1990 (8) TMI 380 - HC - VAT and Sales Tax

Summary

Issues:
Assessment based on dominant object - Whether transactions are exigible to tax irrespective of tax realization.

Analysis:
The case involved a partnership firm operating a canteen where sweets and tiffins were supplied for payment. The firm contended that the dominant object was service, not sale, thus not exigible to tax under the Orissa Sales Tax Act, 1947. However, the Sales Tax Officer determined that the dominant object was the sale of goods. The Assistant Commissioner and the Tribunal upheld this view, emphasizing that the pricing system indicated a sale rather than a service. The Tribunal differentiated a previous decision and confirmed the assessment based on the dominant object being the sale of food.

The Supreme Court precedent in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi was cited, highlighting that the supply of food in an eating house or restaurant could be considered a sale if the dominant object was the sale of food, with services being incidental. This principle was reiterated in subsequent cases like Piplani Sweets v. Sales Tax Officer and Sagarika Hotel v. Union of India, emphasizing that where the dominant object is the sale of eatables, beverages, or drinks, sales tax is applicable. The Court's role is limited to determining whether the transaction's dominant object is sale or service, with the taxing authority's finding being final.

Regarding the 46th Amendment to the Constitution, it was clarified that the exemption under section 6(2) applies to transactions involving both service and supply of food materials, not to cases where the dominant object is the sale of food. Non-collection of tax does not grant exemption when the dominant object is sale. The dealer's option not to collect tax does not absolve them of liability under section 4 of the Act, which places the tax liability on the dealer. Therefore, the Tribunal was justified in holding that the transactions were subject to tax regardless of tax realization.

In conclusion, the High Court affirmed the Tribunal's decision, stating that the transactions were exigible to tax irrespective of tax realization. The judgment was delivered by Justices S.C. Mohapatra and J.M. Mahapatra, with the reference being answered in the affirmative.