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2014 (11) TMI 393 - HC - Service TaxLevy of service tax on Supply of food and beverages in a restaurant - Constitutional validity of sub clauses (zzzzv) and (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011 - single Judge found that the matters covered by sub clauses (zzzzv) and (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011, are matters enumerated in Entries 54 and 62 respectively, of List II of the Seventh Schedule to the Constitution and hence, beyond the legislative competence of the Union to impose tax on such matters, invoking Entry 97 of List I of the Seventh Schedule of the Constitution - Held that:- Supply of food and beverages in a restaurant, as indicated above, prior to the Constitution (Forty Sixth Amendment) Act, the same was considered to be wholly a service. When the whole transaction was held to be a service, the States could not have imposed tax in respect of that transaction. However, by virtue of the Constitution (Forty Sixth Amendment) Act, this transaction was also deemed to be a sale, conferring authority on the States to tax on the whole consideration received by the person making the supply of food and beverages. Thus, after the Constitution (Forty Sixth Amendment) Act, tax could be imposed and levied by the States on the value of the goods involved in the works contract and tax could be imposed and levied by the Union for the value of the services involved in the works contract. As far as the supply of food and beverages in a restaurant is concerned, after the Constitution (Forty Sixth Amendment) Act, tax could be imposed and levied for the whole amount of the consideration received by the person making the supply of the food and beverages. Sub clause (zzzzv) of Clause 105 of Section 65 of the Finance Act, 1994, relates to the supply of food and other consumables in restaurants. After the Constitution (Forty Sixth Amendment) Act, the said activity is deemed as a sale of goods. After the Constitution (Forty Sixth Amendment) Act, it cannot be said that it is an activity of service. When the said activity is deemed to be a sale of the food and other articles of human consumption, by a constitutional definition, tax on the said activity can be imposed only by the States in view of Entry 54 in List II of the Seventh Schedule. In view of the words used in article 366(29A) (f), the bill raised on the customer cannot be split as charged for the service part and as charged for the food part and that the supply of food by the restaurant owner to the customer, though it may be a part of the service that he renders by providing good furniture, furnishings and fixtures, linen, crockery and cutlery, music etc., tax is leviable for the whole amount of the consideration received by the restaurant owner. In other words, in view of the aforesaid constitutional amendment, it cannot be said that there is any service involved in the supply of food and other articles of human consumption in a restaurant. It is thus evident that the matter covered by sub-clause (zzzzv) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011 is a matter enumerated in Entry 54 of List II of Seventh Schedule and the States alone have the legislative competence to enact any law imposing tax on the said matter. Matter covered by sub-clause (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011, is a matter enumerated in Entry 62 of List II of Seventh Schedule and the States alone have the legislative competence to enact any law imposing tax on the said matter. since the whole of the consideration received by a restaurant owner for supply of food and other articles of the human consumption, including the service part of the transaction, is exigible to tax by the State by virtue of the constitutional definition, it is not open to the Union to characterise the same transaction as a service for imposition and levy of service tax. No reason to interfere with the decision of the learned single Judge - Decided against Revenue.
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