1991 (9) TMI 327 - HC - VAT and Sales Tax

Issues Involved:
1. Scope and ambit of section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982, vis-a-vis the Orissa Sales Tax Act, 1947.
2. Taxability of supply of food in restaurants or eating houses.
3. Dominant object of the transaction: sale of food vs. package of services.
4. Exemption under section 6(2)(a) of the Amendment Act.
5. Burden of proof on the assessee regarding non-collection of tax.

Issue-wise Detailed Analysis:

1. Scope and Ambit of Section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982, vis-a-vis the Orissa Sales Tax Act, 1947:
The judgment examines the applicability of section 6(2) of the Amendment Act in relation to the Orissa Sales Tax Act, 1947. The Amendment Act aimed to nullify the effect of certain Supreme Court decisions that had held that the service of meals in hotels and restaurants did not constitute a sale for the purpose of sales tax. Section 6(2) provides exemption for supplies made between 7th September 1978 and 2nd February 1983, provided no tax was collected during this period.

2. Taxability of Supply of Food in Restaurants or Eating Houses:
The historical background of the levy of tax on the supply of food and service of meals is discussed, referencing various Supreme Court decisions. In State of Himachal Pradesh v. Associated Hotels of India Ltd. and Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, it was held that the supply of food in a hotel or restaurant was essentially a service and not a sale. However, the Amendment Act was enacted to nullify these decisions, making such supplies taxable.

3. Dominant Object of the Transaction: Sale of Food vs. Package of Services:
The judgment emphasizes that the dominant object of the transaction determines its taxability. If the dominant object is the sale of food, the transaction is taxable. Conversely, if the dominant object is the provision of services, the transaction is exempt. This principle was reiterated in Northern India Caterers' cases, where it was held that the substance of the transaction and the dominant object must be considered.

4. Exemption under Section 6(2)(a) of the Amendment Act:
Section 6(2)(a) provides exemption for supplies made between 7th September 1978 and 2nd February 1983, provided no tax was collected during this period. The judgment clarifies that the exemption applies only if the assessee can prove that the dominant object of the transaction was the provision of services and not the sale of food. The burden of proof lies on the assessee to establish that no tax was collected because the transactions were not taxable at that time.

5. Burden of Proof on the Assessee Regarding Non-collection of Tax:
The judgment places the burden of proof on the assessee to demonstrate that no tax was collected during the relevant period. The assessee must establish that the dominant object of the transactions was the provision of services and not the sale of food. If the assessing authority is satisfied that the dominant object was the provision of services, it must then investigate whether tax was actually collected.

Conclusion:
The judgment concludes that there is no conflict between the Supreme Court's decision in Shri Krishna Enterprises and the decisions of the Orissa High Court in Piplani Sweets, Sagarika Hotel, and Prince Hotel. It reiterates that transactions where the dominant object was the sale of food were taxable all through, and the assessing authority must determine the dominant object of the transaction. The judgment also emphasizes that the burden of proof lies on the assessee to show that no tax was collected during the relevant period to claim exemption under section 6(2)(a) of the Amendment Act. The reference is answered accordingly.

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