1994 (12) TMI 311 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether deductions made by a hotelier from employees' salaries for the supply of food constitute consideration for the sale of food.

Analysis:
The High Court of Karnataka addressed the issue of whether deductions made by a hotelier from employees' salaries for the supply of food should be considered as a sale of food. The petitioner argued that the deductions were part of the employees' wages and not consideration for the sale of food. The department, however, contended that the deductions were in fact consideration for the supply of food.

The assessing authority determined that the amount deducted for the supply of food to workers was taxable, following a decision by the Karnataka Appellate Tribunal. The Tribunal held that the deductions made by the petitioner from employees' salaries for food constituted sales, as the recoveries were in lieu of the value of food supplied to the workers. The Tribunal emphasized that there was no difference between selling food to workers and selling food to others, noting that the deductions were compulsory and akin to a sale.

The petitioner relied on a decision by the Andhra Pradesh High Court, which held that food supplied by a hotelier to employees was an amenity and not a sale. However, the Government Pleader argued that the deductions were indeed a form of sale, as workers had the option to take food at the hotel or elsewhere, with deductions only applicable if food was consumed at the hotel.

The Court examined the concept of wages under the Minimum Wages Act and a notification issued by the Karnataka Government regarding deductions for food supplied to workers. It was concluded that the deductions were more akin to the deduction of an amenity value rather than payment of wages in the form of food. The Court determined that the deductions were part of the contract of service and not a separate contract of sale of food.

In considering the relationship between master and servant, the Court found that deductions made for food supplied to employees should be treated as part of wages and not a separate sale of food. The Court emphasized that if wages were paid in kind with free meals provided, it would not constitute a sale. Ultimately, the Court allowed the petitions and set aside the orders made by the lower authorities, ruling in favor of the petitioner.