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Chandra Vilas Hotel Vs. the Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case Number Sales Tax Reference No. 11 of 1969
Judge
Reported in[1973]30STC505(Guj)
AppellantChandra Vilas Hotel
RespondentThe Commissioner of Sales Tax
Appellant Advocate S.L. Modi, Adv.
Respondent Advocate B.R. Shah, Assistant Government Pleader,; M.G. Doshit, Adv. and;
Cases ReferredA.V. Fernandez v. State of Kerala
Excerpt:
- - 100 where this entry is explained in the following terms :it is clear on a plain reading of the entry that the following conditions must be satisfied in order -to attract the applicability of the entry, namely :(i) the goods sold must be cooked food and non-alcoholic drinks ;(ii) they must be served at one time at a price of not more than one rupee per person; interpreting the word 'outside',this court said that it meant 'any place in the wide open world outside the eating establishment'.speaking of the object of the legislature in granting exemption in question, the following observations were made in that case by this court :the object of the legislature in granting exemption under entry 14 of schedule a clearly is that cooked food and non-alcoholic drinks being almost the bare.....t.u. mehta, j.1. the question involved in this reference which is made by the gujarat sales tax tribunal is with regard to the interpretation of entry 14 of schedule a attached to the bombay sales tax act, 1959 (hereinafter referred to as 'the act'). this entry seeks to exempt 'cooked food and non-alcoholic drinks' from payment of sales tax under certain conditions and subject to certain exceptions as mentioned therein.2. short facts of the case are that the applicant-assessee, m/s. chandra vilas hindu hotel, is a registered dealer carrying on the business of running a hotel and an eating house. it serves at its eating house cooked food and non-alcoholic drinks including tea. cooked food consists inter alia, of dal (cooked pulses) and shak (cooked vegetables). it also prepares jalebis (a.....
Judgment:

T.U. Mehta, J.

1. The question involved in this reference which is made by the Gujarat Sales Tax Tribunal is with regard to the interpretation of entry 14 of Schedule A attached to the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the Act'). This entry seeks to exempt 'cooked food and non-alcoholic drinks' from payment of sales tax under certain conditions and subject to certain exceptions as mentioned therein.

2. Short facts of the case are that the applicant-assessee, M/s. Chandra Vilas Hindu Hotel, is a registered dealer carrying on the business of running a hotel and an eating house. It serves at its eating house cooked food and non-alcoholic drinks including tea. Cooked food consists inter alia, of dal (cooked pulses) and shak (cooked vegetables). It also prepares jalebis (a variety of sweet) in its premises. All these articles are supplied to the customers in the premises of the eating house of the assessee. But, some customers prefer not to consume these articles at the premises of the eating house and occasionally take away these articles with them outside the premises of the eating house. On such occasions jalebis are supplied either wrapped in paper or arranged in a basket, while dal and shak and tea are supplied in customers' own utensils.

3. The assessee was assessed for the purpose of sales tax for the S. Y. 2019, the corresponding period of the Gregorian calendar being from 29th October, 1962, to 17th October, 1963. Now, according to entry 14 of Schedule A attached to the Bombay Sales Tax Act, 1959, as it read at the relevant time, if cooked food 'is served at one time at a price of not more than one rupee for consumption at or outside the eating house', it would be exempt from sales tax. During the course of the assessment proceedings, the concerned Sales Tax Officer found that the jalebis supplied by the assessee at one time at a price of not more than one rupee per person and allowed to be taken outside the assessee's eating house was worth Rs. 36,000 per year, while dal and shak supplied by the assessee to different customers at one time at a price of not more than one rupee, per person, and allowed to be taken outside the eating house in the utensils of the customers, were worth Rs. 34,200 per year. The Sales Tax Officer, therefore, included both these amounts in the total turnover for the purpose of levying sales tax under the Act.

4. The applicant-assessee contended that jalebis, shak, dal and tea supplied to different customers in this manner were not liable to any sales tax because supply of these articles at the counter would amount to 'service' for consumption irrespective of the question whether the articles were consumed by the customers in the eating house itself or whether taken away by the customers for consumption outside the assessee's eating house. This contention of the assessee was rejected by the Sales Tax Officer with the result that, the assessee preferred an appeal before the Assistant Commissioner, Sales Tax. The assessee was, however, not successful in this appeal. It, therefore, preferred second appeal before the Tribunal. Before the Tribunal, the assessee contended that even though jalebis wrapped in papers and supplied in baskets were allowed to be taken outside the premises of the eating house and even though other articles, namely, dal, shak and tea were also similarly supplied in the utensils brought, by the customers, these articles maintain the character of cooked food and non-alcoholic drinks 'served for consumption' at the counter of the eating house and, therefore, the turnover represented by such sales was covered by the exemption contemplated by entry 14 of Schedule A. The Tribunal while appreciating this contention of the assessee considered the meaning of the word 'served' appearing in the said entry 14 and held that having regard to the entry and different conditions appearing therein, the entry covered cooked food and non-alcoholic drinks served at eating house, restaurant, hotel, refreshment room or boarding establishment, at one time at a price of not more than one rupee, per person, irrespective of the place where such cooked food and non-alcoholic drinks are 'served' and does not cover sales or supply of such cooked food or drinks unaccompanied by any 'service' being rendered. According to the Tribunal, 'service' which is contemplated by entry 14 is service at table and not at counter and, therefore, cooked food and non-alcoholic drinks, in order to come within the purview of entry 14 of Schedule A must be served at table by the concerned 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 case of jalebis, dal, shak and tea 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 cannot be said that these articles were served for consumption within the meaning of entry 14.

