1965 (10) TMI 49 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of entry 14 of Schedule A to the Bombay Sales Tax Act, 1959.
2. Applicability of tax exemption to sales of refreshments served outside the hotel premises.

Issue-wise Detailed Analysis:

1. Interpretation of entry 14 of Schedule A to the Bombay Sales Tax Act, 1959:

The primary issue in this case revolves around the interpretation of entry 14 of Schedule A to the Bombay Sales Tax Act, 1959. The applicants, who run a hotel, served refreshments at the premises of A. V. Parekh Institute and sought a determination on whether these sales were exempt from tax under entry 14 of Schedule A.

Entry 14 of Schedule A states:
"Cooked food and non-alcoholic drinks served at one time at a price of not more than one rupee per person, for consumption at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment which is not a shop or establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries."

The court identified four conditions that must be satisfied for the exemption to apply:
(i) The goods sold must be cooked food and non-alcoholic drinks.
(ii) They must be served at one time at a price of not more than one rupee per person.
(iii) They must be served for consumption and not for sale or any other purpose.
(iv) The service must be for consumption at or outside an eating house, restaurant, hotel, refreshment room, or boarding establishment not falling within the excepted category.

The dispute centered on whether the fourth condition was met, specifically if serving refreshments at the premises of A. V. Parekh Institute could be considered as service "at or outside" the hotel.

The Revenue contended that "at or outside" meant inside, immediately outside, or in the immediate vicinity of the establishment. The applicants argued for a broader interpretation, suggesting it meant anywhere outside the establishment, whether nearby or far away.

The court referred to the rule of construction established in Heydon's case and reaffirmed in Eastman Photographic Material Co. v. Comptroller-General of Patents, Designs and Trade Marks, which allows considering the former Act, the mischief it caused, and the remedy provided by the new Act.

The court examined the legislative history and the corresponding entry 22 of Schedule A in the Bombay Sales Tax Act, 1953, which required consumption "at" the establishment. The Tribunal had previously interpreted "at" to include immediately outside the establishment. However, this caused hardship to owners of eating establishments who could not maintain separate accounts for sales consumed on-premises and those taken away.

The Legislature, while enacting the Bombay Sales Tax Act, 1959, extended the exemption to consumption "at or outside" the establishment to address this issue. The court concluded that interpreting "outside" to mean immediately outside would render the words "or outside" superfluous and contradict the legislative intent to broaden the exemption.

2. Applicability of tax exemption to sales of refreshments served outside the hotel premises:

The court emphasized that the word "outside" should be given its plain natural meaning, implying any place outside the eating establishment. The premises of A. V. Parekh Institute would fall within this interpretation. The court also noted that the legislative objective was to exempt sales of cooked food and non-alcoholic drinks, essential for life, provided they were served at a price not exceeding one rupee per person.

The court found no basis for distinguishing between sales consumed on-premises and those consumed elsewhere, as long as the price condition was met. The broader interpretation aligned with the legislative purpose and avoided unnecessary hardship for eating establishment owners.

Conclusion:

The court held that the exemption under entry 14 of Schedule A applies to sales of cooked food and non-alcoholic drinks served for consumption both at or immediately outside the eating establishment and at any other place outside the establishment. Consequently, the sales made by the applicants to A. V. Parekh Institute were exempt from tax.

Judgment:

The court answered question (a) in the affirmative and question (b) in the negative, indicating that the sales were exempt from tax. The State was ordered to pay the costs of the reference to the applicants.

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