1. Whether Reporters of local papers may be allowed to see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in Digest? Yes
ORDR.
1. By this common order, we will dispose of all the writ petitions referred above, which involve a common question of law.
2. The petitioner is a Government company, providing services, including catering on board the trains run by Indian Railways, under identical contracts between the petitioner- company and Indian Railways. The petitioner has also sub- leased the contract in respect of some trains to various contractors. The consideration for these services is included in the fare charged by Indian Railways from the passengers and the petitioner-company is paid, by Indian Railways, for what it terms as the services, including catering provided by it to the passengers. The petitioner had in the past been paying VAT, in respect of the services on board the trains, including providing of food and beverages and the tax was paid up to 30th April, 2007.
3. Section 84 of Delhi Value Added Tax Act, 2004, to the extent it is relevant, provides that if any determinable question arises, otherwise than in proceedings before a court, a person may apply in the prescribed manner to the Commissioner for the determination of that question. The determinable question includes as to whether a transaction is or would be a sale.
4. The petitioner sought a determination from the Commissioner of Value Added Tax, under Section 84 of Delhi Value Added Tax Act, 2004 (hereinafter referred to as "the Act") on the taxability to VAT in respect of the food and beverages served to the passengers, on board the trains. The determination was sought on the following questions: "
(1) Whether in the facts and circumstances and the Agreements signed between Indian Railways Catering & Tourism Corporation Limited and the Licensees, the food and beverages provided by the Licensee(s) to the passengers on moving trains for consumption is in the nature of sale/purchase of food and beverages and whether it is liable to tax under the DVAT Act or that under the CST Act in Delhi?
(2) Whether in the facts and circumstances and the Agreements reached between Northern Railways and the Indian Railways Catering & Tourism Corpn. Ltd., providing of food and beverages by the Indian Railways Catering & Tourism Corpn. Ltd. to the passengers during journey on board the running trains for consumption is sale and whether the same is taxable under the DVAT Act; or that under the CST Act in Delhi?
(3) Whether on the request of the Indian Railways Catering & Tourism Corpn. Ltd., the Licensees are required to issue to the Corporation, the "Tax Invoices" in terms of Section 50 of the DVAT Act and the Indian Railways Catering & Tourism Corpn. Ltd. is entitled to claim credit of input tax at the time of working out the output tax payable by it in respect of the sales made by it to the Railways?"
5. Vide Determination Order dated 23.03.2006, the Commissioner of Value Added Tax held that VAT was payable on the services provided on board the trains, since it amounted to sale within the meaning of Section 2(zc)(vii) of the Act. He also took the view that there were three transactions of sale, one from the licensee contractor to the petitioner, the second from the petitioner to the Railways and the third from the Railways to the passengers.
6. In the Determination Order, the Commissioner, inter alia, observed as under:
"Therefore, it comes out to be a clear case of sale/supply of food and beverages first by the Licensee(s)/Caterer(s) to the applicant Corporation, then by the applicant Corporation to the Indian Railways and thereafter, ultimately by the Indian Railways to the passengers on board. To put it in clear words, three sale transactions of food and beverages, first by the Licensee(s)/Caterer(s) to the applicant Corporation, second by the applicant Corporation to the Indian Railways and then the third by the Indian Railways to the passengers on board the running trains are involved in the whole process attracting tax at all stages under the Act. Further, in ease, the suppliers i.e. the Licensee(s)/Caterer(s), the applicant Corporation and then the Indian Railwaysare all located in Delhi, they all are personally liable to collect and pay the value added tax on their sales transactions individually at 12.5% u/s 4(1)(e) of the DVAT Act, 2004 in Delhi. Likewise, if the goods i.e. food and beverages are boarded by the Licensee(s)/Caterer(s) in the trains in Delhi, despite the fact that the Licensee(s) or the Caterer(s) are stationed/located outside Delhi and also the supplies are made by them to the passengers on running trains outside Delhi, the sales shall be treated to be the Local ones attracting tax under the provisions of DVAT Act, 2004."
7. An appeal was filed by the petitioner before the Appellate Tribunal against the determination made by the Commissioner. It was submitted by the petitioner before the Appellate Tribunal that it did not have any grievance against the answers given by the Commissioner to the questions raised by them in their application seeking determination. They, however, objected to the following observations made by the Commissioner:
"However, in case, the first sellers i.e. the Licensee(s) and the Caterer(s) appointed by the applicant Corporation in such a case are located outside Delhi and also board the goods i.e. the raw materials etc. for preparing food and the beverages etc. for supplying them to the passengers on running trains outside the State, then their sales to the applicant Corporation shall be inter-State or say, outside the State while those of the applicant to the Indian Railways local and then again by the Indian Railways to the passengers inter-State attracting tax under the provisions of the DVAT Act, 2004 and the CST Act, 1956respectively. In this eventuality, the tax liability of the Licensee(s)/Caterer(s) shall arise under the CST Act, 1956 in the State in which they board the supplies on the trains. In such a case, the Indian Railways alone and not the applicant Corporation shall be entitled to demand from the applicant Corporation the "Tax Invoice"in term of Section 50 of the Act and then claim the credit of input tax on its basis from the Department. It is held and determined accordingly."
