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TMI Blog1999 (10) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Kumar, Ms. Santi Narayan, Y. Subba Rao, B. Sridhar, S.N. Terdol, P. Parameswaran, Ms. B. Sunita Rao, C.V.S. Rao, Mrs. Shureshta Bagga and K.R. Nambiar. Other Advocates. A.K. Goel. Additional Advocate-General for U.P. R.B. Mehrotra, K. Parasaran, Harish N. Salve, R.F. Nariman, S.K. Dholakia and B. Sen. Senior Advocates. JUDGEMENT S.P. BHARUCHA, J.- The issues in these appeals and writ petitions relate to the entitlement of the States to levy tax on the sale of food and drink. Entry 54 of List II of the Seventh Schedule to the Constitution empowers the States to levy "taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92-A of List I". (Entry 92-A of List I deals with taxes on the sale or purchase of goods in the course of inter-State trade or commerce and does not concern us here.) 2. In the decision in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474; [1972] 2 SCR 937, this Court considered the plea of Associated Hotels of India Ltd., which ran the Cecil Hotel in Shimla, that it was not liable to pay sales tax in respect of meals served to guests who came there to stay. Posing the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to another in case he chooses not to consume it himself. The title to food never passes as a result of an ordinary transaction of supplying food to a guest". This principle, put in the words of Professor Beale, had been extended in England to the service of food at restaurants. The restaurateur was regarded fundamentally as providing sustenance to those who ordered food to eat in the premises. Like the hotelier, the restaurateur provided many services in addition to the supply of food. He provided furniture and furnishings, linen, crockery and cutlery and, perhaps, music, a dance floor and a floor show. The court held, accordingly, that the service of meals to visitors in the appellant's restaurant was not liable to sales tax and this was so whether the charges were imposed for the meals as a whole or according to the dishes separately ordered. 4. A review petition was filed in respect of the judgment in Northern India Caterers [1980] 45 STC 212 (SC); [1980] 2 SCC 167 and all three Judges found that it should be dismissed. The order of the majority noted that it appeared from the submissions that were made in the review petition that the States were apprehensive that the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration". The definition of "dealer" was similarly expanded. Section 3A was introduced providing for the levy of tax on the transfer of the right to use goods and, in 1986, section 3B was inserted to provide for the levy of tax on the transfer of goods involved in work contracts. [Article 366, clause (29A), sub-clauses (d) and (b) respectively provided for the levy of tax on the transfer of the right to use goods and on the transfer of goods involved in work contracts]. By successive notifications issued under the said Tamil Nadu Act, exemptions were granted in respect of the tax payable on the sale of food and drink by hotels, restaurants, sweet stalls and other eating houses. Then, in 1997, section 3D was introduced with effect from April 1, 1997, and the exemption in respect of the tax payable on the sale of food and drinks by hotels, restaurants, sweet stalls and eating houses was increased so that those whose total turnover was not more than rupees 25 lacs were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-clause (f) have found place in the Sales Tax Acts of most States and, as we have seen, they have been used in the said Tamil Nadu Act. The tax, therefore, is on the supply of food or drink and it is not of relevance that the supply is by way of a service or as part of a service. In our view, therefore, the price that the customer pays for the supply of food in a restaurant cannot be split up as suggested by learned counsel. The supply of food by the restaurant owner to the customer though it may be a part of the service that he renders by providing good furniture, furnishing and fixtures, linen, crockery and cutlery, music, a dance floor and a floor show, is what is the subject of the levy. The patron of a fancy restaurant who orders a plate of cheese sandwiches whose price is shown to be Rs. 50 on the bill of fare knows very well that the innate cost of the bread, butter, mustard and cheese in the plate is very much less, but he orders it all the same. He pays Rs. 50 for its supply and it is on Rs. 50 that the restaurant owner must be taxed. 10. The contentions of learned counsel for owners of restaurants in West Bengal (Writ Petition Nos. 15227 and 17245 of 1984) are simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t residential hotels may provide lodging and full or part board as set out above. If the Rules are framed by June 1, 2000, the assessments that are not completed only by reason of this order may be proceeded with. If the rules are not framed by the said date, these assessments shall lapse. No proceedings for assessments shall be commenced hereafter until the rules have been framed. At the same time, completed assessments as of today shall not be affected by this order, and the assessees would be entitled to adopt proceedings thereagainst, subject to the law. 15. Learned counsel for the owners of residential hotels in the State of Maharashtra then referred to the provisions of the Bombay Sales Tax Act, 1959. Section 2, sub-section (28) dealing with "sale" was amended with effect from August 16, 1985, and clause (b) was introduced therein. Sub-clause (iii) thereof read: "(iii) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is made or given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) for cash, deferred payment or other valuable consideration; and (b) every transaction by way of supply of the nature referred to in clause (a) made before such commencement shall be deemed to be, and shall be deemed always to have been, a transaction by way of sale, with respect to which the person making such supply is the seller and the person to whom such supply is made, is the purchaser, and notwithstanding any judgment, decree or order of any court, Tribunal or authority, no law which was passed or made before such commencement and which imposed or authorised the imposition of, or purported to impose or authorise the imposition of, the aforesaid tax shall be deemed to be invalid or ever to have been invalid on the ground merely that the Legislature or other authority, passing or making such law did not have competence to pass or make such law, and accordingly- (i) all the aforesaid taxes levied or collected or purporting to have been levied or collected under any such law before the commencement of this Act shall be deemed always to have been valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the sales tax laws of the States with retrospective effect and that, therefore, the States were entitled to levy the tax on the supply of food and drink regardless of the fact that there was no provision in the State Acts for such levy prior to February 2, 1983. The argument was not pressed after the learned Additional Solicitor-General, appearing for the Union of India, submitted that the said section 6 validated a State law only, prior to February 2, 1983, if the State law had contained a provision entitling the State to levy a tax on the supply of food and drink. If such State law had existed, it was rendered valid by reason of the amendment of the definition of "sale" in article 366(29A) made by section 4 of Constitution (Forty-sixth Amendment) Act on that date and the retrospectivity given thereto by the said section 6. The contention then urged on behalf of the States of Maharashtra and Uttar Pradesh was that the said section 6 validated the levy of sales tax on food and drink by equating it to the levy on the supply of food and drink. 21. Parliament, when exercising the powers to amend the Constitution under article 366, cannot and does not amend State Acts. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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