Sujata V. Manohar, J.
1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959. The respondents, who are the assessees, have an establishment at Nasik where, inter alia, sweetmeats are sold for consumption on the premises. It also seems that the respondents sell, inter alia, sweetmeats across the counter for being consumed outside the premises or being taken away. For the assessment period 1st April, 1966, to 31st March, 1967, the respondents were assessed to sales tax and the Sales Tax Officer held that the establishment conducted by the respondents was a shop conducted primarily for the sale of sweetmeats. He therefore refused to allow any deduction to the respondents for any sales which may be covered under entry 14 of Schedule A to the Bombay Sales Tax Act, 1959. It may be mentioned here that for the earlier assessment years the respondents had been given deductions under entry 14 of Schedule A on the ground that the respondents conducted predominantly an eating house. For the relevant period, however, the respondents were not granted any such deductions. This finding of the Sales Tax Officer was confirmed by the Assistant Commissioner of Sales Tax. In second appeal the Sales Tax Tribunal allowed the appeal and remanded the case to the Assistant Commissioner for a fresh decision in the light of the observations made by the Tribunal in its judgment. The order of the Assistant Commissioner and the decision of the Sales Tax Tribunal are in respect of two orders of assessment for the periods 1st April, 1965, to 31st March, 1966, and 1st April, 1966, to 31st March, 1967. The present reference however is concerned only with the assessment for the period 1st April, 1966, to 31st March, 1967.
2. The Tribunal, at the instance of the Commissioner of Sales Tax, has referred the following two questions for determination by the High Court :
'(1) Whether the Tribunal was correct in law in holding that a shop or establishment would be a shop or establishment conducted primarily for the sale of sweetmeats within the meaning of entry 14 of Schedule A, only if the sales of sweetmeats without service are preponderating over the sales of sweetmeats followed by service for consumption ?
(2) Whether, on the facts and in the circumstances of this case, the Tribunal was correct in law in holding that the appellant was entitled to deduction under entry 14 of Schedule A to the Bombay Sales Tax Act, 1959 ?'
3. Both the sides are agreed that in view of the remand order the second question does not arise for determination by us and hence question No. (2) is deleted.
4. The respondents have claimed an exemption from the payment of sales tax in respect of certain sales falling within entry 14 of Schedule A to the Bombay Sales Tax Act, 1959. This entry, at the relevant time, was as follows :
----------------------------------------------------------------- 'Entry Description of goods Conditions and Period of No. exceptions subject operation to which exemption is granted 1 2 3 4 -----------------------------------------------------------------
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14 Cooked food and non-alcoholic drinks served at one time at a price of not more than one rupee and fifty paise 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. -------------------------------------------------------------------
Schedule A of the Bombay Sales Tax Act, 1959, deals with goods, the sale or purchase of which is free from all taxes. Now sales tax can be levied by the State only on the transactions of sale. Sales tax cannot be imposed by the State on those transactions which do not amount to a sale. Therefore, the question of exemption under entry 14 of Schedule A can only arise in the case of those transactions which are transactions of sale. The respondents can, therefore, claim exemption in respect of sales of cooked food served at one time at a price of not more than one rupee and fifty paise per person. Further, in order to claim this exemption, the respondents must show that such sales were in respect of cooked food served for consumption at or outside an eating house, restaurant, hotel, refreshment room or boarding house. Now, in the first place, serving of cooked food, at an eating house, restaurant, hotel, refreshment room or boarding establishment for the requisite price, does not necessarily amount to a sale of cooked food. In the case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi : 1SCR557 the Supreme Court has held that the supply of food or drink to customers by a hotelier or restaurateur does not partake of the character of a sale of goods. The Supreme Court has held that a hotelier provides many services in addition to the supply of food. He provides furniture and furnishings, linen, crockery and cutlery, and in the eating places of today, he may add music and a specially provided area for floor dancing or in some cases, a floor show. It cannot, therefore, he said that the supply of food at a hotel, restaurant, etc., will amount to a transaction of sale of food simpliciter. This decision of the Supreme Court was confirmed by the Supreme Court in a review application, which is reported in : 2SCR650 [Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi]. In this judgment the Supreme Court has observed that the hotel and catering industry is a service-oriented industry. The purpose of a hotelier and caterer is not to sell food, but to serve it in proper atmosphere so as to make the service and consumption of food enjoyable for the guests. The court also pointed out that though the customer pays for the food, he can enjoy only that much of food as can be consumed by him at one particular time. The guest is not entitled to carry away the unconsumed portion of his food. Lastly, the amount received by the hotelier is not the price of any goods. It also represents his charges for looking after the convenience and enjoyment of the customer including his needs for food and rendering him various kinds of other services and providing him with various facilities and comforts. The amenities provided in an eating house such as the respondents' may not bear any comparison to the amenities provided by a restaurant in a five-star hotel. But the poorer sections of the society to which such eating houses cater, resort to such eating houses for basically the same reasons that induce the rich to flock to the restaurants in five-star hotels - relaxation and enjoyment of food in a congenial atmosphere. In view of the tests which have been laid down by the Supreme Court, the cooked food served by the respondents in their establishment for consumption by the customers in the establishment may not amount to a sale at all. If so, no sales tax can be levied on such transactions. A fortiori there can be no question of exempting or not exempting such transactions from the levy of sales tax under entry 14 of Schedule A. This aspect of the matter has not been considered at all by the taxing authorities and the Tribunal in the case of the respondents so far.
