M FAR HOTELS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) THE appellant is a company incorporated under the Companies Act, 1956, a registered dealer so far as Kerala Value Added Tax (KVAT) and Kerala Tax on Luxuries on the rolls of fourth respondent. The appellant is a V star hotel providing multi cuisine restaurants, rooms for accommodation and various amenities including conference halls, business centre, health club and spa, swimming pool, banquet halls, travel desk, auditorium, etc. The value of the food they supplied at the restaurants, according to the appellant, is on a flat rate so far as buffet system and also on an 'a la Carte' as per the tariff declared in the menu. So far as the use of banquet hall, conference hall and auditorium and other facilities available, which included various amenities like lighting systems, sound systems, screens, etc., chosen at the option of the individuals, independent rentals are charged, which would be arrived at after negotiation between the parties. It is contended that while negotiating such rates, appellant takes in the possible rental for the banquet hall, conference hall or auditorium and also other facilities provided.

(2.) THE accounting system maintained by the appellant provides bifurcation so far as value of food and drink and the rentals charged for the accommodation, etc. as stated above. So far as food and drinks supplied in the hotel, it is taxed under KVAT Act and supply of food and drinks at the conference hall, banquet hall and auditorium is subjected to luxury lax and service tax apart from KVAT. Hence, while declaring its turn over, it adopts a bifurcation by which 25% of the total charges collected for the services offered in the banquet hall, convention centre and auditorium is shown as rent, which is subjected to luxury tax and the rest is shown as charges for food and drinks which is subjected to KVAT.

(3.) LEARNED single Judge interfered with the order of penalty only on the aspect of quantum and directed reconsideration refusing to interfere with inclusion of alleged luxury tax component treated as sale value, which culminated in imposition of penalty. Aggrieved by the same, appellant is before this Court contending that taxation authorities have failed to understand as to how the transaction should be taxed when a transaction comprises of several components; failed to note that every supply of service must normally be regarded as distinct and independent but failed to identify the taxable event in providing the auditorium or conference or banquet hall. Therefore, the taxation authorities have no jurisdiction to consider the entire supply as one transaction, i.e., supply of food.