5. Being aggrieved by this decision of the Tribunal, the assessee has preferred this reference. Following is the question of law, which is referred to this court by the Tribunal for opinion :

Whether on the facts and in the circumstances of the case, the sale of jalebis by wrapping them in paper or putting them in basket and of dal, shak and tea by putting them in the customers' utensils at a price of not more than Re. 1 per person for consumption by the customers outside the restaurant, are covered by entry 14 of Schedule A to the Bombay Sales Tax Act, 1959.

6. Before attempting to discuss the merits of the point raised by the question, which is referred to us, it would be proper to make a reference to the relevant scheme of the Act. Section 3 of the Act is the charging section, which contemplates the levy of sales tax on a turnover beyond a particular limit. Then follows Section 4. It speaks about; the liability of a dealer registered under the Central Sales Tax Act, 1956. For the purpose of this reference, we are not concerned with this section. But the section relevant to the facts of the present case is Section 5. It provides for making sales and purchases of certain goods free from sales tax. It begins with a non obstante clause and is found in the following terms :

5. (1) Notwithstanding anything in this Act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule A, no tax shall be payable on the sales or purchases of any goods specified in that Schedule.

(2) The State Government may by notification in the Official Gazette add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein ; and thereupon, the said Schedule shall be deemed to be amended accordingly.

(3) Every notification issued under Sub-section (2) shall be laid for not less than thirty days before the State Legislature as soon as possible after it is issued and shall be subject to rescission by the State Legislature or to such modification as the State Legislature may make, during the session in which it is so laid or the session immediately following. Any rescission or modification so made by the State Legislature shall be published in the Official Gazette and shall thereupon take effect.

Schedule A which is contemplated by Sub-section (1) of Section 5, therefore, provides for those goods, the sale or purchase of which is free from all taxes. It is in this schedule that entry 14 appears. This entry was as under at the relevant time :

Cooked food (excluding ice-cream and kulfi) and non-alcoholic drinks not containing ice-creams 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.

Analysis of this entry reveals the following aspects:

(1) It exempts 'cooked food' (excluding ice-cream and kulfi) and non-alcoholic drinks, not containing ice-cream.

(2) It attaches a condition for exemption by providing that they should be 'served at one time at a price not more than rupee one per person for consumption'.

(3) It provides for a situs by saying that the said service for consumption should be at or outside any 'eating house, hotel, restaurant, refreshment room or boarding establishment'.

(4) It carves out an exception by providing that such eating house, etc., should not be a 'shop or establishment conducted primarily for the sale of sweetmeats, confectionery, cakes, biscuits or pastries.

7. We find that this court had an occasion to consider this entry in Govindshram Hotel v. The State of Gujarat [1966] 17 S.T.C. 100 where this entry is explained in the following terms :

It is clear on a plain reading of the entry that the following conditions must be satisfied in order -to attract the applicability of the entry, namely :

(i) the goods sold must be cooked food and non-alcoholic drinks ;

(ii) they must be served at one time at a price of not more than one rupee per person;

(iii) they must be served for consumption and not for sale or any other purpose ; and

(iv) the service must be for consumption at or outside an eating house, restaurant, hotel, refreshment room or boarding establishment not falling within the excepted category.

The question involved in that case was whether the exemption contemplated by the entry would be available where cooked food is served for consumption at any other place outside the eating house concerned. Interpreting the word 'outside', this court said that it meant 'any place in the wide open world outside the eating establishment'. Speaking of the object of the Legislature in granting exemption in question, the following observations were made in that case by this court :

The object of the Legislature in granting exemption under entry 14 of Schedule A clearly is that cooked food and non-alcoholic drinks being almost the bare necessaries of life, no tax should be chargeable by the State on sale of cooked food and non-alcoholic drinks provided of course they are served at one time at a price not exceeding one rupee per person, this latter condition being introduced to secure that the benefit of the exemption should be available only to the common man who would ordinarily not consume at one time cooked food and non-alcoholic drinks exceeding one rupee and if that be the object of enactment of entry 14 of Schedule A, we do not see what difference it should make whether cooked food and non-alcoholic drinks are served by the eating establishment to the common customer for consumption in or immediately outside the eating establishment or at any other place outside the eating establishment.

