1997 (5) TMI 401 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of U.P. Sales Tax Act, 1948 regarding the taxation of supplies of food and drinks as sale or service.

Analysis:
The judgment involved three revision petitions under section 11 of the U.P. Sales Tax Act, 1948, challenging a common order by the Sales Tax Tribunal regarding the assessment years 1978-79, 1979-80, and 1980-81. The dealer, running a residential hotel and restaurant, claimed that the supply of food and drinks was a service, not sales. The Tribunal held that the dominant object was the sale of goods, making the entire turnover taxable. The dealer cited the Supreme Court case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, emphasizing that the nature of the transaction determines tax liability. The Tribunal found that the dealer's activity was akin to a regular eating house, with sales tax charged from customers, indicating a perception of sale of goods. The Tribunal's finding was upheld, dismissing the revision petitions.

The legal position, as established by the Supreme Court, emphasizes determining the dominant object in a transaction to ascertain if it constitutes a sale or service. The Tribunal's analysis of the evidence led to the conclusion that the dealer's primary objective was the sale of goods. The judgment cited previous cases where the nature of the business and the customer's right to take away food influenced the classification of the activity as sale or service. The Tribunal's detailed examination, including the profit structure, service charges, and sales tax collection, supported the finding that the dealer's activity aligned with the sale of goods. The Tribunal's independence in evaluating the facts for the specific assessment years was highlighted, reinforcing the validity of its decision in the absence of legal flaws.

In conclusion, the Tribunal's determination that the dealer's supply of food and drinks constituted the sale of goods was upheld, with no legal grounds for intervention in the revisional jurisdiction. The judgment reiterated the importance of assessing the dominant object in transactions to differentiate between sales and services for taxation purposes. The dealer's perception of its activity as sales, evidenced by charging sales tax and profit structure, aligned with the Tribunal's finding, leading to the dismissal of the revision petitions.