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2000 (11) TMI 1065 - SC - VAT and Sales TaxTransfer of property - Held that - Appeal dismissed. In the present case, when a customer goes to a restaurant and orders food and in respect of which he pays the price indicated therein and the said food items are supplied to him, it would clearly be a case of transfer of property in goods to the customer. Whether the customer eats the entire or part of the dish or chooses not to eat at all would make no difference if he pays for the dishes supplied. The moment the dish is supplied and sale price paid, it would amount to a sale.
Issues Involved:
1. Challenge to the Forty-sixth Amendment to the Constitution. 2. Interpretation of the Delhi Sales Tax Act, 1975, specifically whether sales made in restaurants within hotels are taxable. Detailed Analysis: 1. Challenge to the Forty-sixth Amendment to the Constitution: The appellants initially challenged the Forty-sixth Amendment to the Constitution, which amended the definition of "sale of goods." However, during the proceedings, the appellants did not argue this point. Therefore, the court did not address this issue in detail. 2. Interpretation of the Delhi Sales Tax Act, 1975: The primary contention was whether the sales made in restaurants situated within hotels could be subjected to sales tax under the Delhi Sales Tax Act, 1975. - Provisions of the Delhi Sales Tax Act, 1975: - Section 2(e) ("dealer"): Defines "dealer" to include any person engaged in the business of selling goods in Delhi, including clubs or associations selling goods to their members. - Section 2(g) ("goods"): Includes all movable properties, materials, articles, or commodities, explicitly excluding newspapers, actionable claims, stocks, shares, securities, or money. - Section 2(l) ("sale"): Defines "sale" as any transfer of property in goods for cash, deferred payment, or other valuable consideration, including supply by clubs or associations to their members. - Section 3 (Charging Section): Imposes sales tax on dealers whose turnover exceeds the taxable threshold. - Section 4 (Rate of Tax): Specifies various rates of tax for different categories of goods and services, including: - Section 4(1)(c): Tax on food or drink served in hotels or restaurants with cabaret or similar entertainment. - Section 4(1)(d): Tax on other goods not specified in the previous sections. Arguments and Court's Reasoning: - Appellants' Argument: The appellants, relying on the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386; (1978) 4 SCC 36, argued that meals served in a hotel restaurant to non-residents do not constitute a sale of foodstuffs, and thus, no sales tax could be levied. - Court's Analysis: The court distinguished the present case from Northern India Caterers' case, noting that the latter dealt with the Bengal Finance (Sales Tax) Act, 1941, not the Delhi Sales Tax Act, 1975. The court emphasized that the definitions in the 1975 Act, particularly sections 2(e), 2(g), and 2(l), clearly include food served in a restaurant as "goods" and the transfer of property in these goods as a "sale." - Section 4(1)(c) Interpretation: The court rejected the appellants' contention that section 4(1)(c) only applies to hotels or restaurants with cabaret or similar entertainment. The court reasoned that if no sale occurred in a restaurant, as argued by the appellants, section 4(1)(c) would be rendered meaningless. The court clarified that food and drink served in any hotel or restaurant are taxable, with section 4(1)(c) specifying a higher rate for establishments with entertainment and section 4(1)(d) applying to others. Conclusion: The court concluded that food and drink served in a restaurant within a hotel fall under the definition of "goods" and their supply constitutes a "sale" under the Delhi Sales Tax Act, 1975. Consequently, such transactions are subject to sales tax. The appeal was dismissed with costs. Final Judgment: The appeal was dismissed, affirming the applicability of sales tax on food and drink served in hotel restaurants under the Delhi Sales Tax Act, 1975.
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