1. These three revisions are directed against the common order of the Karnataka Appellate Tribunal, Bangalore, dated August 29, 1977 made in S.T.A. Nos. 474, 475 and 476 of 1976.
2. The Petitioner assessee is running a Luxury Hotel called 'Moti Mahal' in Mangalore. The assessee has collected what is termed as "Service Charges" at 5 percent from the customers on the room rent and also on the value of food supplied. The assessee filed returns for the assessment years 1971, 1972 and 1973 claiming exemption of that service charges from the taxable turnover.
3. The common question raised for decision is whether the service charges collected by the assessee from the customers form part of the turnover as defined under Section 2(l)(v) of the Karnataka Sales Tax Act. 1957 ('the Act') and if so, whether the assessee would be entitled to deduction of that charges under Rule 6 (4) (ff) of the Karnataka Sales Tax Rules 1957 ('The Rules').
4. The Commercial Tax Officer allowed the assessee's claim for deduction in regard to the service charges collected on room rent. But so far as the service charges collected on the supply of food are concerned, he took the view that it should be considered as part of the sale consideration.
5. Aggrieved by the order of the Commercial Tax Officer, the assessee took up the matter in appeal before the Deputy Commissioner of Commercial Taxes (Appeals) Mangalore, who dismissed the appeal confirming the order of assessment.
6. The assessee then took up the matter in further appeal before the Karnataka Appellate Tribunal. It was contended before the Tribunal that having regard to the circumstances of the case, the service charges collected by the assessee on the value of the food supplied to customers cannot be regarded as part of the sale consideration. It was also contended before the Tribunal that what was collected by way of service charges was only towards labour charges and therefore, it should be exempted under Rule 6 (4) (ff) of the Rules. But the Tribunal rejected both the contentions. The Tribunal in support of its conclusion mainly relied upon the decision of the Bombay High Court in Sun-N-Sand Hotel (P) Ltd.-v.-The State of Maharashtra, 23. S.T.C. 507.
7. In these Revision Petitions Mr. S. P. Bhat, Learned Counsel for the Petitioner submitted that the decision of the Bombay High Court in Sun-N-Sand Hotel's case and the decision of the Andhra Pradesh High Court in Poosarla Sambamurthi's case, 7 S.T.C. 652 are no longer good law in view of the decision of the Supreme Court in Commissioner of Income Tax (Central) New Delhi -v.- Bijli Cotton Mills (P) Ltd, 116 I.T.R. 60.
8. We do not think that the contention of Mr. Bhat is sound. Similar contention urged in The State of Karnataka -v.- Dada & Co., 55 S.T.C. 367 has been rejected by his Court stating that the Supreme Court in Bijli Cotton Mill's Case bad expressly left open the correctness of the view taken by the Andhra Pradesh High Court in Poosarla Sambamurthi's case and the similar view taken by the Madras High Court in N.S. Pandaria Pillai -v.- The State of Madras, 31 S.T.C. 108. This is clear from the following observations of the Suprems Court in Bijli Cotton Mills case at page 74 :
"Ihe two decisions on which reliance was placed by counsel for the revenue, namely, Poosarla Sambamurthi's case (1956 7 STC 652-AP) and Pandaria Pillai's case (1973-31 STC 108-Mad) are clearly distinguishable and inapplicable to the facts of this case in as much as both the decisions were rendered under Sales Tax legislation where the question that was required to be considered was whether the realisations for dharmam (Charitable purpose) in the former case or mahimai (religious purpose) in the latter case would fall within the definition of 'turnover' as contained in the concerned legislation and it was held that such realisations were includable in the assessee's turnover. We do not wish to express any opinion on the correctness of these decisions. Suffice it to state that the ratio of these decisions cannot apply to the instant case."
