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Commissioner of Sales Tax, Maharashtra, Bombay Vs. Lala Lajpatrai Hotel - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 35 of 1969
Judge
Reported in[1975]35STC368(Bom)
ActsBombay Sales Tax Act, 1959 - Sections 5 and 61(1)
AppellantCommissioner of Sales Tax, Maharashtra, Bombay
RespondentLala Lajpatrai Hotel
Appellant AdvocateK.S. Cooper and ;R.A. Dada, Advs.
Respondent AdvocateR.V. Patel, Adv.
Excerpt:
.....counter sales at hotel are covered by entry 14 - entry 14 includes cooked food and non-alcoholic drinks served for consumption at outside or inside eating house, restaurant and hotel - held, order of tribunal upheld - counter sales fall within entry 14 of schedule a. - - cooper placed strong reliance on the decision of a division bench of the gujarat high court in chandra vilas hotel v. we fail to find anything in the terms of the entry itself which would require a narrow meaning or restricted meaning to be given to the word 'served' used in the said entry. 22. the division bench has observed that there was really no valid or cogent reason to differentiate between the sale of food and non-alcoholic drinks for consumption at the eating establishment and sale of food and..........no. 14 of the said schedule at the material time read as follows : 'cooked food and non-alcoholic drinks served at one time at a price of not more than one rupee per person, for consumption at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment, which is not a shop or establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries.' 5. the submission of mr. cooper, the learned counsel for the applicant, was that the word 'served' used in this entry must be given a narrow interpretation. it was urged by him that although the word 'service' has a multiplicity of meanings, it must be construed in the light of the context in which it occurs, and if this is done, the word 'served' used in this entry must be given.....
Judgment:

Kania, J.

1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act').

2. The respondent runs an Udipi Hotel and admittedly does not keep regular accounts. The respondent servers idli, dosa, etc., in the hotel and also makes certain sales, which have been described in the judgment of the Tribunal as 'counter sales'. By these 'counter sales' are meant sales of the aforesaid articles of food at the counter for being taken away by the customers for consumption. For the assessment periods from 1st April, 1961, to 31st March, 1962, and 1st April, 1962, to 31st March, 1963, the Sales Tax Officer held that these counter sales were taxable and estimated the same at 3 per cent of the turnover of the estimated sales. The respondent preferred appeals against these decisions to the Assistant Commissioner of Sales Tax, but the same were rejected. The respondent then approached the Sales Tax Tribunal by way of second appeals against these decisions. In these appeals, the contention of the department was that although the counter sales were for consumption outside the hotel, still the articles of food in question were taken away by the customers from the hotel for consumption outside and it could not be said that they were 'served' within the meaning of the said expression in entry No. 14 of Schedule A to the said Act which confers the exemption. This contention was rejected by the Tribunal. After taking into account the legislative history in connection with the said entry No. 14 of Schedule A to the said Act, the Tribunal came to the conclusion that the word 'served' in the said entry must be given a broad meaning, and consequently, counter sales at the hotel of the respondent were covered by entry No. 14 of Schedule A and they were exempt from the sales tax. Both the appeals were allowed by the Tribunal and as aforesaid it was held that the said counter sales were not liable to sales tax.

3. The question, which has been referred to us for our consideration, is as follows :

'Whether, on the facts and in the circumstances of the case and on a true and proper interpretation of entry No. 14 of Schedule A to the Bombay Sales Tax Act, 1959, the Tribunal was justified in law in concluding that the 'counter sales' at the hotel of the respondent are covered by entry No. 14 of Schedule A to the Act and they are exempt from sales tax ?'

4. Schedule A to the said Act, under section 5 thereof, sets out the list of goods, the sale or purchase of which is free from all taxes. Entry No. 14 of the said schedule at the material time read as follows :

'Cooked food and non-alcoholic drinks served at one time at a price of not more than one rupee per person, for consumption at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment, which is not a shop or establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries.'

