In Sales Tax Revision/Reference No. 63/2020 -RAJ HC- Rajasthan High Court affirms VAT on entire consideration for supply of food by Chokhi Dhani Resorts Pvt. Ltd., upholds penalty under Rajasthan Value Added Tax Act
Justice Sameer Jain [02-06-2023]

Read Order: Commercial Taxes Officer v. M/s Chokhi Dhani Resorts Pvt. Ltd.

Chahat Varma

New Delhi, June 27, 2023: The Rajasthan High Court has quashed the order of the Tax Board and ruled that M/s Chokhi Dhani Resorts Pvt. Ltd. (assessee) cannot split the amount charged for the sale of food, even if they provide certain additional services along with the food and VAT must be paid on the entire consideration charged for the food. The court also upheld the penalty imposed on the assessee under Section 61 of the Rajasthan Value Added Tax Act, 2003 (RVAT Act).

In the present case, the Revenue argued that during a survey conducted at the premises of the assessee, it was discovered that the assessee, which operated restaurants and resorts, issued entry coupons that were only adjustable against food. However, the assessee was only paying VAT on a portion of the entry coupon amount, while the remaining amount was reflected separately in the books of accounts under a different head. The Revenue contended that this constituted tax evasion as VAT should be paid on the entire amount charged, including the portion allocated to services other than food.

The single judge bench of Justice Sameer Jain observed that the assessee, used to issue entry coupons to customers, charging Rs. 350 per adult and Rs. 175 per child. The entry coupon specifically mentioned that it was adjustable only towards food. However, the assessee was only paying VAT on Rs. 250 (for adults) and Rs. 125 (for children) out of the total amount collected for food. The bench also noted that the assessee separately charged customers for additional services provided within the premises.

The bench considered the definitions of ‘sale’ and ‘sale price’ as provided under the RVAT Act. After a conjoint reading of these definitions, the bench concluded that the assessee, cannot divide the amount charged for the sale of food, even if additional services were provided alongside the food.

The bench ruled that since the assessee issued coupons that were specifically adjustable only against food, the entire consideration charged from customers for the supply of food was subject to VAT.