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TMI Blog2016 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... a subject of VAT, that the dealer is subjected to actual levy and collection at a higher threshold is a matter of detail. The levy exists per se by legal definition. It is this aspect which is crucial rather than the existence of higher or lower threshold as is urged by the revenue - Rule 3 (2) (b) (ii) is ultra vires - appeal allowed - decided in favor of appellant. - W. P. (C) 297/2013 - - - Dated:- 6-10-2016 - S. Ravindra Bhat And Deepa Sharma, JJ. For the Petitioner : Mr.Ruchir Bhatia, Advocate For the Respondents : Mr.Pankaj Sinha and Ms.Richa Singh, Advocates , Mr.Satyakam, ASC, GNCTD with Mr.Ashok Kumar, AVATO, Mr.Sanjeev Narula, Sr.Standing Counsel with Mr.Abhishek Ghai, Adv. ORDER Mr. Justices. Ravindra Bhat (Open Court) 1. The petitioner in this proceeding under Article 226 of the Constitution challenges the vires of Rule 3 (2) (b) (ii) of the Delhi Tax on Luxury Rules, 1996. The petitioner is an association of Banquet Hall Owners. According to its pleadings a large majority of its members are registered dealers under the Delhi VAT Act, 2004. The existing VAT regime in Delhi requires dealers who report return of an annual turnover of more than &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to luxury tax. It is submitted that in effect Rule 3 (2) (b) (i) and (ii) constitute dimensions of the mechanism for recovery of luxury tax and cannot be per se characterised as ultravires. 3. The revenue elaborates that the impugned rule only clarifies the peculiar situation where a consolidated bill is charged by banquet halls. It only provides a method for bifurcation of the bill by treating 60% of the turnover of receipts as a luxury component. The revenue relies upon a decision of the Kerala High Court in M Far Hotels Ltd. v. State of Kerala, decided on 20.12.2013 in WP(C).30399/2009, which held that where the appellant is not collecting separate rental charges, a similar rule by fiction of law took care of the situation to enable the collection of a certain percentage of the total amount charged. The revenue further relies upon the judgment of the Supreme Court in Kunj Behari Lal Butail and Ors.v. State of H.P. and Ors., AIR 2000 SC 1069 to say that as long as the power to legislate exists, the adoption of a particular mode or method for recovery of the tax cannot be characterised as illegal. It is also submitted that the judgment in Federation of Hotels Restaurant Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 3 (4) relates to luxury provided in a hotel; and Section 3 (5) relevant for the purpose of this litigation provides as under: The tax shall not be levied and payable in respect of turnover of receipts for supply of food, drinks and goods such as cosmetics, medicines, nutritional supplements etc. on the sale of which the proprietor is liable to pay tax under the Delhi Value Added Tax Act, 2005. Sections 3 4 obliged the proprietor and firm as a case given the nature of activity in the ownership thereof, subjects proprietor and firm to the levy of Luxury Tax. 8. Rule 3 of the Luxuries Act reads as follow: 3. Incidence of levy of tax and maintenance of accounts (1) The proprietor shall be liable for collection and payment of tax for luxury as defined under clause (i) of Section 2 of the Act, provided at the establishment to a customer either directly or indirectly through any person or agency. (2) The tax shall be levied and collected by a proprietor- (a) in respect of luxury provided in the establishment (other than banquet hall) on the tariff rate, (b) in respect of luxury provided in a banquet hall in the manner prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this present instance the provision Section 3(5) embodies an important and salient principle i.e. excludes all those items for luxury which were also subjected to DVAT levy. 10. The argument of the revenue is that Rule 3 (2) (b) (ii) only supplements and does not in any manner undermine the principle contained in Section (3) (5) of the Act. This court is unpersuaded by the submission. One of the submissions made by the revenue is that the component of luxury includes the hiring of the property in the present instance i.e. banquet halls. In order to support its argument that the impugned rule cannot be held to be ultravires, reliance is placed upon the judgment of Kerala High Court in M Far Hotels Ltd. s (supra). This court is of the opinion that that ruling is inapplicable because a plain reading of Rule 3C of the Kerala Rules brings out the circumstance that there was no separate provision for luxury to the extent dealt with hiring out of premises. In the present case, there is however, a separate provision by way of Rule 3 (2) (b) (i). The petitioners do not dispute that. Furthermore and more crucially the Kerala judgment of M Far Hotels Ltd. s (supra) or the discussion by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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