5. The submission of Mr. Cooper, the learned counsel for the applicant, was that the word 'served' used in this entry must be given a narrow interpretation. It was urged by him that although the word 'service' has a multiplicity of meanings, it must be construed in the light of the context in which it occurs, and if this is done, the word 'served' used in this entry must be given a narrow meaning, viz., to wait upon a person at a table or set food before him for consumption. It was submitted by him that a customer at an eating establishment could be said to be served only where food or drink was taken or set before the customer, so that he could consume the same. It was strongly urged by him that it was very significant that the exemption granted under the said entry was confined to an eating house, a restaurant, hotel, refreshment room or boarding establishment, viz., only to establishments where food was normally intended to be consumed. Mr. Cooper placed strong reliance on the decision of a Division Bench of the Gujarat High Court in Chandra Vilas Hotel v. Commissioner of Sales Tax [1972] 30 S.T.C. 505.. In that case, the assessee was a registered dealer carrying on the business of running a hotel and an eating house and served at its eating house cooked food and non-alcoholic drinks including tea. Some customers took away these articles with them outside the premises of the eating house. The question was whether the amount representing the supply of cooked food and tea by the assessee to the customers at the rates mentioned in entry No. 14 in Schedule A, but allowed to be taken outside the assessee's eating house came within the purview of that entry and, therefore, not liable to be included in the total turnover of the assessee for the purpose of levying sales tax. The Sales Tax Tribunal held that 'service' contemplated by entry No. 14 was service at table and not at counter and, therefore, cooked food and non-alcoholic drinks, in order to come within the purview of entry No. 14 of Schedule A, must be served at a table by the restaurant or the eating house at its own premises or outside the said premises at the rates specified per person. The Tribunal further held that in the case of articles taken away by the customers outside the premises of the restaurant or the eating house, no 'service' was rendered by the assessee and, therefore, it could not be said that there articles were served for consumption within the meaning of entry No. 14. The Division Bench upheld the view taken by Tribunal.

6. We find it difficult to accept the submission of Mr. Cooper, which we have set out earlier. On a plain reading of entry No. 14, which we have already set out above, all that appears to be required to claim exemption is : (1) that the items sold must be cooked food and non-alcoholic drinks, (2) that they should be served at one time at a price of not more than one rupee per person, (3) that they should be served for consumption at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment, and (4) that the same must not be a shop or establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries. We fail to find anything in the terms of the entry itself which would require a narrow meaning or restricted meaning to be given to the word 'served' used in the said entry. In this connection, we may refer to an earlier decision of a Division Bench of the Gujarat High Court in Govindshram Hotel v. State of Gujarat [1966] 17 S.T.C. 100., where it was held that the exemption granted under entry No. 14 of Schedule A of the said Act would be available not only where cooked food and non-alcoholic drinks are served by an eating establishment (other than that falling within the excepted category) for consumption in or immediately outside the eating establishment but also where cooked food and non-alcoholic drinks are served by the eating establishment at any place outside the eating establishment for consumption at any such place outside the eating establishment. The question there related to fifty plates of refreshments served by the assessee at a price not exceeding one rupee at one A. V. Parekh Institute for consumption at the premises of he Institute. The Division Bench in that case has referred to the legislative history regarding this entry. It has been pointed out in the judgment that under the corresponding entry, being entry No. 22 of Schedule A, of the Bombay Sales Tax Act, 1953, it was required that food and non-alcoholic drinks in order to be exempt from tax should be consumed 'at' a hotel, restaurant, refreshment room, eating house or other place where such food and drinks are served. The Division Bench has taken note of the considerable amount of hardship and difficulty caused by the wording of the said entry No. 22. The Division Bench has observed that there was really no valid or cogent reason to differentiate between the sale of food and non-alcoholic drinks for consumption at the eating establishment and sale of food and non-alcoholic drinks for consumption elsewhere so long as the basic condition was satisfied, namely, that the cost of food and non-alcoholic drinks consumed at one time should not exceed one rupee per person. The Legislature, therefore, while enacting the said Act introduced entry No. 14 of Schedule A in different terms and instead of confining the exemption to cases where food and non-alcoholic drinks are consumed 'at the eating establishment' extended the scope of the exemption by providing that the consumption may be 'at or outside' the eating establishment. Taking into account this legislative history, the Division Bench declined to interpret the word 'outside' in entry No. 14 of Schedule A as meaning only immediately outside as contended by the department and came to the conclusion was have set out earlier.