9. The Bombay High Court while considering the scope of the definition of 'sale price' under Section 2(29) of the Bombay Sales Tax Act (51 of 1959) has held that the service charges collected from the customers should form part of the sale price. It was observed at page 510 :-
"-....In the case of service charges, the customers have no option but to pay these charges when demanded by the asscssee, irrespective of the fact whether the employees were serviceable or had rendered useful service. In as much as in the case of demand for tips, it is entirely a voluntary payment, the customer may or may not pay a tip to the particular servant who attends on him according as he is satisfied with the service of that particular employee or not. The Tribunal has also pointed out that the service charges of 10 per cent for the services rendered are for the execution of the order that is placed by the customer. In other words, the service charges are entirely dependant on the food consumed by the customer after placing an order. It is because there is a sale of the food ordered by the customer that the service charges are collected; it is because the price of the food and service charges are inseparably wedded together that it is not possible to view one without the other. In other words, service charges had no independent existence of their own. So far as the customer is conscerned and for all practical purposes, the price of the food ordered by the customer is required to pay what is stated as Tariff plus 10 per cent, over and above that tariff, then the price, so far as the customer is concerned, for the food supplied and served to him in the establishment will be the total amount of the bill that is charged including the so-called service charges........."
It may be stated that the definition of ' sale price' under Section 2 (29) of the Bombay Sales Tax Act (51 of 1959) is similar to the definition of ' turnover' under Section 2(l)(v) the Karnataka Sales Tax Act (excluding the explanation (ii)
10. Section 2(1)(v) of the Karnataka Sales Tax Act reads:
"Turnover" means the aggregate amount for which goods are bought or sold, or supplied or distributed by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration."
Explanation :-- Subject to such condition and restrictions, if any, as may be prescribed, in this behalf--
(i) xx xx (Omitted by Act 7 of 1966)
(ii) the amount for which goods are sold include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof.
(iii) and (iv) omitted xx xx."
Explanation (ii) referred to above takes within its fold any sum charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof. 'Service Charges' in our opinion, therefore, squarely and fairly falls within this explanation since it was charged and collected by the assessees for supplying the articles from the kitchen to the dining table.
11. In Poosarla Sambamurthi's case the Andhra Pradesh High Court while considering the scope of similar provision under the Madras General Sales Tax Act (IX of 1939 as amended by Andhra Amendment Act of 1954) has held that the consideration for the sale or purchase of goods includes any sums charged by the dealer for any thing done in respect of the goods sold at the time of or before delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object.
It is necessary to state that the definition of 'turnover' in Section 2(i) of the Madras General Sales Tax Act (IX of 1939 as amended by Andhra Amendment Act of 1954) is similar to the definition of 'turnover' under Section 2(l)(v) of the Karnataka Sales Tax Act. The ratio of the decision of the Bombay High Court in Sun-n-Saud Hotel's Case and the decision of the Andhra Pradesh High Court in Poosarla Sambamurthi's case are clearly, therefore, applicable to the facts of the present case.
12. In N. S. Pandaria Pillai's case the Madras High Court while dealing with a corresponding provision, viz., Section 2(r) of the Tamil Nadu General Sales Tax Act (I of 1959) has observed that if the mahimai collection made formed part of the aggregate amount for which the goods are sold by the assessee, it will come under the definition of 'turn over' unless there is any specific statutory deduction available either under the Act or under the Rules.
13. The next question for consideration is, whether the assessee is entitled to deduct the service charges under Rule 6 (4) (ff) of the Rules. The authorities below have rejected this claim solely on the ground that the service charges form part of the price. In our opinion, this question could be conveniently disposed of by a simpler reasoning. Rule 6 (4) (ff) provides :--
"all amounts falling under the head 'charges for packing materials and cost of labour' .........."
It means that all the amounts falling under the head 'charges for packing materials and cost of labour' are entitled to be deducted from the total turnover.
We do not think that the said Rule has got any application to this case. The service charges collected by the asses-see from the customers were not towards 'packing materials and cost of labour'. The cost of labour referred to in Rule 6 (4) (ff) is in relation to the packing involved and not independent of it since both the expressions are clubbed together and put within the inverted comma as 'charges for packing materials and cost of labour '.
We are, therefore, of the opinion that the assessee is also not entitled to the deduction claimed under Rule 6(4)(ff) of the Rules.
In the result, these Revision Petitions fail and are dismissed.