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Community Welfare Banquet Association Delhi Versus Govt. of NCT of Delhi And Others

2016 (11) TMI 83 - DELHI HIGH COURT

Vires of Rule 3 (2) (b) (ii) of the Delhi Tax on Luxury Rules, 1996 - bifurcation of consolidated bill amount - principle contained in Section (3) (5) of the Act - luxury tax “in respect of turnover of receipts for supply of food, drinks and goods such as cosmetics, medicines, nutritional supplements etc. on the sale of which the proprietor is liable to pay tax under the Delhi Value Added Tax Act, 2004” - Held that: - the revenue had suggested that there is a radical difference between the thres .....

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the goods or other services which are purportedly a subject of VAT, that the dealer is subjected to actual levy and collection at a higher threshold is a matter of detail. The levy exists per se by legal definition. It is this aspect which is crucial rather than the existence of higher or lower threshold as is urged by the revenue - Rule 3 (2) (b) (ii) is ultra vires - appeal allowed - decided in favor of appellant. - W. P. (C) 297/2013 - Dated:- 6-10-2016 - S. Ravindra Bhat And Deepa Sharma, J .....

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s. According to its pleadings a large majority of its members are registered dealers under the Delhi VAT Act, 2004. The existing VAT regime in Delhi requires dealers who report return of an annual turnover of more than ₹ 20 lakhs, to comply with its provisions and file quarterly returns purporting the details of the transaction for the particular periods. The grievance in these proceedings is that the Delhi Tax on Luxury Act, 1996 (the Luxury Act), which according to the petitioners clearl .....

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ther the substantial part or whole of them are subjected to VAT levy. It is urged that given the primacy of the provision under the parent statute i.e. the Luxury Act, the extraction of luxury tax by the Rule mandated inclusion of the VAT turnover, is ultravires to rule making power and parent amendment. The petitioners rely upon the constitution bench judgment of the Supreme Court in Godfrey Phillips India Ltd.& Anr. v. State of U.P. & Ors. [2005] 139 STC 537 (SC), where entry 62 of the .....

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egislatively incompetent." 2. The revenue counters the argument of the petitioner and submits that given the broad and expanded definition of term luxury which includes provision for accommodation of space provided in the banquet hall that also includes air cooling, air conditioning and other furniture etc., the rule cannot be characterised as ultravires. It is further submitted that though VAT amounts are excluded by virtue of Section 3 (5), its language states that tax amount would not be .....

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furcation of the bill by treating 60% of the turnover of receipts as a luxury component. The revenue relies upon a decision of the Kerala High Court in M Far Hotels Ltd. v. State of Kerala, decided on 20.12.2013 in WP(C).30399/2009, which held that where the appellant is not collecting separate rental charges, a similar rule by fiction of law took care of the situation to enable the collection of a certain percentage of the total amount charged. The revenue further relies upon the judgment of th .....

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y element or aspect, could correctly be included in the turnover and was done legally under the impugned rule. 4. The Luxury Act defines the taxing event i.e. luxury as follows: "(i) "luxury" means use of goods, services, property; facilities etc. for enjoyment or comfort or pleasure or consumption by any customer extraordinary to the necessity of life, that is to say:- (i) accommodation or space provided in a banquet hall which includes air cooling, air conditioning, chairs, tabl .....

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is seven hundred fifty rupees per room per day or more whether such charges are received collectively or separately per room per day. (iv) facilities or services provided in a spa which includes beauty treatment, manicure, pedicure, facial, laser treatment, massage shower, hydrotherapy, steam both, saunas or cuisine, medispa and the like;"; 5. Receipt is defined under Section 2 (m) as the amount of monetary consideration received or receivable by a proprietor or by his agent for any luxury .....

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ing to its provisions. Section 3 (2) defines the quantum i.e. the rate not exceeding 15% . Section 3 (3) by dealing fiction includes the service charges which a proprietor may not include in a given case. Section 3 (4) relates to luxury provided in a hotel; and Section 3 (5) - relevant for the purpose of this litigation provides as under: The tax shall not be levied and payable in respect of turnover of receipts for supply of food, drinks and goods such as cosmetics, medicines, nutritional suppl .....

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Section 2 of the Act, provided at the establishment to a customer either directly or indirectly through any person or agency. (2) The tax shall be levied and collected by a proprietor- (a) in respect of luxury provided in the establishment (other than banquet hall) on the tariff rate, (b) in respect of luxury provided in a banquet hall in the manner prescribed below- (i) where the hiring charges have been collected separately, there shall be levied a tax on such turnover of receipts in respect o .....

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Form 1A exclusively and separately; (c) daily account of occupancy of residential accommodation in hotel and collection of tax therefor in Form 2; (d) daily account of luxury provided in banquet hall of gymnasium/health club or spa and collection of tax therefor, inform 2A exclusively and separately; and (e) monthly abstract of collection and remittance of tax, in Form 3. (4) The proprietor shall maintain a separate bound register for each of the Forms and shall get each of the pages of such reg .....

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n all those incidents which are defined as luxury under Section 2 (i). The provisions of the Act lay out the manner of recovery which is through an obligation on the part of the proprietor or firms which provides luxury to register itself and collect luxury tax charges, from its customers in respect of the luxury service provided by it. At the same time Section 3 (5) incorporates an important exclusionary principle. Given that the legislature was conscious of an element of overlap in the broad n .....

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nciple contained in Section (3) (5) of the Act. This court is unpersuaded by the submission. One of the submissions made by the revenue is that the component of luxury includes the hiring of the property in the present instance i.e. banquet halls. In order to support its argument that the impugned rule cannot be held to be ultravires, reliance is placed upon the judgment of Kerala High Court in M Far Hotels Ltd. s (supra). This court is of the opinion that that ruling is inapplicable because a p .....

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as the argument with respect to aspect theory is concerned, the court is again unimpressed. The aspect theory is usually in the context of conflict between two legislatures - classically Federal & State or Provincial Legislatures. It has never been resorted to in case of legislation by the State under two heads. It is ofcourse quite likely that one activity may itself lead to two taxing incidents. But what is confronted here is the setting up of a subordinate legislation against a parent ena .....

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