Whether VAT is leviable on service portion, in sale of food and drinks, which is considered to be value of services under service tax law?

Hotel  East Park   VS. Union  of India [2014  (35) STR  433 (Chhattisgarh)]

 

 

FACTS:

The  points  for  determination   in the  writ  petition  were whether  any service tax could be charged  on sale of an item or vice-versa   and whether under Article 366(29A)(f) of the Constitution  of India, service  is subsumed  in sale of food and drink.  Further, whether  section  66E(i) of the Finance Act,  1994 was volatile  of Article  366(29A)(f)  of the Constitution  of India?

HELD:

Relying on the decision of T. N. Kalyan   Mandapam Assn. VS.  Union  of India  & Others   2006 (3) STR  260  (Se),   it was observed that section 66E(i) read with section 65B(44) of the Finance Act, 1994, only charges service tax on service portion and not on sales portion and was held ultra virus the  Constitution.  Article 366(29A)(f)  separates  sale  and service  portion and the valuation  should be done as per Rule 2C of the Service tax (Determination  of Value) Rules,2006.  Generally, service tax is charged on presumptive basis i.e. on 40% or 60% of the bill value. However, VAT is charged on total bill value. VAT shall not be charged over the amount determined as service portion and which can be agitated before the State VAT authorities.  VAT authorities were directed to issue necessary directions