A.V. Krishna Rao, J.
1. The above two writ petitions have been filed with a prayer to issue a writ of mandamus or any other appropriate writ, order or direction directing the respondents, the State of Andhra Pradesh and the Commissioner, Commercial Taxes, Board of Revenue, Government of Andhra Pradesh, not to collect any sales tax on the turnover of the business of the writ petitioners after declaring that Section 5(1) read with the first proviso of the Andhra Pradesh General Sales Tax Act of 1957 ultra vires and unconstitutional in so far as they relate to the turnover of the business of the petitioners. In Writ Petition No. 4864 of 1973 as many as 83 petitioners joined claiming to be carrying on the hotel and restaurant business. In Writ Petition No. 2070 of 1973, the only petitioner is Sri Anand Bhavan Hotel, Secunderabad, represented by its managing partner.
2. The averments in both the writ petitions are substantially the same and may be set out. The petitioners are all owners of hotels or catering establishments in the twin cities of Hyderabad and Secunderabad. Some of the petitioners run boarding and lodging houses and some others run boarding-houses and restaurants exclusively. The customers who reside in the lodges are served with meals and refreshments and a comprehensive bill is issued for the total service rendered to them. In the case of restaurants and catering houses, the foodstuffs are served in the premises and consumed there. In a few cases the foodstuffs are taken by the customers outside the premises. For the purpose of making the foodstuffs, large quantities of raw materials of various types are used. The foodstuffs and the beverages are made by a large labour force like cooks, servers, etc. The premises provide decent and comfortable accommodation for the customers who enjoy the amenities provided for relaxation such as fans, etc., while consuming the foodstuffs. The bulk of the price paid by the customers goes towards the service charges. The charges for service constitute about 80 per cent of the price paid by the customer for the foodstuffs and the remaining 20 per cent goes only to the cost of the materials. The petitioners provide therefore essentially service to the customers. The business of the petitioners is in the nature of an agency for preparing foodstuffs and storing them to be served later to the customers who come there. The relationship between the petitioners and their customers is in the nature of a contract of service. Thus the entire transaction between the petitioners and their customers is not one of sale or purchase but is essentially one of service. Under entry 54 in List II of the Seventh Schedule of the Constitution of India, the State Legislature is empowered to levy a tax on sale or purchase of goods but cannot levy a tax on a mere contract of service. But the Andhra Pradesh Legislature, ignoring the important constitutional provision, has provided for a levy of sales tax on hotel turnover. Perishable articles like fruits, vegetables, etc., which stand on a par with the foodstuffs sold in a hotel are completely exempt and therefore the first proviso to Section 5(1) of the Act is discriminatory. The State Legislature is not invested with any power to levy tax on any contractual service such as the one which the petitioners are rendering because contractual service is the very essence of the petitioner's business. The definition of the words 'goods', 'business' and 'sale' in the Act also support the petitioner's case. In the case of the petitioner in Writ Petition No. 2070 of 1973, it was stated that the 2nd respondent accepted the plea of the petitioner with regard to the sale of foodstuffs to the lodgers, but declined to treat the other sales as one of service and by his order dated 6th March, 1973, a demand of sales tax was made on the sales in the hotel premises of the petitioner.
3. The counter-affidavit filed on behalf of the respondents stated, inter alia, that there is no constitutional infirmity in Section 5(1) of the Act and the proviso and that so long as the assessments made by the department stand, the petitioners cannot obtain any relief. So long as the elements of a sale are satisfied regarding the foodstuffs, the turnover is liable to be taxed. There is no question of any discrimination within the meaning of Article 14 of the Constitution. So far as the exemption from tax of flowers, fruits, etc., is concerned, the legislature could provide for exemptions of any particular type of goods or commodities and its competence in that behalf cannot be questioned.
4. Sri T. Anantha Babu on behalf of the writ petitioners contended that the price which a customer pays for the eatables in a restaurant or a catering establishment is more for service which the customer gets while on the premises than for the price of foodstuffs, that the bill presented to the customer represents one consolidated bill in respect of both the service, which is the main thing, and the cost of the foodstuffs and beverages which is secondary. The learned counsel, in substance, contended that the transaction in a restaurant is no different from that of service rendered to the resident guests in a hotel with regard to which the Supreme Court had held that the transaction is essentially one of service and as such was not liable to tax. The counsel contended that in the case of sale of foodstuffs in a restaurant also, the transaction does not amount to a sale. Even in a restaurant chairs, tables, linen and courteous service by servers is offered. The main purpose for which the customers go to the restaurant section was not merely for consuming foodstuffs, but substantially to relax and enjoy the comfort and amenities provided by the restaurants. He submitted that as it is service in essence which the restaurant provides, the turnover of the business in the restaurant is not taxable and the first proviso to Section 5(1) of the Act in so far as it provided for the taxation of the turnover of restaurant is unconstitutional, having regard to entry 54 of List II of the Seventh Schedule of the Constitution, as the transactions are not sales of goods.
