1995 (2) TMI 376 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the service of food in the various eating rooms was a sale under section 2(28) of the Bombay Sales Tax Act, 1959.
2. Whether only 50% of the receipts for the service of food were liable to tax.
3. Whether the service of food was incidental to the services and amenities offered.
4. Whether there were two implied contracts: one for environment and amenities and the other for food.
5. Whether the department discharged the burden of proving that the service of food was a taxable transaction.

Detailed Analysis:

Issue 1: Whether the service of food in the various eating rooms was a sale under section 2(28) of the Bombay Sales Tax Act, 1959.

The court held that the service of food in the various eating rooms of the applicants was indeed a sale as defined in section 2(28) of the Bombay Sales Tax Act, 1959, and was liable to tax. This conclusion was supported by the precedent set in Yogi Restaurant v. Commissioner of Sales Tax [1991] 83 STC 122 and Naranga Hotels Private Ltd. v. Union of India [1994] 94 STC 5. Thus, the court answered this question in the affirmative and in favor of the Revenue.

Issue 2: Whether only 50% of the receipts for the service of food were liable to tax.

The court rejected the assessee's contention that only 50% of the receipts should be considered for tax, arguing that the entire amount paid by the customer was for the food and drinks, without any separable component for amenities or environment. The court emphasized that the "sale price" under section 2(29) of the Act includes the total consideration paid by the purchaser for the goods, irrespective of how the price is composed. The court cited the Supreme Court decision in McDowell & Co. v. Commercial Tax Officer [1985] 59 STC 277, which held that the entire amount paid by the purchaser constitutes the sale price. Therefore, the court answered this question in the negative and in favor of the Revenue.

Issue 3: Whether the service of food was incidental to the services and amenities offered.

The court concluded that the service of food was not incidental to the services and amenities offered to the customers. This conclusion was also supported by the precedent set in Yogi Restaurant v. Commissioner of Sales Tax [1991] 83 STC 122 and Naranga Hotels Private Ltd. v. Union of India [1994] 94 STC 5. Thus, the court answered this question in the affirmative and in favor of the Revenue.

Issue 4: Whether there were two implied contracts: one for environment and amenities and the other for food.

The court found no merit in the argument that there were two implied contracts. The court stated that the contract between the assessee and its customers was an indivisible contract for the supply of food and drinks for an all-inclusive price. The court referred to the decision in Sun-N-Sand Hotel P. Ltd. v. State of Maharashtra [1969] 23 STC 507, which held that service charges inseparably mixed with the total amount paid by the customer constituted the sale price. Therefore, the court answered this question in the negative and in favor of the Revenue.

Issue 5: Whether the department discharged the burden of proving that the service of food was a taxable transaction.

The court held that the department had indeed discharged the burden of proving that the service of food by the applicants in the various eating rooms was a taxable transaction under the Bombay Sales Tax Act, 1959. This conclusion was also supported by the precedent set in Yogi Restaurant v. Commissioner of Sales Tax [1991] 83 STC 122 and Naranga Hotels Private Ltd. v. Union of India [1994] 94 STC 5. Thus, the court answered this question in the affirmative and in favor of the Revenue.

Conclusion:
The court answered questions 1, 3, and 5 in the affirmative and in favor of the Revenue, and questions 2 and 4 in the negative and in favor of the Revenue. The reference was disposed of accordingly, with no order as to costs.