1987 (5) TMI 365 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to assessment orders for the years 1977-78 and 1978-79 regarding sales tax on food sold in a restaurant.

Analysis:
The petitioners challenged the assessment orders, contending that no sales tax was payable on food sold and consumed in the restaurant. They relied on a Supreme Court decision and a Division Bench judgment of the High Court. The Supreme Court judgment clarified that sales tax is not applicable to food served in restaurants unless the dominant purpose is the sale of food, with services being secondary. The petitioners also highlighted the Constitution (Forty-sixth Amendment) Act, 1982, which introduced Article 366(29A)(f) regarding taxes on the supply of goods as part of a service. This amendment validated the imposition of taxes on certain supplies. The Bihar Finance Act, 1984, incorporated these changes, providing statutory sanction for previously disputed taxes.

The Court acknowledged the legal arguments presented and allowed the writ petitions, quashing the assessment orders in question. The respondent was directed to reconsider the case in line with the law and the Court's observations. No costs were awarded in this matter. The judgment emphasized the impact of the constitutional amendment and subsequent legislative changes on the taxation of food supplies, ultimately leading to the annulment of the challenged assessment orders.