DURGA BHAVAN Vs. DEPUTY COMMERCIAL TAX OFFICER ANANTAPUR

JUDGEMENT

(1.) The common question for consideration in this batch of writ petitions is whether the State is entitled to levy and collect sales tax under the A.P. General Sales Tax Act where restaurants supply food-stuffs, drinks, etc., to customers. In some of these cases the restaurants are attached to hotels which afford both boarding and lodging facilities. In other cases the petitioners are restaurants which are not attached to any hotel.

(2.) In the decision reported 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 to consider the case where hotels serve meals to guests who stay in the hotel. It was contended that such a transaction did not amount to a sale within the meaning of the Punjab General Sales Tax Act. The submission on behalf of the assessee was that the hotel receives a guest primarily 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 view to bring the latter under the Act.

(3.) In a later case 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 Supreme Court had to consider the case of service of meals to casual visitors in a restaurant. The Supreme Court referred to the decision 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.), in which it was held that there is no sale when food and drinks are supplied to guests residing in a hotel. The Supreme Court observed that if that be true in respect of hotels, a similar approach seems to be called for on principle in the case of restaurants. The classical legal view being that a number of services are concomitantly provided by way of hospitality, the supply of meals must be regarded as ministering to a bodily want or to the satisfaction of a human need. It was, therefore, held that the service of meals to visitors in the restaurant of the appellant is not taxable under the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, and this is so whether a charge is imposed for the meal as a whole or according to the dishes separately ordered. The expression "sale" has been defined by section 2(g) of the Bengal Finance (Sales Tax) Act to mean