1. The following questions have been referred to us by the Lt. Governor of Delhi under the provisions of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi :
'(1) Whether, on the circumstances and on the facts of this case, the applicant-company is legally entitled to split up the restaurant sales into charges for services rendered and price for sale of goods and comprising of the sale price of the goods and service charges when consolidated rate is charged without making any break-up in the bills and if so, on what basis and at what rate
(2) Whether, on the facts and in the circumstances of the case, the applicant company is legally entitled to split up its turnover in respect of sale of goods and services for special reception and meetings when consolidated rate is charged If so, on what basis and at what rate
(3) Whether, on the facts and in the circumstances of the case, the learned Financial Commissioner was justified to hold that the receipts from holding special eves were not exempt from the levy of sales tax entirely
2. The questions relate to sales made by M/s. East India Hotels Ltd., in the hotel known as Oberoi Intercontinental Hotel situated on Dr. Zakir Hussain Road, New Delhi. The questions have arisen concerning the claim of the assessed to the effect that the sales made in the restaurant were not chargeable to sales tax in entirety, the plea of the assessed being that the sales included elements like entertainment, special decorations and other services distinct from the mere supply of food. The case of the assessed was that tax could be charged only on the sale of food and not on the element of entertainment, decorations and other services. The final order passed in revision by the Financial Commissioner shows that there was a cafeteria which is being run for the staff which was run on a no-profit-no-loss basis and regarding the sales from this cafeteria they were not in the course of business and, hence, were not liable to be included within the taxable turnover of the assessed.
3. Regarding the receipts from the restaurant business, the Financial Commissioner was of the view that if there was an element in the charge which was subject to an entertainment tax, that should be separated. In respect of sales made at receptions, meetings, marriages, etc., the Financial Commissioner ordered that 15 per cent of the receipts should be excluded from tax. The other claim of the assessed that the normal restaurant sales should be subjected to a 50 per cent deduction on account of other amenities was not accepted.
4. This has led to the present reference. The learned counsel for the assessed submits that the questions referred to us are covered by the judgments in the
Northern India Caterers (India) Ltd.'s case : 2SCR650 decided by the Supreme Court. The learned counsel for the department also submits the same. However, it was pointed out that the initial judgment which is reported as Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi  42 S.T.C. 388 (S.C.) was reviewed and the review is published as : 2SCR650 It is contended on behalf of the department that the judgment passed in review clearly shows that the initial judgment was limited to certain types of cases and could not apply generally.
5. It is now necessary to refer to the actual decision of the Supreme Court and also the decision in the review petition.
6. The initial judgment was a unanimous judgment in which it was held that when food is served to a customer in a restaurant, it is not a sale as such. It was observed as follows :
'It was urged for the respondent that in Associated Hotels of India Ltd. : 2SCR937 this court drew a distinction between the case of meals supplied to a resident in a hotel and those served to a customer in a restaurant. We are unable to find any proposition of law laid down by the court there which could lead to that inference. We may point out that in the view which appeals to us we find ourselves unable to agree with the observations to the contrary made by the Punjab High Court in Associated Hotels of India Ltd., Simla v. Excise and Taxation Officer, Simla , and by the Delhi High Court in Municipal Corporation of Delhi v. Laxmi Narain Tandon : AIR1970Delhi244 .
In the result, we hold 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.'
7. On the review petition, two separate judgments have been recorded, one by Pathak, J., on behalf of himself and Tulzapurkar, J., and one by Krishna Iyer, J. It was observed in the judgment by Pathak, J., as follows :
'The appellant prepared and served food both to the residents in its hotel as well as to casual customers who came to eat in its restaurant, and throughout it maintained that having regard to the nature of the services rendered there was no real difference between the two kinds of transactions. In both cases, it remained a supply and service of food not amounting to a sale. It is important to note that the facts alleged by the appellant were never disputed at any stage, and we find no attempt by the taxing authorities to enquire into the truth of the facts so asserted. It is in that factual context that this court examined the question whether any liability to sales tax was attracted. Our judgment rests on that factual foundation, and must be understood in that light.'
8. It may also here be mentioned that one of the questions that the court was considering was the distinction between a sale of food and mere supply or service of food. There was a distinction drawn between a sale of the food where the customer could take away the food and the case in which the customer could enter the restaurant and eat the food served, but could not carry away the unconsumed food. It was observed as follows :
'Had that amounted to a sale, the unconsumed portion would have belonged to the customer to take away and dispose of as he pleased. Besides, the court noted, there were other amenities and services of considerable materiality which were also provided. That was the case set up by the appellant before the assessing, appellate and revisional authorities, and it was apparently also the case pleaded before the High Court.'
9. In the judgment of Krishna Iyer, J., it was noted that he concurred with the view originally given, but made some remarks about the effect of the carrying away of the food. He, however, seemed to doubt whether the situations were much altered by carrying away of the food. It thus appears that the ratio of the two judgments 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.
10. We agree with the counsel for the assessed that the two judgments do cover the questions referred to us and the questions have been answered by the Supreme Court in favor of the assessed.
11. In the circumstances, the questions have to be answered somewhat differently from the way in which they have been framed.
12. The first question regarding the splitting of the restaurant sale and the service charges does not arise as the Supreme Court has said that the entire amount is not taxable. We, thereforee, decline to answer this question as the entire sale including the amount charged for supply of food and the amount charged for services rendered is to be excluded from the taxable turnover.
13. Turning to question No. (2), which concerns the consolidated charge at receptions, meetings, etc., the same situation holds true. The entire charge both for food as well as service is a service rendered by the hotel. There is no controversy in the present case that any part of the food is carried away by the customers. So, the entire amount will be excluded from the taxable turnover.
14. As regards the third question regarding eves, we hold that the learned Financial Commissioner was wrong in holding that the amounts received by the hotel for holding special eves were not exempt. Not only was the amount for special eves exempt, but in view of the judgment of the Supreme court, the entire amount in the case of ordinary supply of food to the customers which did not result in the food being carried away by the customers would be exempt. If, in any case, the customers purchased the food and took it away, then only would it be chargeable to sales tax and would be included in the taxable turnover.
15. As our judgment has been based on the position as settled by the Supreme Court, we would leave the parties to bear their own costs.
16. Reference answered accordingly.
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