5. In relation to the transactions of sale at the respondents' establishment, it remains to be seen whether any such transactions of sale are entitled to exemption under entry 14 of Schedule A. Under this entry exemption cannot be availed of if the cooked food of the type in question is sold by a shop or an establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries. Hence, in the present case, what requires determination is whether the establishment of the respondents is an establishment which is conducted primarily for the sale of sweetmeats. In order to decide this, one must consider which transactions are transactions for the sale of sweetmeats. A shop which sells sweetmeats ordinarily sells its wares across the counter to its customers who carry away the purchases made by them. A shop does not ordinarily provide any facilities for the consumption on the premises of the sweetmeats it sells. Hence, the sales of sweetmeats which are to be considered for the purpose of deciding whether the establishment conducted by the respondents is primarily for the sale of sweetmeats will be the sales of sweetmeats across the counter by the respondents for being taken away by the customers. These sales of sweetmeats will have to be compared with the total business of the respondents, that is to say, all the transactions which are entered into by the respondents - whether they are transactions of sale or not, including the transactions of serving sweetmeats inside the establishment for consumption inside the establishment or outside, as well as all transactions of sales across the counter. If the sales of sweetmeats by the respondents across the counter for being taken away predominate over all other transactions of the respondents, then, it may be said that the establishment is conducted by the respondents primarily for the sale of sweetmeats. The main object of the respondents' establishment must be the sale of sweetmeats across the counter for being taken away. All other purposes must be incidental or ancillary. This fact can only he ascertained by viewing the entire business of the respondents and examining whether the transactions for the sale of sweetmeats to be carried away predominate over all other transactions. Merely to say that the sales of sweetmeats across the counter exceed all other transactions (which may or may not amount to sales) would not be sufficient. The transactions of sale of sweetmeats across the counter must substantially exceed all other transactions. Only then it would be possible to say that the respondents' establishment is primarily for the sale of sweetmeats and all its other business is merely ancillary. Hence, in the present case, in order to ascertain whether the establishment of the respondents is an establishment primarily conducted for the sale of sweetmeats or not, it is necessary for the taxing authorities to consider all the transactions of the respondents entered into in their establishment, whether these transactions are transactions of sale or service of food or any other transactions and to ascertain whether in these transactions, the transactions which amount to sales of sweetmeats across the counter for consumption outside the establishment predominate. If they do, then the establishment of the respondents will amount to an establishment primarily for the sale of sweetmeats. If they do not predominate, then, it cannot be said that the establishment of the respondents is primarily for the sale of sweetmeats. In the latter case the respondents would be entitled to exemption under entry 14 of Schedule A in respect of the cooked food served at one time at a price of not more than Rs. 1.50 per person for consumption at or outside the establishment.
6. In the light of this discussion, it would seem that the test which has been laid down by the Tribunal while remanding the matter to the Assistant Commissioner of Sales Tax is too narrow. The Tribunal ought to have laid down the tests mentioned above and it ought to have given directions in conformity therewith. The Tribunal also ought to have given directions to the Assistant Commissioner of Sales Tax for determining which of the transactions of the respondents amounted to sales within the ratio of the judgment of the Supreme Court referred to earlier.
7. Accordingly the question which is referred to us by the Tribunal is answered as follows :
The Tribunal is only partly correct in holding as it did. It ought to have laid down the tests as discussed above in our judgment and it ought to have given directions in conformity with those tests.
8. The Tribunal will, therefore, now dispose of the case in the light of the observations made above.
The applicant will pay to the respondents the costs of the reference fixed at Rs. 300.
9. Reference answered accordingly.