On a conjoint reading of Section 2(35) & 2(36) of the RVAT Act, the Rajasthan High Court held that the assessee (Chokhi Dhani – Hotel/Resort) cannot split up the amount charged for the sale of food, even if the assessee provides certain services in addition to the food, and VAT has to be paid on the entire consideration charged for the food.

Referring to the decision of K. Damodarasamy Naidu and Bros. and Ors. vs. The State of Tamil Nadu and Ors [(2000) 1 SCC 521], a Single Judge Bench of Justice Sameer Jain clarified that since the assessee had issued coupons that were adjustable against food only, the assessee is liable to pay VAT on the entire consideration charged from its customers for the supply of food.

Advocate Punit Singhvi appeared for the Petitioner, whereas Advocate Mahendra Gargeiya appeared for the Respondent.

Facts in brief: a survey was conducted of the premises of the assessee wherein it was discovered that the assessee, which is engaged in the business of restaurants and resorts, was issuing ‘entry coupons’ at the entry gate of the premises to its customers and charging Rs. 350/- per adult and Rs. 175 per minor. The said charge, as per the entry coupon, is only adjustable against food. However, the assessee was only paying VAT on Rs. 250 (in case of adults) or Rs. 125 (in case of children) and the remaining amount was reflected separately in the assessee’s books of accounts under the head ‘Charges for generation of Cultural Receipts, Staff, Maintenance, Administrative Expenses’, and no VAT was being paid on the same, which amounts to evasion of tax. Accordingly, the Assessment Order was passed and tax along with interest and penalty was imposed upon the assessee. On appeal, the Deputy Commissioner maintained the levy of tax and interest but deleted the penalty imposed under Section 61 of the RVAT Act. Thereafter, the Tax Board allowed the appeal filed by the assessee and set aside the levy of tax and interest also.

After considering the submission, the Bench noted that the assessee was issuing an entry coupon which contained the specific note that the amount so charged in the coupon is adjustable only against food.

“However, against the contents of their coupons, the assessee adopted window dressing deliberately, intending to evade tax, by bifurcating the amount so charged from the customers that were adjustable only against food into separate entries, including the one for cultural receipts, admin expenses, maintenance etc”, added the Bench.

Thus, the High Court clarified that for all intent and purposes and in the facts of the case, the entry coupon was represented as an invoice only.

The Bench further highlighted that since the assessee is admittedly charging separately for the services, it cannot be said that the dominant purpose of the entry coupon was for providing entertainment/services where the supply of food is only incidental.

Accordingly, the Bench quashed the order of the Tax Board and maintained the levy of penalty.

Cause Title: Commercial Taxes Officer, Anti-Evasion, Zone-Iii, Jaipur v. M/s Chokhi Dhani Resorts Pvt. Ltd., S-8, Shyam Nagar, Civil Lines, Jaipur

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Rajasthan High CourtJustice Sameer Jain

Pankaj Bajpai