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TMI Blog1980 (9) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... marily for the purpose of lodging, that the management provides him with a number of amenities incidental to such lodging which includes supply of meals at fixed hours, that the bill given by the hotel and paid by the guest is one and indivisible, that is, a fixed amount per day during his stay in the hotel and the transaction so entered into does not envisage any sale of food. This contention was accepted by the Supreme Court. The Supreme Court held that the transaction essentially is one of service by the hotelier in the performance of which meals are served as part of and incidental to that service, and the bill prepared by the hotelier is one and indivisible not being capable by approximation of being split up into one for residence and the other for meals. It is true, such a bill would be prepared after consideration of the cost of meals, but that would be so for all other amenities given to the customer. The revenue, therefore, is not entitled to split up the transaction into two parts, one of service and the other of sale of food-stuffs and to split up also the bill charged by the hotelier as consisting of charges for lodging and charges for food-stuffs served to him with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 1980 S.C. 674. The said decision was rendered in an application to review the judgment in Northern India Caterers v. Lt. Governor of Delhi[1978] 42 S.T.C. 386 (S.C.); A.I.R. 1978 S.C. 1591. The review petition was heard by Krishna Iyer, Tulzapurkar and Pathak, JJ. The first of them was not a party to the original judgment but the other two were members of the court which rendered the original judgment. Pathak, J., delivered the main judgment for himself and on behalf of Tulzapurkar, J., in the review petition. While dismissing the review petition on the ground that there was no error apparent on the face of the record in the judgment sought to be reviewed, it was stated in paragraph No. 12 of the judgment as follows: "12. It appears from the submissions now made that the respondent as well as other States are apprehensive that the benefit of the judgment of this court will be invoked by restaurant-owners in those cases also where there is a sale of food and title passes to the customers. It seems to us that having regard to the facts upon which our judgment rests-undisputed as they have remained throughout the different stages of the litigation-and the considerations which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.); A.I.R. 1972 S.C. 1131., the Supreme Court observed as follows: "What precisely then is the nature of the transaction and the intention of the parties when a hotelier receives a guest in his hotel? Is there in that transaction an intention to sell him food contained in the meals served to him during his stay in the hotel?" They answered the question in paragraph No. 14 as follows: "No doubt, the customer, during his stay, consumes a number of food-stuffs. It may be possible to say that the property in those food-stuffs passes from the hotelier to the customer at least to the extent of the food-stuffs consumed by him. Even if that be so, mere transfer of property, as aforesaid, is not conclusive and does not render the event of such supply and consumption a sale, since there is no intention to sell and purchase. The transaction essentially is one of service by the hotelier in the performance of which meals are served as part of and incidental to that service, such amenities being regarded as essential in all wellconducted modern hotels. The bill prepared by the hotelier is one and indivisible, not being capable by approximation of being split up into one for residence an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, and for no other purpose. He may satisfy those wants; but there he must stop. He may not turn over unconsumed portions to others at his pleasure, or carry away such portions. The Supreme Court held that "what has been said in the above case appears to be as much applicable to restaurants in India as it does elsewhere and it has not been proved that any different view should be taken, either at common law, in usage or under statute". Dealing with the argument that in State of Himachal Pradesh v. Associated Hotels of India[1972] 29 S.T.C. 474 (S.C.); A.I.R. 1972 S.C. 1131. the Supreme Court had drawn a distinction between a case of meals supplied to a resident in a hotel and those served to a customer in a restaurant, the Supreme Court observed that they were unable to find any such proposition of law laid down by the court in that case. It is thus clear from the decision of the Supreme Court in the second case that they held that the transaction whereby a customer is supplied food in a restaurant does not amount to a sale for two reasons, (1) there is no agreement to transfer the property in the food or drink to the customer. He does not become owner of the food set before hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers and as a matter of fact the counsel on both sides did not make any distinction between the two types of restaurants. In the judgment of the Supreme Court in Northern India Caterers v. Lt. Governor of Delhi[1978] 42 S.T.C. 386 (S.C.); A.I.R. 1978 S.C. 1591. stress is laid on the fact that there is no transaction of sale as the property does not pass to the customer and the customer has no right to take away the goods. The supply of goods is only a part of the service contract. This fact is emphasised even in the judgment in the later case in more than one place. At the end of paragraph No. 2 in Northern India Caterers v. Lt. Governor of Delhi[1980] 45 S.T.C. 212 (S.C.); A.I.R. 1980 S.C. 674., the Supreme Court observed dealing with the previous judgment that the court had held that when meals were served to casual visitors in the restaurant the service must be regarded as providing for the satisfaction of a human need and could not be regarded as constituting a sale of food when all that the visitors were entitled to do was to eat the food served to them and were not entitled to remove or carry away uneaten food. Supporting considerations included the circumstance that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 386 (S.C.); A.I.R. 1978 S.C. 1591. which was also affirmed in Northern India Caterers v. Lt. Governor, Delhi[1980] 45 S.T.C. 212 (S.C.); A.I.R. 1980 S.C. 674. What then is the meaning and effect of the observations made in paragraph No. 12 relied on by the learned Advocate-General, viz., that where food is supplied in an eating-house or restaurant, and it is established upon the facts that the substance of the transaction, evidenced by its dominant object, is a sale of food and the rendering of services is merely incidental, the transaction would undoubtedly be exigible to sales tax? What apparently their Lordships had in mind was that even if a person had a right to take away the food-stuffs it would still be open to the assessee to argue that the transaction was in essence a transaction of service and not a transaction of sale. The observations of the Supreme Court in paragraph No. 12 would apply to such cases and the Supreme Court apparently wanted to emphasise that in such a case where the customer had a right to take away the food, if the dominant object was the sale of food and the rendering of service is merely incidental, then the transaction would be a transaction of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions of sale. It may be that in doing so some services are rendered by packing the food-stuffs, etc., but this part of the service is so infinitesimal and insignificant that the transaction would nevertheless be one of sale. Even in a case where a customer is asked to sit down in a chair or a more comfortable seat while the food-stuff is packed and handed over to him, still we consider that the transaction would be one of sale. No serious attempt was made by Mr. Nariman or other Advocates that such transactions are not sales exigible to tax. The only other question which remains to be considered is the question of burden of proof. Sri Nariman took exception to that part of the observations of Krishna Iyer, J., quoted earlier, in which it is stated that where such a negative is not made out by the dealer (meaning that the dealer is not able to prove that there is no right to take away) exigibility is not repelled. He submitted that the burden is upon the taxing authorities to show that a transaction is liable to tax as a sale and, therefore, the burden is upon the revenue to show that the customer has a right to take away the goods. It is true that the normal rule is that the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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