VAT Leviable On Entire ‘Entry-Coupon’ Amount Charged By Chokhi Dhani Resort Is Adjustable Against Food: Rajasthan High Court

The Rajasthan High Court, Jaipur Bench, has held that Value Added Tax (VAT) is leviable on the entire ‘entry-coupon’ amount charged by Chokhi Dhani Resort, which is adjustable against food.

The bench of Justice Sameer Jain has observed that since the assessee is charging separately for the services, it cannot be said that the dominant purpose of the entry coupon was for providing entertainment or services where the supply of food is only incidental. Because of the bifurcation of the amount charged for the entry coupon, done by the assessee itself, the majority of the charge was for the supply of food.

The respondent/assessee is in the business of restaurants and resorts. It issued ‘entry coupons’ at the entry gate of the premises to its customers and charged Rs. 350 per adult and Rs. 175 per minor.

A survey was conducted on the premises of the respondent/assessee. It was discovered that the assessee's charge, as per the entry coupon, is only adjustable against food. However, the assessee was only paying VAT on Rs. 250 (in the case of adults) or Rs. 125 (in the case of children), and the remaining amount, i.e., Rs. 100 (in the case of adults) and Rs. 50 (in the case of children), was reflected separately in the assessee’s books of accounts under the heading ‘Charges for Generation of Cultural Receipts, Staff, Maintenance, Adm. Expenses’ and no VAT was being paid, which amounts to an evasion of tax.

The assessment order was passed, and tax, along with interest and penalties, was imposed upon the assessee. Upon appeal, the Deputy Commissioner (Appeal) maintained the levy of tax and interest but deleted the penalty imposed under Section 61 of the RVAT Act. The Tax Board allowed the appeal filed by the assessee. The Rajasthan Tax Board has held that the expenses charged are separate from the food charges, despite only one coupon of the composite amount issued at the entry by the respondent. The Rajasthan Tax Board deleted the tax and interest.

The petitioner/department filed the sales tax revisions and references under Section 84 of the Rajasthan Value Added Tax Act, 2003, read with Section 86 of the Rajasthan Sales Tax Act, 1994, assailing the order passed by the Rajasthan Tax Board, Ajmer.

The department contended that the assessee was separately charging for other services, like animal riding, astrology services, and other recreational activities, inside the premises, and the entry coupon specifically contained the words "adjustable in food only". Therefore, as per the definition of ‘sale’ and the definition of ‘sale price’ VAT is payable on the entire amount. The assessee cannot split up the amount charged for the sale of food, even if the assessee provides certain services in addition to food, as VAT has to be paid on the total amount charged.

The assessee contended that the customer is not allowed to pay and enter just for food or just for entertainment, which clearly implies that the customer is paying for both food and entertainment separately.

The court, while ruling in favor of the department, noted that no one is allowed entry if they only want to have a cultural experience; an entry coupon that is adjustable only against food is a must.

The court quashed the order of the Tax Board and maintained the levy of penalties.

Case Title: Commercial Taxes Officer Versus Chokhi Dhani Resorts Pvt. Ltd.

Citation: 2023 LiveLaw (Raj) 55

Case No.: S.B. Sales Tax Revision / Reference No. 63/2020

Date: 02/06/2023

Counsel For Petitioner: Punit Singhvi, Ayush Singh

Counsel For Respondent: Mahendra Gargeiya, Devang Gargeiya, Aurnabh Dey

Click Here To Read The Order