5. The Government of India Act, 1935, empowered the State Legislatures to impose a tax on sales as provided in entry 48, List II, of the Seventh Schedule to that Act. It may be noticed that entry 54 in the said list in the Seventh Schedule to the Constitution is in the same terms as entry 48 in List II in the Seventh Schedule to the Government of India Act, 1935.
6. In State of Madras v. Gannon Dunkerley & Co. A.I.R. 1958 S.C. 560, the Supreme Court had to consider a case which arose under the provisions of the Government of India Act, 1935, in relation to the Madras General Sales Tax Act, 1939. The vires of the said Act as amended by Madras Act 25 of 1947, which widened the definition of sale by including, inter alia, in it a transfer of property in the goods involved in the execution of works contract was raised. Under the amended definition, the sales tax authority brought into chargeable turnover the materials used in the construction works carried out by Gannon Dunkerley and Co. Venkatarama Aiyar, J., held that a power to enact a law with respect to tax on sale of goods under entry 48 of List II in the Government of India Act, 1935, in order to be intra vires be one relating in fact to sale of goods, and that a Provincial Legislature could not in the purported exercise of its power tax transactions which were not sales by enacting that they should be deemed to be sales. In order to construe a transaction as a sale, there should be an agreement relating to the goods to be supplied by passing title in those goods and that it was the essence of such a contract that both the agreement and the sale should relate to one and the same subject-matter. The building contract in the case, even if it were to be disintegrated, there was no passing of title in the materials as movables in favour of the other party to the contract. The contract was one and indivisible, there was no sale of the materials and there was therefore no question of title to the materials used by the builders passing to the other party to the contract. Even in case where the thing produced under a contract is movable property, the materials incorporated into it might pass as a movable only in cases where there was an agreement to sell the materials as such. Otherwise, it would not be taxable. It was further held that the expression 'sale of goods' in entry 48 is a nomen juris. Further, the expression 'sale of goods' could not be construed in its popular sense, but must be interpreted in its legal sense and should be given the same meaning which it has in the Sale of Goods Act, 1930. It was further observed that both in England and in India, in order to constitute a sale, it was necessary that there should be, an agreement between the parties for the purpose of transferring title to the goods. It presupposes a capacity to contract. The transaction must be supported by money consideration. The result of the transaction must be that the property actually passes in the goods. There would be no sale if merely title to goods passes where it is not the result of any contract between the parties either express or implied. In the case of a building contract, there is neither a contract to sell the materials used in the construction, nor does property pass therein as movables. The Supreme Court held that there was no sale and therefore the Provincial Legislature had no competence to impose a tax under entry 48. From the aforesaid decision, the meaning to be given to the expression 'sale of goods' has to be understood and given the same meaning as it is given in the Sale of Goods Act.
7. In New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar  14 S.T.C. 316 (S.C.), the Supreme Court had again held that in understanding the definition of sale in the Sales Tax Acts, it must be regarded as implicit that the transaction must have all the elements which constitute a sale within the meaning of the Sale of Goods Act. In Government of Andhra Pradesh v. Guntur Tobaccos Ltd.  16 S.T.C. 240 (S.C.), Shah, J., had made the following observations, which are useful in the present context:
The question in each case is one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances. But one fundamental fact has to be borne in mind that from the mere passing of title to goods either as integral part of or independent of goods it cannot be inferred that the goods were agreed to be sold, and the price was liable to sales tax...in order that there should be a sale of goods which is liable to sales tax as part of a contract for work under a statute enacted by the Provincial or State Legislature, there must be a contract in which there is not merely transfer of title to goods as an incident of the contract, but there must be a contract, express or implied, for sale of the very goods which the parties intended should be sold for a money consideration, i. e., there must be in the contract for work an independent term for sale of goods by one party to the other for a money consideration....Whether a contract for service or for execution of work, involves a taxable sale of goods must be decided on the facts and circumstances of the case.
