Entire ‘Entry Coupon’ adjusted against Food is liable to VAT: Rajasthan HC maintains Penalty on Chokhi Dhani Resorts [Read Order]

While entertaining the Sales Tax Revision (STR) filed by the revenue department, the Rajasthan High Court maintained the penalty imposed on the Chokhi Dhani Resorts. Also quashed the order of the tax board issued in favour of the resort.

A Single bench of Justice Sameer Jain observed that the entire entry coupon provided by the Chokhi Dhani Resorts in the gate adjusted against the food is liable to Value Added Tax (VAT).

The counsel of the revenue submitted that the entry coupon is charged at Rs. 350 per adult and Rs. 175 per minor. The said charge, as per the entry coupon, is only adjustable against food.

However, the assessee was only paying VAT on Rs. 250 (in case of adults) or Rs. 125 (in case of children) and the remaining amount, i.e. Rs. 100 (in case of adults) and Rs. 50 (in case of children) was reflected separately in the assessee’s books of accounts under the head ‘Charges for generation of Cultural Receipts, Staff, Maintenance, Adm. Expenses’ and no VAT was being paid on the same.

Further added that the Deputy Commissioner (Appeal), maintained the levy of tax and interest but deleted the penalty imposed under Section 61 of Rajasthan Value Added Tax Act (RVAT). Thereafter, the Tax Board allowed the appeal filed by the assessee and set aside the levy of tax and interest also.

The Revenue has also emphasized the fact that the assessee was not issuing invoices to the customers in the regular course of business and only issued the invoices when the customer specifically demanded it.

Conversely, the counsel of the assessee contended that the entire case of the revenue proceeds on a wrong factual premise that the coupons were issued in lieu of invoice. The coupons were issued merely for administrative convenience of the assessee and the assessee was always issuing invoices/bills/receipts separately.

Additionally stated that mere mentioning of the term ‘adjustable in food only’ in such coupons is not conclusive and cannot be read in isolation and such a phrase was only used to avoid any possibility of misuse by a customer towards another chargeable entertainment activity.

The bench observing the definition of Sale and Sale Price under RVAT stated that the assessee cannot split up the amount charged for the sale of food, even if assessee provides certain services in addition to the food, and VAT has to be paid on the entire consideration charged for the food.

Also noted that the contention of the assessee that as per aspect theory, the dominant supply was of supply of entertainment/service is also untenable for the following reason:

1. Because it is an admitted position that no one is allowed entry if they only want to have cultural experience, an entry coupon which is adjustable only against food is a must.
2. Because the assessee is charging separately for the services provided inside the premises.
3. Because as the bifurcation of the amount charged for entry coupon, done by the assessee itself, majority of the charge was for supply of food.

In addition to the above reasons to the observations of the bench, it was held that VAT is applicable on whole entry coupons. Thus, set aside and quashed the impugned order of the tax board and maintained the penalty imposed.

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