1994 (8) TMI 271 - HC - VAT and Sales Tax

Issues Involved:

1. Legality of the assessment orders levying sales tax on the sale of eatables in hotels/restaurants.
2. Validity of the circular issued by the Commissioner, Commercial Taxes, Rajasthan.
3. Applicability of the Constitution (Forty-sixth Amendment) Act, 1982.
4. Interpretation of the term "sale" under the Rajasthan Sales Tax Act, 1954.
5. Availability of alternate remedies and maintainability of the writ petition.
6. Retrospective application of the amended definition of "sale."

Issue-wise Detailed Analysis:

1. Legality of the assessment orders levying sales tax on the sale of eatables in hotels/restaurants:

The petitioner-respondent, running a restaurant business, challenged the assessment orders levying sales tax on the sale of eatables within the restaurant premises. The learned single Judge quashed these assessment orders, referencing the earlier decision in Rambagh Hotels Pvt. Ltd. v. Commercial Taxes Officer [1990] 78 STC 35, which held that the Constitution (Forty-sixth Amendment) Act merely validates earlier laws levying tax on the supply of food and drink but does not authorize future levies without amending the State Act.

2. Validity of the circular issued by the Commissioner, Commercial Taxes, Rajasthan:

The circular dated September 7, 1983, issued by the Commissioner, directed officers to levy and collect taxes from hoteliers and restaurateurs treating the service or supplies made by them as sales. The petitioner contended that the Commissioner could not levy and collect sales tax via an executive order without legislative amendment. The respondents argued that the amendment in the Rajasthan Sales Tax Act aligned with the Constitution (Forty-sixth Amendment) Act, 1982, thus validating the circular.

3. Applicability of the Constitution (Forty-sixth Amendment) Act, 1982:

The Forty-sixth Amendment introduced clause (29A) to article 366 of the Constitution, expanding the definition of "tax on the sale or purchase of goods" to include the supply of food and drink. The respondents argued that this amendment justified the assessment orders. The petitioner countered that the amendment did not apply retrospectively to periods before its enactment.

4. Interpretation of the term "sale" under the Rajasthan Sales Tax Act, 1954:

The term "sale" was redefined to include transactions involving the supply of food and drink by hoteliers and restaurateurs. The learned single Judge held that without amending the State Act post the Forty-sixth Amendment, the levy of sales tax on such transactions was unauthorized. The respondents contended that the definition in the State Act was in line with the constitutional amendment, thus validating the tax.

5. Availability of alternate remedies and maintainability of the writ petition:

The respondents raised a preliminary objection regarding the availability of alternate remedies, arguing that the writ petition should be dismissed as not maintainable. The petitioner maintained that the State Legislature had not amended the definition of "sale" in the Rajasthan Sales Tax Act, thus challenging the validity of the assessment orders directly through a writ petition.

6. Retrospective application of the amended definition of "sale":

The petitioner argued that the definition of "sale" had not been substituted from February 2, 1983, and could not be applied retrospectively. The learned single Judge agreed, stating that tax was leviable under new provisions only from the date they were introduced, not from the date of the constitutional amendment.

Conclusion:

The High Court set aside the impugned order of the learned single Judge, remanding the matters back to the assessing authority to determine whether the supply of food or other articles in each case was dominantly part of service or sale. This determination must be made in light of the review judgment in Northern India Caterers (India) Ltd.'s case [1980] 45 STC 212 and other relevant case law. The parties were directed to appear before the concerned assessing authority by September 30, 1994, for a fresh decision.

Appeal allowed.

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