8. In Associated Hotels of India Ltd. v. Excise and Taxation Officer  17 S.T.C. 555, Narula, J. (as he then was), had considered a similar question. M/s. Associated Hotels of India Ltd. were carrying on two types of business. The first is what may be called a hoteliers' business proper and the second is the restaurant business. So far as the hotelier business was concerned, they were receiving guests and the guests were provided with comfortable lodging and various other amenities such as public and private rooms, bath with hot and cold running water, clean linen and various other services and comforts. The guests were supplied with food at the premises during stated hours. The guests could not claim any rebate if they did not want to take food. The charges were included in a single bill both for service, for lodging and for board. On the question whether the turnover of the hotel business was liable to sales tax, it was held by the learned Judge that the transaction between a hotelier and its resident client is an indivisible contract and does not include any sale of goods as such. The food given by a hotel to its resident client who makes one consolidated payment per day or periodically for residence in that hotel is not sold by the hotel but merely 'served' to the resident. That being so, it was not a sale of food within the meaning of the Sale of Goods Act and does not fall under Section 2(h) of the Punjab Act. It partakes more of the nature of service than a sale for the reasons : (1) That no price is paid or agreed to be paid for the food as such ; (2) The predominant purpose of the agreement is to reside in the hotel and not to get food ; (3) It was clearly stipulated in the relevant chart of the hotel produced before the revising authority that service of food would not constitute a sale of the food ; (4) There is no understanding or contract for the supply of any particular food nor even of any kind of food ; (5) If the food is not to the taste of the guest or if he is to be away at the time of lunch or dinner he may not take it but he gets no rebate or remission in the overall charges made by him ; (6) Property in the food does not pass to the guest at any stage because at no stage can a guest say that he has paid for the food or agreed to pay for it and that he would, therefore, take it away or keep it for being taken later or give it to a friend ; (7) The guest has to pay the same amount even if he does not take the food ; (8) The food forms a very insignificant part of the services rendered by a hotelier for which a guest pays so heavily ; (9) The food served to a resident guest in a hotel without any separate or distinct charge being made for it is as such not a sale. No one goes and stays in a hotel to buy food.
9. Regarding the restaurant business, the learned Judge had observed thus:
The considerations which have impelled me to decide the first question in favour of the assessee are wholly absent in the case of the restaurant business. A customer can pay for a plate of fish and can take it home. He can ask for a packed lunch and pay for it and take it away. The moment he takes delivery of the food and he is free to remove it or to serve it to his wife or friend accompanying him, the property in the goods passes to the customer and is appropriated to him. This is clearly sale. The customer can order for a particular dish at the restaurant and reject it when it is offered to him if it is not in accordance with his orders. I, therefore, hold that the restaurant sales to non-residents and sales of packed food by the petitioner-company to its customers are taxable under the Punjab Act.
10. The above case was carried in Letters Patent Appeal by the State and was affirmed in State of Punjab v. Associated Hotels of India Ltd.  20 S.T.C. 1. In further appeal to the Supreme Court in State of Himachal Pradesh v. Associated Hotels of India Ltd.  29 S.T.C. 474 (S.C.), the Supreme Court had upheld the decision of the Punjab High Court. The Supreme Court considered both types of business carried on by the hotelier. After examining the nature of the transaction between a hotelier and a visitor to a hotel as one essentially of service in the performance of which and as part of the amenities incidental to that service, the hotelier served meals at stated hours, the Supreme Court made these observations regarding the restaurant business (at page 475 and 476) :
That is, however, not the case in its restaurant business where a customer takes his meal consisting either of items of food of his choice or a fixed menu. The primary function of such a restaurant is to serve meals desired by a customer, although along with the food, the customer gets certain other amenities also, such as service, linen, etc. The bill which the customer pays is for the various food items which he consumes or at a definite rate for the fixed menu, as the case may be, which presumably takes into account service and other related amenities.
11. It was also observed (at page 479) :
The difficulty which the courts have often to meet with in construing a contract of work and labour, on the one hand, and a contract for sale, on the other, arises because the distinction between the two is very often a fine one. This is particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale ; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel.