8. The contention before the Tribunal was that when the matter under reference was only with regard to taxability of food and beverages loaded on trains from Delhi, there was no occasion for him to observe regarding the taxability on the sale or purchase of goods taking place outside the State. It was submitted that the observations, regarding taxability of goods on running trains outside the State, was outside the ambit of Determination Order passed by the Commissioner. The Tribunal accepted the contention and quashed the above- referred portion of the Determination Order passed by the Commissioner.
9. The Assessment Order for the year 2007-08 was passed by Value Added Tax Officer (VATO), following the Determination Order passed by the Commissioner of Value Added Tax. A Revision Petition filed by the petitioner against the order was dismissed vide order dated 10.12.2008.
10. Service tax under Section 65(105)(zzt) of the Finance Act, 1994 is being paid by the petitioner in respect of the transactions in question. The petitioner has been advised that there cannot be levy of both, service tax as well as VAT, on the same transaction. It has also been stated in the petition that catering services provided by an outdoor caterer on a train was fully exempt from service tax vide notification dated 10.09.2004, but that notification was rescinded vide subsequent notification dated 01.03.2006, which provides for 50% abatement, to the outdoor caterer. The case of the petitioner is that if the transaction entered into by it is subject to service tax, it cannot be subjected to levy of VAT and vice versa, since one transaction cannot be subjected to levy of both VAT as well as service tax. The submission is that service tax and VAT/sales tax operate in different fields and are mutually exclusive. The petitioner claims that on account of the Determination Order/Assessment Order passed under the DVAT Act, the provisions of Section 2(zc)(vii) of the DVAT Act, 2004 had come into direct conflict with the provisions of Section 65(105)(zzt) of the Finance Act, 1994. It has also been alleged in the petition that the respondents are seeking VAT even in respect of the food and beverages which are not loaded on the trains in Delhi.
11. The petitioner has accordingly sought a declaration that the services, rendered by it on board the trains, are not liable to Value Added Tax and are liable to service tax alone. It has been further prayed that in case it is held that the services provided by the petitioner along with food and beverages, amount to sale of goods, the provisions of Section 65(105) (zzt) of Finance Act, 1994 be declared ultra vires. The petitioner has also sought quashing of the Assessment Order in respect of the year 2007-08 as well as the Determination Order dated 20.03.2006, besides seeking orders restraining the respondents from levying sales tax/VAT on the services provided by the petitioner.
12. The petition has been contested only by respondent No.1-Government of NCT of Delhi and respondent No.2- Commissioner of Value Added Tax. No reply has been filed by respondents 3 to 5. The contesting respondents have taken a preliminary objection that the petitioner can file objections under Section 74 of the DVAT Act in case it is aggrieved from the order passed by the VATO and a further remedy of appeal before the Appellate Tribunal is also available to it against the order of the Objection Hearing Authority.
13. It has been stated in the counter-affidavit that in the appeal filed by the petitioner against the Determination Order passed by the Commissioner of Value added Tax, the Appellate Authority vide order dated 29.08.2006 held that only the food and beverages loaded in trains from Delhi were liable to VAT and the sale and purchase of goods taking place outside Delhi, on the running trains, were outside the ambit of Determination Order passed by the Commissioner of VAT. The order passed by the Tribunal was not challenged by either party and, therefore, has become final. On merits, it has been alleged that the petitioner was receiving consideration from Indian Railways in respect of supply of food and beverages served to the passengers and, therefore, the transaction amounts to sale in terms of Section 2(1)(zc) of the Act. It has also been stated that services provided by the petitioner by employing staff to serve the food and beverages loaded from Delhi was incidental to the business of supply of food, etc. and the invoices, issued by the petitioner, clearly indicate that consideration was being received by it from Indian Railways for sale of food and beverages. It has been further stated that the petitioner itself has admitted raising bills in respect of supply of cooked food, water and newspapers. It has been clarified that no VAT has been demanded in respect of supply of newspapers.
14. Since the order passed by the Tribunal has not been challenged by either party, the dispute before us is confined to payment of VAT in respect of the food and beverages which are loaded on board the trains in Delhi.
15. The procedure adopted for supply of food and beverages to the passengers is that the licensee(s)/caterer(s), who supply the food and beverages to the passengers in the running trains, raise sales bills and invoices in respect of those supplies, in favour of the petitioner-corporation which, in turn, issues a consolidated sale invoice of such supplies in the name of Indian Railways and receives the sale consideration from it.
16. It is an admitted position that the invoices are raised by the petitioner in favour of Indian Railways in respect of three items (a) food; (b) beverages; and (c) newspaper. Admittedly, no VAT is being claimed by the respondents in respect of newspapers. Admittedly, the payment is being taken by the caterers/licensee from the petitioner-company, which raises bills in favour of Indian Railways and takes payment from it. The food is loaded in the trains as per the reservation chart finalized by Indian Railways and communicated to the petition