISM CORPORATION LTD Versus GOVT OF NCT OF DELHI & ORS - 2010 (20) S.T.R. 437 (Del.) , [2011] 30 STT 479 (Del.) , [2010] 32 ... Issues Involved:1. Taxability of food and beverages served on board trains under DVAT Act or CST Act.2. Determination of whether the transaction is a sale or a service.3. Applicability of VAT and service tax on the same transaction.4. Jurisdictional concerns regarding the place of sale.5. Validity of the Assessment Order and Determination Order.Detailed Analysis:1. Taxability of Food and Beverages:The petitioner, a government company, sought determination from the Commissioner of Value Added Tax under Section 84 of the DVAT Act on whether the food and beverages served to passengers on board trains constitute a sale/purchase and are liable to tax under the DVAT Act or CST Act. The Commissioner determined that VAT was payable on these services as they amounted to a sale under Section 2(zc)(vii) of the Act. The petitioner contended that the transaction should not be taxed under the DVAT Act if the goods are loaded outside Delhi. The Tribunal quashed the portion of the Determination Order that extended taxability to goods loaded outside Delhi.2. Nature of the Transaction:The court analyzed whether the transaction between the petitioner and Indian Railways was a service or a composite contract of providing service and selling goods. The court referred to several precedents, including State of Madras Vs. Gannon Dunkerley & Co., and concluded that the transaction was a sale. The court emphasized that the food articles and water provided to passengers are goods under Section 2(7) of the Sale of Goods Act and Section 2(m) of the DVAT Act. The court held that the transaction between the petitioner and Indian Railways is a sale, with the service component being incidental and minimal.3. Applicability of VAT and Service Tax:The petitioner argued that both VAT and service tax cannot be levied on the same transaction. The court rejected this contention, stating that the transaction is purely a sale of goods, and the service component is incidental. The court held that the respondents are entitled to levy VAT on the entire amount of consideration paid by Indian Railways to the petitioner for food and beverages.4. Jurisdictional Concerns:The petitioner contended that the property in the goods does not transfer to Indian Railways until they are served to passengers, and thus, the sale does not occur in Delhi. The court rejected this argument, stating that the property in the goods transfers to Indian Railways when they are loaded on the train and kept in equipment belonging to Indian Railways. The court emphasized that the goods become the property of Indian Railways upon loading, regardless of where they are served.5. Validity of the Assessment and Determination Orders:The court upheld the Assessment Order for the year 2007-08 and the Determination Order dated 20.03.2006, stating that the transaction between the petitioner and Indian Railways is a sale of goods. The court dismissed the writ petitions, allowing the petitioner to claim a refund of service tax already paid and to challenge any future levy of service tax on such transactions.Conclusion:The court concluded that the transaction between the petitioner and Indian Railways is a sale of goods, not a service or a composite contract. The sale occurs when the goods are loaded on the trains in Delhi, and VAT is applicable on the entire consideration paid by Indian Railways. The court dismissed the petitions, allowing the petitioner to seek a refund of service tax and to challenge any future service tax levies.