12. In the course of the judgment, it was further observed :
Thus, in considering whether a transaction falls within the purview of sales tax, it becomes necessary at the threshold to determine the nature of the contract involved in such a transaction for the purpose of ascertaining whether it constitutes a contract of sale or a contract of work or service. If it is of the latter kind it obviously would not attract the tax. From the decisions earlier cited it clearly emerges that such determination depends in each case upon its facts and circumstances. Mere passing of property in an article or commodity during the course of the performance of the transaction in question does not render it a transaction of sale. For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials. In every case the court would have to find out what was the primary object of the transaction and the intention of the parties while entering into it.
13. Dealing with the hoteliers' business, their Lordships had observed that a customer during his stay in a hotel may consume a number of foodstuffs and that it may be possible to say that the property in those foodstuffs passes from the hotelier to the customer, at least to the extent of the foodstuffs consumed by him. Even if that be so, mere transfer of property 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 essentials in and all well-conducted modern hotels.
14. Now coming to the relevant provision in the Sale of Goods Act, 1930, Section 4 reads thus :
(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
15. Section 5(1) of the Andhra Pradesh General Sales Tax Act, 1957, reads thus :
Every dealer (other than a casual trader and an agent of a non-resident dealer) whose total turnover for a year is not less than Rs. 15,000 and every agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year, at the rate of three paise on every rupee of *Here italicised, his turnover. Every casual trader shall pay a tax at the rate of three paise on every rupee of his turnover.
16. The first proviso to Section 5(1) of the Act reads thus :
Provided that if and to the extent to which such turnover relates to articles of food or drink or both sold in a hotel, boarding-house, restaurant, stall or any other place for consumption on the premises and if the total turnover relating to those articles is not less than Rs. 40,000 for the year, the tax shall be calculated at the rate of three paise in the rupee, on the first Rs. 39,999 and at the rate of four paise in the rupee on the balance of the turnover.
17. This is the charging section in the Act. What is contended by the 1 earned counsel for the petitioners is that it cannot be said that articles of food or drink or both sold in a hotel constitute a sale when they are served. If it is not a sale of goods, then the State Legislature has no constitutional competence to levy a tax, as the same does not fall within entry 54 of List II of the Seventh Schedule of the Constitution. The word 'sale' is defined in the Andhra Pradesh General Sales Tax Act as under :
'Sale' with all the grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash, or for deferred payment....
18. The writ petition is based mainly on the grounds that the petitioners, who are running the restaurants or catering establishments, are agencies for preparing foodstuffs and storing them for consumption by customers on the spot and the relationship between the owners of the establishment and the customer is essentially one of service and that it is not a sale liable to tax. Having regard to the nature of the transactions in a catering establishment or a restaurant, in the light of the tests laid clown by the Supreme Court in State of Himachal Pradesh v. Associated Hotels of India Ltd.  29 S.T.C. 474 (S.C.), there can be no doubt that the transactions constitute sales within the meaning of the word 'sale' occurring in the Sale of Goods Act. As pointed out by the Supreme Court one has to examine the essential nature of the transaction. The sale of the eatables in a restaurant has for its main object the transfer of property in the eatables sold and the delivery of the possession to the customer as an eatable to the customer. That is the principal or primary object of the transaction and also undeniably the intention of the parties while entering into the transaction. When we examine the essentiality or the reality of the transaction, in the case of a restaurant owner and the customer, besides there being a transfer of property, there is an intention to sell and also purchase. It is difficult to hold regarding the transactions under consideration that they are essentially one of service as in the case of hoteliers' business properly so-called. As observed by the Supreme Court the primary function in the restaurants is to serve meals or other articles of food desired by the customer. It may be that the customer gets certain amenities, such as service, linen and other related amenities. It may be that the bill which the customer pays is not only for the various food items which he consumes but it may even be presumed that the bill paid takes into account the service and other related amenities. But that cannot make the transaction one essentially of service. The restaurant is the seller and the customer is the buyer. To the said buyer the seller offers to sell the eatables at prices which very often are exhibited in the catering premises. The moment a customer enters the premises and occupies a seat and asks the server to serve him with specified eatables, the eatables are served to the customer. There is a transfer of property in the eatables to the customer. The essential elements of a sale are all satisfied, having regard to the definitions contained in Section 4(1), (3) and (4) of the Sale of Goods Act. While it may be said of a hotel proper that the resident-guest is not staying there for food and drink as such, in the case of a restaurant or other catering establishment, it cannot but be held that the customer goes there only to get his requirement of the eatables prepared by the restaurant and offered for sale. The essence of the transaction is one of sale and purchase.
