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Gopi Nath and Sons Vs. Shri H.B. Gandhi, Excise and Taxation Officer-cum-assessing Authority and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition No. 2054 of 1982
Judge
Reported in[1983]54STC211(P& H)
AppellantGopi Nath and Sons
RespondentShri H.B. Gandhi, Excise and Taxation Officer-cum-assessing Authority and ors.
Appellant Advocate N.C. Jain, Adv.
Respondent Advocate B.L. Bishnoi, Additional Adv.-General
DispositionPetition allowed
Cases ReferredSimla v. Excise and Taxation Officer
Excerpt:
.....food was supplied in an eating house or restaurant and the dominant object of the transaction is sale of food and rendering of service is merely incidental, such sale is exigible (to tax). the petitioners did not provide any high-class services, like ball dancing, music, et cetera. imperial hotel and restaurant) :that no doubt the customers do not take the left-overs and remnants of food, but that is because the people think such a conduct to be bad mannered and against etiqutte. bishnoi has laid a great stress on the following paragraph of the judgment in the review application (reported in air 1980 sc 674) :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..........excise and taxation officer held that the restaurant of the petitioner was run for the purpose of sale of foodstuffs. no special service is being rendered for which any appreciable sum can be charged by the dealer. the dealer has failed to establish that any condition has been laid down that the customer cannot take away the left-overs. on the other hand there is a prevalent practice that that the people purchase foodstuffs and carry away in the tiffin boxes. they have challenged this order of the assessing authority. similarly, a show cause notice in form s.t. 25 dated 21st july, 1980, was issued to messrs. imperial hotel and restaurant, karnal, which culminated in passing an order dated 23rd march, 1982, vide which the petitioners were assessed to pay sales tax on the gross turnover.....
Judgment:

Sukhdev Singh Kang, J.

1. This judgment will dispose of Civil Writ Petitions Nos. 2054 and 2170 of 1982, because common questions of law and facts are involved in them.

2. The facts as they emerge from the pleadings of the parties are as under : Messrs. Gopi Nath and Sons who are the petitioners in Civil Writ Petition No. 2054 of 1982 and Messrs. Imperial Hotel and Restaurant, Karnal, petitioners in Civil Writ Petition No. 2170 of 1982, run restaurants at Karnal. Meals are served there to the public according to a la carte menu. In addition to the service of meals, beverages and tea, the petitioner-concerns have got bar licences for beer and whisky and the customers can consume liquor and beer. The petitioners had been charging sales tax on eatables and drinks up to the second quarter of the year 1978-79, at the rate of 7 per cent and used to pay this tax to the sales tax department. However, the Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC) held that the service of meals to visitors to the restaurants was not taxable and that was so whether the charge was for the meals as a whole or according to the dishes separately ordered. The petitioners stopped charging sales tax from their customers in the third quarter of the year 1978-79 and did not show the receipt of any sales tax in the returns filed by them and did not deposit any tax in relation to meals and drinks. The Assessing Authority accepted this position and did not point out that the petitioners were liable to charge sales tax on the food and drinks served to the customers. The petitioners continued filing quarterly sales tax returns showing no sales tax being charged from the customers visiting the restaurants and no tax being deposited on this score. The judgment in the Northern India Caterers' case [1978] 42 STC 386 (SC) was reviewed by their Lordships of the Supreme Court. Their Lordships reconsidered the matter and declined to change the decision given earlier and upheld the earlier judgment.

