1981 (1) TMI 235 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of entry 14 of Schedule A to the Bombay Sales Tax Act, 1959.
2. Determination of whether an establishment is primarily conducted for the sale of sweetmeats.

Analysis:

Issue 1: Interpretation of entry 14 of Schedule A
The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, regarding the exemption from sales tax claimed by the respondents for sales under entry 14 of Schedule A. The entry provided an exemption for cooked food and non-alcoholic drinks served at a specific price for consumption at or outside certain establishments not primarily for the sale of sweetmeats. The Court emphasized that sales tax can only be levied on transactions that amount to a sale. Referring to a Supreme Court judgment, it was established that the supply of food by establishments like hotels and restaurants does not constitute a simple sale of goods but a service-oriented transaction. The Court highlighted that the purpose of such establishments is to serve food in a conducive atmosphere, providing various services beyond just the food itself. Therefore, the exemption under entry 14 applies only to transactions that qualify as sales, which must be carefully evaluated based on the nature of the establishment's operations.

Issue 2: Determination of establishment's primary nature
The key issue was whether the respondents' establishment was primarily conducted for the sale of sweetmeats, affecting their eligibility for the exemption under entry 14. The Court outlined the criteria for determining this primary nature, focusing on the predominance of sweetmeat sales across the counter for take-away compared to all other transactions. It was emphasized that if sales of sweetmeats for take-away substantially exceed all other transactions, the establishment could be considered primarily for sweetmeat sales. The Court criticized the Tribunal's narrow approach in remanding the case, stating that a broader evaluation of all transactions, whether sales or services, was necessary to ascertain the primary nature of the establishment. The Tribunal was directed to apply the outlined tests and make a decision in line with the Supreme Court's judgment on sales transactions in such establishments.

In conclusion, the Court found the Tribunal's decision partially correct but directed a more comprehensive evaluation of the establishment's operations to determine its primary nature. The case was remanded for further consideration based on the observations provided, and the costs of the reference were awarded to the respondents.