7. In interpreting the words of this entry, it would certainly be not out of place to refer both to the former Act or Acts and to the ascertained evils to which the former Act or Acts had given rise (see Eastman Photographic Material Co. v. Comptroller-General of Patents, Designs and Trade Marks [1898] A.C. 571. From the decision of the Supreme Court in State of West Bengal v. Subodh Gopal and Others : [1954]1SCR587 , it appears that it is permissible to refer to the statement of objects and reasons appended to the Bill which eventually became the amending Act, for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil which he sought to remedy.

8. Now, in coming to the legislative history of this entry, it appears that the corresponding entry under the Bombay Sales Tax Act, 1946, was entry No. 10. This was the first Sales Tax Act of the then Province of Bombay and the relevant part of entry No. 10 ran as follows :

'Cooked food eaten at a hotel, restaurant, refreshment room, eating house or other place where cooked food is served.'

9. By the amending Act 1 of 1949 the said entry was substituted by a new entry, the relevant portion of which read as follows :

'Food and non-alcoholic drinks consumed at a hotel, restaurant, refreshment room, eating house or other place where such food and drinks are served.'

10. Under the Bombay Sales Tax Act, 1953, the relevant portion of the corresponding entry, which was entry No. 22, ran as follows :

'Food and non-alcoholic drinks consumed at a hotel, restaurant, refreshment room, eating house or other place where such food and drinks are served.'

11. The report of the Sales Tax Enquiry Committee, 1957-58, in relation to entry No. 22 of the Bombay Sales Tax Act, 1953, shows that it was pointed out to the Committee that the restriction imposed by the said entry operated to the disadvantage of many establishments eligible for the benefit of exemption and was causing administrative difficulty. The reason was that the smaller of these establishments, the number of which was considerable, could not maintain satisfactory accounts from which the turnover of sales of food and drinks not liable to tax could be worked out and the assessing authorities had to resort to estimating the turnover of sales liable to assessment on the basis of various factors. The Committee thought fit to recommend that the condition attaching to the exemption, namely, that the food and drink should be consumed at the eating place itself, should be removed so that although such food including non-alcoholic drink may be carried away for consumption outside the eating place, the exemption of the sale price of such food and drinks should be permitted. In pursuance of this recommendation, the Committee suggested an entry, being entry No. 11 of the list of exemptions annexed to the Report, which is in identical terms to entry No. 14 of Schedule A to the said Act. It is also significant that Dr. Jivraj Mehta, the Finance Minister of the then State of Bombay, in his speech in the Legislative Assembly on the Bombay Sales Tax Bill, 1959, stated in connection with this entry (which was entry No. 35 in Schedule A annexed to the said Bill) that it has been provided in accordance with the Committee's recommendations that the exemption would be admissible whether or not the food or drink served was consumed at the eating place itself. This makes it clear that the change effected in wording the present entry, viz., entry No. 14 in Schedule A to the said Act, differently from the said former entry was effected with a view to confer the exemption although such food and drink may be carried away for consumption outside the eating place. We have, of course, to see whether this intention has been given effect to in entry No. 14 or the words used are such that they have failed to give effect to the said intention.

