1989 (9) TMI 353 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the transaction (sale vs. service).
2. Applicability of sales tax under the Bengal Finance (Sales Tax) Act, 1941.
3. Retrospective application of the Forty-sixth Amendment of the Constitution.
4. Exemption under section 26A of the BFST Act.

Issue-wise Detailed Analysis:

1. Nature of the Transaction (Sale vs. Service):
The primary contention by the petitioner was that the supply of cooked food and related services under a contract did not constitute a sale of goods. The petitioner argued that the charges were for services and the supply of food was incidental. The respondents countered, asserting that the supply of food was essentially a sale, with services being incidental. The Tribunal referenced Supreme Court decisions, including *State of Himachal Pradesh v. Associated Hotels of India Limited* and *Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi*, which discussed the indivisibility of transactions involving supply of food and services. The Tribunal concluded that the supply of food by the petitioner amounted to a sale, fitting within the definition of "sale" as amended by the Forty-sixth Amendment.

2. Applicability of Sales Tax under the Bengal Finance (Sales Tax) Act, 1941:
The petitioner argued that the supply of cooked food did not fall under the definition of "sale" as per section 2(g) of the BFST Act, 1941, and hence was not liable for sales tax. The respondents maintained that the transactions were sales and taxable. The Tribunal noted the amendments to the definition of "sale" under the BFST Act, which included the supply of food as part of any service. It held that the supply of food by the petitioner was taxable under the BFST Act, as the amended definition included such transactions.

3. Retrospective Application of the Forty-sixth Amendment of the Constitution:
The petitioner contended that the amendment to section 2(g) of the BFST Act did not have retrospective effect. The Tribunal disagreed, stating that the validation clause in section 26A of the BFST Act provided retrospective effect to the amendment. The Tribunal emphasized that retrospective operation was indicated through the validation clause, making the amendment applicable to past transactions.

4. Exemption under Section 26A of the BFST Act:
The petitioner sought exemption under section 26A(2) of the BFST Act, arguing that no sales tax was collected during the relevant period. The Tribunal examined the exemption clauses, noting that clause (b) applied to supplies not made by restaurants or eating houses. The Tribunal determined that the petitioner's case fell under clause (b) and was eligible for exemption from 4th January 1972 to the commencement of the West Bengal Taxation Laws (Second Amendment) Act, 1983, provided the petitioner could prove that no tax was collected during that period. The burden of proof lay on the petitioner to demonstrate that no tax was collected.

Conclusion:
The Tribunal concluded that the supply of food by the petitioner was taxable but allowed for the possibility of exemption under section 26A(2) of the BFST Act, subject to the petitioner proving that no tax was collected during the specified period. The assessing authority was directed to revise the completed assessments from 1972 onwards and dispose of pending assessments in accordance with the law and the Tribunal's observations, after giving the petitioner an opportunity to be heard. The interim order was vacated, and no order for costs was made.