1970 (3) TMI 120 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the assessee-company is liable to be assessed under the Orissa Sales Tax Act for providing food to its residents.
2. Whether the supply of food by the company to its residents constitutes a sale of goods under the Orissa Sales Tax Act.

Analysis:
The case involved a hotelier, registered under the Orissa Sales Tax Act, providing lodging and boarding services to customers. The hotel charged a composite fee for accommodation, food, linen, and other services. The issue was whether the supply of food to residents who did not have a separate agreement for food constituted a "sale" under the Act. The definition of "sale" under section 2(g) of the Act was crucial, requiring a transfer of property in goods for consideration. The agreement between the hotelier and boarders did not have a separate clause for the sale of food. The food supply was an integral part of the overall service agreement, with no separate pricing or rights for the food provided. Customers could not claim rebates for unused food or transfer it elsewhere, indicating an indivisible contract.

The Tribunal had initially rejected the hotelier's argument based on Rule 90 of the Orissa Sales Tax Rules, which imposed a tax on the annual turnover of sales for establishments selling meals separately. However, the Court found that Rule 90 did not apply to the hotel's situation, as the supply of food was not done separately but as part of a comprehensive service agreement. The Court cited a similar decision by the Punjab High Court, where it was held that the supply of food as an integral part of an agreement did not constitute a sale. The Court concluded that the supply of food to residents without a separate agreement for food did not amount to a sale under the Orissa Sales Tax Act.

The Court answered the first question in the negative, indicating that the supply of food to residents was not liable to be assessed under the Act. The second question was deemed irrelevant as it overlapped with the first question. The references were accepted without costs, and the dealer was entitled to a refund of the reference fees. Both judges concurred with the decision, and the references were answered accordingly.