12. Coming to the language of entry No. 14 itself, we find that it is significant that the only requirement regarding service, on a plain reading thereof, is that cooked food and non-alcoholic drinks should be served for consumption; and the clause 'at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment' comes immediately not after the word 'served', as would have been the case if Mr. Cooper's contention was correct, but after the word 'consumption'. Thus, on a plain reading of this entry, the requirement to be fulfilled to get the exemption is that food and drinks served should be for consumption at or outside any eating house and other establishments referred to in entry No. 14 and not that these articles should be served at the place where they are eaten or intended to be eaten as suggested by Mr. Cooper. On a plain and grammatical construction of the said entry, therefore, we find it difficult to accept the contention of Mr. Cooper. Apart from this, it is significant that the wording of the corresponding entries in the Bombay Sales Tax Act, 1946, before amendment in 1949 as well as thereafter, and in the Bombay Sales Tax Act, 1953, which entries we have referred to earlier, shows that one requirement for getting exemption was that food and drinks concerned should be consumed at the place where they are served. This was done by the use of the expression 'where cooked food is served' in the aforesaid entry No. 10 as it stood prior to the amending Act of 1949, and by the use of the expression 'where such food and drinks are served' after the amending Act in that entry and in entry No. 22 of the Bombay Sales Tax Act, 1953. A glance at the present entry No. 14 will show that there is a clear departure from the wordings of the previous corresponding entries and the requirement that the food and drinks concerned should be consumed at the place where they are served has been given a go-by. This fact also militates against the interpretation suggested by Mr. Cooper. Even apart from these considerations, we feel that the entries idea behind the grant of this exemption was to exempt sales of cooked food and non-alcoholic drinks to an average customer of limited means at establishments, which normally cater to such customers. There can be no serious dispute that the exemption was, in any event, intended to cover cases where food and drinks are consumed immediately outside the eating establishment. Considering the class of establishments, which was intended to be covered, it is very difficult to contemplate that such an establishment would provide for service outside the establishment itself. Hence to give this entry the construction suggested by Mr. Cooper would be to unduly limit the scope of the exemption sought to be granted. We cannot also lose sight of the fact that in an eating establishment, which might have a self-service counter, the service would remain the same whether the food and drinks are consumed in the establishment or outside it, and if Mr. Cooper's contention were correct, all service of food and drinks at such establishments would have to be excluded from the benefit of the exemption conferred by entry No. 14, for which there seems to be no warrant. In view of this, we are unable to accept the contention of Mr. Cooper that to get the benefit of the exemption conferred by entry No. 14, it is necessary that the food and drinks must be served, in the limited sense set out earlier, by the assessee at the place where they are intended to be consumed. In our view, the Tribunal has come to a correct conclusion regarding the scope of this entry.

13. As far as the decision of the Division Bench of the Gujarat High Court in Chandra Vilas Hotel v. Commissioner of Sales Tax [1972] 30 S.T.C. 505. is concerned, we are, with great respect, unable to agree with the view taken therein. There is a brief reference in the decision to the legislative history, but it seems that the particular aspects in the legislative history of entry No. 14, to which we have referred earlier, were not brought to the notice of the Division Bench, which decided that case. It also appears that the several factors, which we have referred to earlier, were not present to the minds of the learned Judges, who decided the said case. We may also point out that the learned Judges of the Gujarat High Court have not noticed the change in the wording of entry No. 14 from the wording of the earlier corresponding entries, to which we have already referred. In view of all these circumstances, we are, with respect, unable to agree with the view taken in the said case.

14. We may also mention that it was further submitted by Mr. Cooper that to get the benefit of the exemption conferred by entry No. 14, cooked food and non-alcoholic drinks should be served for consumption either at the eating establishment itself or immediately outside it. His contention was that the word 'outside' should be restricted to the immediate vicinity of the eating establishment or other establishments referred to in the said entry. In this regard, we find that in Govindshram Hotel v. State of Gujarat [1966] 17 S.T.C. 100., to which we have already referred, this contention has been categorically negatived, and we are in respectful agreement with the said decision. This contention of Mr. Cooper must be also, therefore, be rejected.

15. In the result, we answer the question referred to us in the affirmative. The applicant must pay the costs of this reference to the respondent.

16. Reference answered in the affirmative.


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