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1988 (3) TMI 417 - HC - VAT and Sales Tax
Issues:
Assessment of sales tax on food and beverages under the Orissa Sales Tax Act for specific years based on the dominant object of the transaction. Analysis: The judgment dealt with writ petitions concerning the assessment of sales tax on food and beverages by two petitioners under the Orissa Sales Tax Act. The assessing officer contended that the petitioners were liable for sales tax based on the decision in a previous case. However, the petitioners argued that after the Constitution (46th Amendment) Act, 1982, the turnover of sale of food and beverages was not subject to sales tax. The court referred to a previous decision in Sagarika Hotel v. Union of India, where it was established that the dominant object of the transaction determines the tax liability. The court reiterated the legal proposition that if the sale of food is the dominant object, the transaction is liable for sales tax. The court emphasized the need for the taxing authority to examine the facts to ascertain whether the dominant object was service or sale. The court highlighted the importance of differentiating between transactions where the dominant object is service and those where it is the sale of food, eatables, beverages, and drinks. The assessing officers were criticized for not considering this distinction and not examining whether the petitioners sold food packets and parcels to outsiders. As a result, the court remanded the cases for a fresh examination of the petitioners' accounts to determine the dominant object of the transactions. In conclusion, the court allowed the writ petitions, quashed the assessment orders, and remanded the cases to the Sales Tax Officer for reassessment according to law. The assessing officer was directed to determine whether the petitioners' dominant object was service or sale and to assess sales tax accordingly. The court emphasized that if the petitioners sold food items in packets and parcels to outsiders, such turnover would be subject to sales tax. The judgment was a unanimous decision, with both judges concurring on allowing the writ petitions and remanding the cases for reassessment.
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