3. On 28th December, 1981, the Assessing Authority issued show cause notice in form S.T. 25 to Messrs. Gopi Nath and Sons under Section 28(2) of the Haryana General Sales Tax Act, 1973 (hereinafter called 'the Act'). The petitioner appeared before him and contended that he did not sell food and only rendered services to the customer. The Excise and Taxation Officer held that the restaurant of the petitioner was run for the purpose of sale of foodstuffs. No special service is being rendered for which any appreciable sum can be charged by the dealer. The dealer has failed to establish that any condition has been laid down that the customer cannot take away the left-overs. On the other hand there is a prevalent practice that that the people purchase foodstuffs and carry away in the tiffin boxes. They have challenged this order of the Assessing Authority. Similarly, a show cause notice in form S.T. 25 dated 21st July, 1980, was issued to Messrs. Imperial Hotel and Restaurant, Karnal, which culminated in passing an order dated 23rd March, 1982, vide which the petitioners were assessed to pay sales tax on the gross turnover annually at the rate of 7 per cent and the petitioners were made liable to pay sales tax, which they had not charged from their customers. The petitioners filed appeal against that, but the appellate authority did not decide it for a long time. The assessing authority issued show cause notice in form S.T. 25 on 2nd December, 1981, for the assessment year 1979-80 and assessed the petitioners to the tune of Rs. 37;000 odd on 23rd March, 1982. Aggrieved, the petitioners have filed these writ petitions.

4. It is contended by Mr. N.C. Jain, the learned counsel for the petitioners, that the petitioners run modern restaurants, where large number of amenities, like neat and clean sitting place, good furniture, crockery, fans, air-conditioner (in the case of Messrs. Gopi Nath and Sons), coolers and other accessories are provided for the comfort and convenience of the customers. They provide congenial atmosphere, where people can relax and have their food and drinks. The customers consume food and drinks but they do not take away these articles along with them. They also do not take along with them the left-overs. Articles of food and drinks are placed at the command of the customers, who consume the same and appease their thirst and hunger. They do not take away the uneaten food. The property of these goods does not pass on to them before they eat the articles of food or consume the drink. Nothing remains of what is consumed to which the right of property may be attached. The customer pays for the service rendered to him. The true sense of these transactions is the service to the satisfaction of human need and desire.

5. Mr. Jain has relied upon the decision of the final Court in Northern India Caterers' case [1980] 45 STC 212 (SC). He has also drawn my attention to a Division Bench decision of the Delhi High Court in East India Hotels Ltd. v. Commissioner of Sales Tax [1981] 48 STC 179.

6. On the other hand, Mr. Bishnoi, the learned Additional Advocate-General, Haryana, has argued that the respective Assessing Authorities went into all the aspects of the matter. It was held that the return for the year 1978-79 was not submitted and it could not be said whether it was mentioned therein that the customers could not take away the left-overs. It has been held by their Lordships of the Supreme Court that if food was supplied in an eating house or restaurant and the dominant object of the transaction is sale of food and rendering of service is merely incidental, such sale is exigible (to tax). The petitioners did not provide any high-class services, like ball dancing, music, et cetera. There were no special services tendered. The object of the dealer was definitely one of sale of foodstuffs and not of rendering services. The Assessing Authorities had compared the prices of different dishes served by the petitioners with the ordinary dhabas. There was not much difference. They varied from 50 paise to 75 paise per plate which showed that nothing was charged for the services rendered. He relied upon the decision of the Supreme Court in the review petition filed in Nothern India Caterers' case now reported as AIR 1980 SC 674.

7. Undoubtedly both the restaurants have been granted licences for running bars and both of them have been furnished with at least moderate quality of furniture. The management has provided crockery, coolers, fans, music, et cetera. The places are kept neat and clean. Food and drinks are served in this congenial atmosphere. The customers order for the dishes and drinks of their choice. These are supplied to them. In these days of inflation of prices, it is difficult to imagine that much of food for which the customers have to pay along with the services will be left unconsumed. Any way, it is not the case of the Assessing Authorities that they saw any customer taking away the food or the left-over of the food served. It has been observed in the assessment Order (in the case of Messrs. Imperial Hotel and Restaurant) :

that no doubt the customers do not take the left-overs and remnants of food, but that is because the people think such a conduct to be bad mannered and against etiqutte.

