2010 (11) TMI 1130 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Taxability of service charges collected separately in restaurant/coffee house.
3. Applicable tax rate on sales of mineral water and aerated drinks.

Summary:

1. Condonation of Delay in Filing the Appeal:
The appellant/Department sought condonation of delay in filing the appeal against the orders dated 16.10.2008 passed by the Appellate Tribunal, Value Added Tax, Delhi. The delay was attributed to confusion regarding the appropriate remedy'whether to file an appeal u/s 81 of the DVAT Act or a reference application u/s 45(1) of the DST Act. Initially, both remedies were invoked, but the appeal was withdrawn under the bona fide impression that the reference application was more appropriate. The legal clarity was provided by the court in the case of Shiv Shakti Kirana Kendra Vs. Commissioner, VAT, which held that the proper remedy was to file an appeal u/s 81 of the DVAT Act. Consequently, the appellant filed a fresh appeal as permitted by the court. The court condoned the delay, acknowledging the appellant's diligence and the peculiar circumstances.

2. Taxability of Service Charges Collected Separately in Restaurant/Coffee House:
The respondent, a charitable institution, was assessed for sales tax on service charges collected in its restaurant/coffee house. The Assessing Officer included these charges in the sale price, but the Tribunal quashed the demand, accepting the respondent's explanation that the service charges were tips pooled for employees and not part of the sale price. The court upheld the Tribunal's decision, distinguishing between "services" and "service charges." It was noted that the service charges were collected on behalf of the employees and distributed among them, making the respondent a trustee of these amounts. The court found that the service charges did not belong to the respondent and thus were not taxable.

3. Applicable Tax Rate on Sales of Mineral Water and Aerated Drinks:
The dispute was whether mineral water and aerated drinks sold by the respondent were taxable at 7% or 10%. The court noted that the applicable tax rate under the law was 7%. The appellant's contention that the issue was not raised before the first appellate authority was rejected as hypertechnical. The court emphasized that the correct tax rate should be applied, and the issue could be raised before the Tribunal. The court dismissed the appeal, confirming that the tax rate for mineral water and aerated drinks was 7%, as specified in the relevant notification.

Conclusion:
The court allowed the application for condonation of delay, upheld the Tribunal's decision on the non-taxability of service charges, and confirmed the tax rate of 7% for mineral water and aerated drinks. The appeal was dismissed with no order as to costs.