19. Sri Anantha Babu referred us to Corpus Juris Secundum. In support of his contention, the learned counsel referred us to certain passages at pages 1214 and 1215 of Volume 77. In paragraph 331 under the heading 'food served in public eating place', it is stated, 'some authorities hold that an implied warranty or fitness for human consumption arises in the case of food served to a patron in a public eating place ; but other authority holds that such a transaction is not a sale and, hence, does not give rise to such a warranty.
20. According to some authorities an implied warranty of wholesomeness and fitness for human consumption arises in the case of food served to a guest in a public eating place, the transaction under this view constituting a sale within the rules giving rise to such a warranty. The nature of the contract for the sale of food by a restaurant to customers implies a reliance, it is said, on the skill and judgment of the restaurant keeper to furnish food fit for human consumption. The proprietor of the eating place is liable for his breach of warranty without proof of negligence on his part, and does not avoid liability by establishing that he exercised due care or kept the food in air-tight casings ; nor is he relieved of liability by the fact that the harmful article was purchased by him from a reliable dealer in a form not subject to effective inspection without destruction of marketability. Nevertheless, it has been held that in order to make him liable the food must have been prepared by him and that the rule of implied warranty does not apply in the case of goods known by a trade-name, and, therefore, obviously prepared elsewhere.
21. On the other hand, there is authority which holds that an implied warranty of this nature does not arise in such transactions, at least in the case of canned goods bought from reliable dealers and duly inspected and that whatever liability for damages there may be in such a case it must rest solely on the packer of the goods. The rule denying the existence of such a warranty is generally founded on the theory that the transaction does not constitute a sale inasmuch as the proprietor of an eating place does not sell but utters provisions, and that it is the service that is predominant while the passing of title is merely incidental.'
22. The learned counsel also referred us to some of the reports of the American Courts. We do not think it necessary to refer in detail to all those cases, as the Supreme Court had referred to the position obtaining in American and English Courts in State of H. P. v. Associated Hotels of India Ltd.  29 S.T.C. 474 (S.C.) In America, as already seen in the passages quoted from Corpus Juris Secundum, there is a divergence of opinion, some authorities holding that food offered for human consumption in a public eating place is a sale and therefore there is an implied warranty of fitness for human consumption, while | other authorities held that such a transaction is not a sale and therefore does not give rise to a warranty. The Supreme Court also referred to the Corpus Juris Secundum (Volume 77, pages 1215-1216) relied upon by the petitioners' counsel. In State of H. P. v. Associated Hotels of India Ltd.  29 S.T.C. 474 (S.C.), the Supreme Court observed;
The two conflicting views (in America) present a choice between liability arising from a contract of implied warranty and for negligence in tort, a choice indicative of a conflict, in the words of Dean Pound, between social interest in the safety of an individual and the individual interest of the supplier of food.
23. We are not in this case required to resolve the conflict obtaining in the American Courts. We have before us for consideration the constitutional provision, entry 54, List II, of the Seventh Schedule, the meaning of the expression 'sale' in the Sale of Goods Act and the relevant provisions of the General Sales Tax Act and the interpretation put upon them by the highest court of the country.
24. It was alleged in the writ petitions that the charges for service constitute about 80 per cent of the price paid by the customer for the foodstuffs and the remaining 20 per cent goes only towards the cost of materials. The petitioners have not placed before us anything to substantiate this contention. We have earlier indicated our view that the essence of the transaction between the customer and the restaurant is one of sale and not of service.
25. As a result of the above discussion, we have no hesitation in holding that, in the instant case, the impugned provision, Section 5(1) of the Andhra Pradesh General Sales Tax Act, 1957, read with the first proviso is not unconstitutional and that the State Legislature is competent to levy sales tax on the turnover of the restaurants as provided in the said section. That being so, the petitioners are entitled neither to the declaration prayed for, nor the consequential writ of mandamus.
26. The question that the impugned section was violative of Article 14 of the Constitution has not been pressed before us. Even otherwise, we are inclined to hold that the fact that fruits, vegetables and other perishables were exempted from sales tax cannot avail the petitioners. Once the appropriate legislature is empowered to levy the sales tax, it is a matter for that legislature to exempt any of the goods from the tax. Further, it cannot be said that the petitioners and the vendors of fruits and vegetables, etc., are similarly situated to attract the vice of discrimination.
27. No other question has been argued before us.
28. The writ petitions fail and are dismissed with costs. Advocate's fee Rs. 150 in each of the writ petitions.