8. There is no material on the file for the conclusion that a part of the food is given to beggars or dogs. Beggars and dogs do not enter any restaurant worth the name. Whatever is served, the whole or substantial part thereof is consumed by the customers. The property in the food articles or drinks does not pass on to the customers before they consume them nor afterwards because after those articles are consumed they are destroyed and they do not remain capable of being possessed. For that reason, the Supreme Court in Northern India Caterers' case [1978] 42 STC 386 (SC) held that in these circumstances there was no element of sale in serving the food along with other amenities provided to the customers. Their Lordships of the Supreme Court observed :

The essence of it is not an agreement for the transfer of the general property of the food or drink placed at the command of the customer for the satisfaction of his desires, or actually appropriated by him in the process of appeasing his appetite or thirst. The customer does not become the owner of the food set before him, or of that portion which is served for his use, or of that which finds a place on his plate or in side dishes set about it. No designated portion becomes his. He is privileged to eat and that is all. The uneaten food is not his. He cannot do what he pleases with it. That which is set before him or placed at his command is provided to enable him to satisfy his immediate wants 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 true essence of the transaction is service in the satisfaction of a human need or desire,-ministry to a bodily want. A necessary incident of this service or ministry is the consumption of the food required. This consumption involves destruction and nothing remains of what is consumed to which the right of property can be said to attach. Before consumption title does not pass; after consumption there remains nothing to become the subject of title. What the customer pays for is a right to satisfy his appetite by the process of destruction. What he thus pays for includes more than the price of the food as such. It includes all that enters into the conception of service and with it no small factor of direct personal service. It does not contemplate the transfer of the general property in the food supplied as a factor in the service rendered.

9. Even after the decision of the review application the position of the articles of food served in the restaurants, which provide other services to the customers, remains substantially the same. Mr. Bishnoi has laid a great stress on the following paragraph of the judgment in the review application (reported in AIR 1980 SC 674) :

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 they attract, no such apprehension can be reasonably entertained. Indeed, we have no hesitation in saying 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. In every case it will be for the taxing authority to ascertain the facts when making an assessment under the relevant sales tax law and to determine upon those facts whether a sale of the food supplied is intended.

10. Their Lordships of the Supreme Court have emphasised that if it is established upon the facts that any restaurant where food is served to the customers, the substance of the transaction is the sale of food and rendering of service is merely negligible, sale tax shall be chargeable. In the cases in hand there is no material to conclude that the sale of food was the substance of the transaction or dominant object. The Delhi High Court had an occasion to examine this argument in somewhat similar circumstances in East India Hotels Ltd's case [1981] 48 STC 179. It has been observed :

The ratio of the two judgments of the Supreme Court in Northern India Caterers {India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC) and [1980] 45 STC 212 (SC) is that if food is served in a restaurant, it is a mere supply to meet the demand of the customer's stomach and is not a sale as such. It is a service rendered to a hungry customer and not a sale of food.

11. It was held:

(i) that the entire receipts of the assessee including the amount charged for the supply of food in its restaurant and the amount charged for services had to be excluded from the taxable turnover and no question of splitting of its restaurant sales into charges for services and price for sale of goods arose ; and the position was the same in relation to the consolidated charges at receptions and meetings ;

(ii) that the amounts received by the assessee for holding special eves would be exempt in the case of ordinary supply of food to customers which did not result in the food being carried away by the customer; and that if, in any case, the customers purchased the food and took it away, then only the amount received would be chargeable to sales tax and liable to be included in the taxable turnover.

12. Mr. Bishnoi had stressed that it was for the petitioners to establish that the customers could not carry away food or the left-overs thereof. The onus was on the assessee and not on the department. There is no substance in this argument. As noticed earlier, the tenor of the order in Civil Writ Petition No. 2170 of 1982 is rather to the effect that the customers do not take away the food.

13. In Associated Hotels of India Ltd., Simla v. Excise and Taxation Officer, Simla AIR 1966 Punj 449, it was held: 'that burden of proving that supply of food amounted to sale, was on the revenue.'

14. Mr. Bishnoi further argued that according to Section 14 of the Act onus to establish that the sale is exempt from sales tax is on the assessee. This provision is also of no help to Mr. Bishnoi. The case of the petitioners here is that the transaction of serving food along with other services in a restaurant is not a sale. Section 14 of the Act will be applicable only if it is held that its activities amounted to sale.

15. For the foregoing reasons, I allow these writ petitions (Civil Writ Petitions Nos. 2054 and 2170 of 1982) and quash the notices issued to the petitioners and the assessment orders passed against them. No costs.


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