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2014 (5) TMI 652 - HC - Service TaxConstitutional validity of section 66E(i) - Service tax on sale value of the food and drinks - facilities provided in a hotel including an air-conditioned, restaurant and a bar - Whether section 66E(i) of the 1994-Act is violative of Article 366 (29A)(f) of the Constitution - Held that:- Section 65B(44)(ii) of the 1994-Act shows that supply of goods that is deemed to be sale under Article 366(29A) is not included in service. - We are afraid, Article 366(29A)(f) of the Constitution does not indicate that the service part is subsumed in the sale of the food; it rather separates sale of food and drinks from service. - Section 65B (44) as well Section 66E(i) only charges service tax on the service part and not on the sale part. It indicates that the sale of the food has been taken out from the service part as was interpreted by the Supreme Court in the Associated-Hotel case and the Northern-Caterers case. Section 66E(i) of Chapter-5 of the relating to service tax of the Finance Act, 1994 [Statutory Provisions Relating to Service Tax] is intra vires the Constitution. - Decided against the assessee. RECOMMENDATIONS: There is no provision in the VAT-Act to bifurcate the amount. The State Government will do well to frame such rules to this effect. These rules may be in conformity with the bifurcation as provided under the 1994-Act or ensure that the Commercial Tax authorities do not charge VAT on that part of the value of the food and drink on which the service tax is being assessed. The restaurant and caterer are also normally charging VAT on the bill value. This is not proper. They may charge service tax on 40% or 60% as the case may be of the bill value and charge VAT at the rate of 60% or 40% of the bill value, but not on the entire bill value. - The State Government will be well advised to issue a clarification/ direction in this regard and will ensure that the consumers are not unnecessarily doubly taxed over the same amount. Decided against the assessee subject to recommendation to state governments.
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