In the Court of Commissioner

IN THE COURT OF COMMISSIONER DEPARTMENT OF TRADE & TAXES GOVERNMENT OF NCT OF DELHI VYAPAR BHAWAN, NEW DELHI

M/s KIC Food Products Pvt. Ltd., NO: 207/CDVAT/2008/ 29, Hanuman Road, Dated: New Delhi -110 003.

Present for the Applicant : Shri Randhir Chawla, Advocate Present for the Department : Shri Nitya Nand, DR

The above named applicant has filed this application u/s 84 of the Delhi Value Added Tax Act, 2004 (herein after referred to as the “said Act”) and the questions put up before this Court for determination under the aforesaid provision of law is as under :

“Whether on the facts and in the circumstances of the case, the providing of totality of services along with food and beverages for price in the out door catering provided to the customers at the customers’ premises is liable to VAT under the DVAT Act?

“ On the facts and in the circumstances of the case, the percentage and extent of the total price received for all the services rendered which could be determined and segregated towards price of food and beverages upon which tax could be imposed?

2. The application for determination has been made in the prescribed format DVAT-42 and the requisite fee of Rs.1,000/- paid through Demand Draft No.087724 dated 15-2-08.

3. The facts as stated in the application are that the Applicant has been carrying on the business of running restaurant and providing outdoor catering at the chosen premises of the customer. The Applicant was registered under the 2

DST Act, 1975 and Central Sales Tax Act, 1956 and now after coming into force of the DVAT Act, 2004 vide TIN 07370025149.

4. It is stated that with respect to food and beverages services in the restaurant, the Applicant has been charging and depositing appropriate taxes under the DVAT Act, 2004. However, in respect of the outdoor catering services, the Applicant contends that the Applicant discusses the menu with the customers and after finalization of menu, takes its own cutlery, crockery, tables, cloth, napkins etc. along with highly trained skilled Chefs, Cooks and waiters and the entire ingredients including raw material required for preparing dishes, utensils etc. It is further submitted by the applicant that after the party is over it brings back all its utensils and other equipments back to its premises. On this basis, it is submitted that running outdoor catering services at the chosen venue of the customer involves indivisible contract and hence in entirety the same is not exigible under the DVAT Act, 2004. The Applicant in order to fortify his submission placed reliance on the judgment of the Constitution Bench of the Hon’ble Supreme Court in the case of State of Himachal Pradesh and Ors. Vs. Associated Hotels of India Ltd. reported in (1972) 29 STC 474, wherein it was held that the bill of hotel cannot be split into two between room tariff and food consumed by the guests. The Applicant also relied on the judgment of the Supreme Court in K.Damodarasamy Naidu & Bros. Vs. State of Tamil Nadu and Anr. Reported in (2000) 117 STC 01.

5. On the other hand the DR submitted that providing outdoor catering services amounts to as much deemed sale as food sold and served in the restaurant run by the applicant. The DR further submitted that the bill is charged on the basis of per head and per plate depending upon the choice of menu. The mere fact that the Applicant brings all the utensils along with skilled chef and waiters and takes it back after the function/party is over would not make it immune from the obligation of paying sales tax. 3

6. The D.R. stated that the judgment in the case of Associated Hotels of India Ltd. was rendered prior to enactment of 46th amendment and hence the same is not a good law. The DR also submitted that the judgment of the Supreme Court in K.Damodarasamy Naidu & Bros. is also distinguishable by submitting that the catering services is qualitatively different from supply of food to the residents in the hotel. Therefore, the direction in the judgment in K.Damodarasamy Naidu & Bros. that Sales Tax on the food consumed by the guests cannot be charged till the State Governments framed appropriate rules indicating the methodology and mechanism for charging sales tax is totally different. The DR further submitted that in catering services, there is no indivisible contract. There is one and only contract and that is contract for sale and supply of food. Since there is only one contract for supply of food at the venue chosen by the customer, it clearly amounts to deemed sale within the meaning of Section 2(zc)(vii) of the DVAT Act, 2004. The dominant aspect is sale of food and beverages and service part is incidental to the same.

7. I have perused the menu attached with the application. The menu indicates different foods and beverages supplied by the Applicant to its customers. I have heard the submission of both the parties. The judgment of the Constitution Bench of Supreme Court in the case of Associated Hotels and the later judgment rendered after 46th amendment, namely, K.Damodarasamy Naidu and Bros. is clearly distinguishable and cannot be of any assistance to the Applicant. The Constitution Bench judgment in the case of State of Himachal Pradesh & Ors. Vs. Associated Hotels of India Ltd. was rendered prior to 46th Amendment and hence ceases to be good law after enactment of 46th amendment. So far as judgment in the case of Damodarsamy Naidu & Bros. is concerned, it could be noticed that the ratio of judgment in the case of Associated Hotels of India Ltd. was clearly reversed by the Constitution Bench in Damodarsamy Naidu & Bros. case in the light of 46th Amendment and also in the light of respective enactments in the States Sales Tax Acts. However, in the 4 case of sales tax being charged on the food consumed by the residents in a hotel, it was directed by the Constitution Bench in Damodarsamy Naidu case that Sales Tax shall not be charged till the State Governments framed appropriate rules in order to minimize the element of arbitrariness. In the case of Damodarsamyu Naidu & Bros. and earlier case of Associated Hotels of India Ltd. rendered prior to 46th amendment, the nature of indivisible contracts came to the fore and the Hon’ble Supreme Court was called upon to determine what was the dominant object and what was merely incidental service. The DR has stated that such factual scenario does not exist in the instant case. Here the contract is one simple contract for supply of food at the chosen venue of the customer and there is no question of splitting it into what part of it is service and what part of it is sale. In factual context the entire transaction amounts clearly to sale within the meaning of Section 2(zc)(vii) of the DVAT Act, 2004.

8. Thus in view of the foregoing, I hold that the providing of services along with food and beverages for price in the outdoor catering clearly amounts to sale and thus exigible to VAT under the DVAT Act, 2004. Held accordingly.

(Archna Arora) Commissioner (T&T)

Copy for information and necessary action to: 1. The Applicant. 2. Addl. Commissioner (L&J) 3. Sales Tax Bar Association,Vyapar Bhawan. 4. The Value Added Tax Officer, Policy Branch. 5. Guard File.

(Archna Arora) Commissioner (T&T))