1980 (6) TMI 112 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax liability on turnover of food and drinks supplied by a hotel, applicability of the judgment in Northern India Caterers case, distinction between sale and service in the context of food supply.

Analysis:
The judgment pertains to two sales tax revision petitions involving the assessment of tax on the turnover of food and drinks supplied by a hotel. The respondent, a hotel in Kolar, was assessed for the turnover of food and drinks served to visitors, including transactions at its branch. The respondent relied on the Supreme Court judgment in Northern India Caterers case, arguing that the supply of food accompanied by service does not constitute a sale. The Karnataka Appellate Tribunal accepted this argument, leading to the State filing revision petitions challenging the Tribunal's decision.

The primary issue before the High Court was whether the supply of food and drinks by the hotel constituted a sale or a service. The Court examined the findings of the Appellate Tribunal and the question of law raised in the revision petition. The Tribunal had held that the supply of refreshments in a restaurant for consumption by visitors is part of the service and not a sale, citing the Northern India Caterers judgment. The Court agreed with the Tribunal's interpretation, stating that the supply of food and drinks by the hotel was in the nature of service and not sale, in line with the precedent set by the Northern India Caterers case.

The State contended that a subsequent judgment in the Northern India Caterers case review petition altered the applicability of the main judgment. However, the Court clarified that the review judgment emphasized that sales tax would apply when the dominant object of the transaction is the sale of food, with services being incidental. Since the hotel in question primarily served food and drinks to visitors for consumption on the premises, similar to the situation in the Northern India Caterers case, the Court upheld the Tribunal's decision based on the main judgment.

Ultimately, the High Court dismissed the revision petitions, ruling in favor of the respondent hotel. The Court concluded that the transactions involving the supply of food and drinks by the hotel were deemed to be in the nature of service and not sale, in accordance with the Northern India Caterers judgment. No costs were awarded in the matter, and the petitions were dismissed.