8. It is in the background of these observations made by this court in the above referred case of Govindshram Hotel, [1966] 17 S.T.C. 100 that we approach the facts of the case before us. It should, however, be noted that the question involved in the case before us is quite different from the question which was considered by this court in Govindshram Hotel's case [1966] 17 S.T.C. 100. Shortly stated, the question which is involved in the matter before us is whether the service, which is contemplated by entry 14 of Schedule A is the service at 'table' or the service at 'counter'.

9. The assessee's contention with regard to this question is that if jalebis are supplied to a customer wrapped in paper or packed in a basket to be carried and consumed at his house, it, none the less, amounts to 'service' within the meaning of the entry and, therefore, it is wholly immaterial if the articles in question are not served at one of the tables in the restaurant or the eating house and consumed there within the sight of the management of the restaurant.

10. On the other hand, the contention of the department is that the service, which is contemplated by the entry, is the service 'for consumption' and such service can be effected only at one of the tables of the restaurant and not at its counter. According to the department, service at the counter amounts to sale but, since such sales are not covered by the exemption provided by entry 14 of Schedule A, the assessee is liable to pay tax on the turnover represented by such sales.

11. In view of this controversy between the parties, a short question which arises to be determined is what type of service is contemplated by the disputed entry. In other words, what the Legislature means when it says that the goods in question should be 'served...for consumption'. This takes us to the primary meaning of the verb 'serve' and its derivative noun 'service'.

12. But before discussing the meanings which can legitimately be attributed to these two words, it would be appropriate to refer to the legislative history of this entry. A similar entry first appeared in the Bombay Sales Tax Act, 1946, at serial No. 10 of Schedule II which also provided for exemption from sales tax. At that time, it was in the following terms:

cooked food eaten at a restaurant, hotel, eating house or other place where cooked food is served-except where the costs of a single meal exceeds rupee one.

Thereafter by Bombay Act 1 of 1949, the entry was amended and the amended entry was found to be as under :

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

Thereafter the Bombay Sales Tax Act, 1953, came into force and a similar entry was provided for by that Act in Schedule A thereof. It was entry No. 22 and the same was in the following terms:

Food and non-alcoholic drinks consumed at a hotel, restaurant, refreshment room, eating house or other place where such food and drinks are served-except when the cost of food and drinks consumed at one time by one person exceeds rupee one.

This was the entry upto the time when the Act of 1959 came into force. In the meanwhile, the word 'at', which is found in entry No. 22 of the Act of 1953, came to be interpreted as meaning 'immediately outside' with the result that sale of food and non-alcoholic drinks served and consumed immediately outside the eating establishment in front of it was held to be exempt from tax under the entry. But even this interpretation resulted in considerable amount of difficulty and hardship to the owners of eating establishments, with the result that eventually the entry which emerged at serial No. 14 of. Schedule A to the Act of 1959, included the word 'outside'. This aspect of the legislative history which led to the entry in the present form is stated by this court in the above referred case of Govindshram Hotel, [1966] 17 S.T.C. 100 in the following words :

But a considerable amount of difficulty and hardship was caused to owners of eating establishments under this entry. The sales of food and non-alcoholic drinks made by them were exempt from tax where food and non-alcoholic drinks were consumed in the eating establishment or immediately outside the eating establishment but where food and nonalcoholic drinks were served by them at other places or though served at the eating establishment were taken away by the customers for consumption elsewhere, the sales were not exempt from tax. Now, by the very nature of the business they could not possibly maintain separate accounts in respect of these two categories of sales, and the sales tax authorities, therefore, used to estimate the taxable sales by reference to such uncertain and undeterminative factors as the number of tables in the area of the eating establishment, the number of waiters employed, the area of the owners of eating establishments, etc. This caused great hardship to the owners of eating establishments and often resulted in unfair and unjust taxation and moreover there was really no valid or cogent reason to differentiate between 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 Bombay Sales Tax Act, 1959, introduced the corresponding entry 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'.

This is in short the legislative background of the entry which we are called upon to interpret. This background, in our opinion, throws a flood of light on the meaning, which the Legislature has intended to give to the word 'serve'. This history which forms the background shows that the article in question was required to be 'eaten' or 'consumed' at the eating house or eating establishment where it was served. The important fact to be noted is that the consumption of the article was initially contemplated only at the eating house. It is difficult to comprehend how the article in question can be served at the counter if it is expected to be 'eaten' or 'consumed' at the eating house concerned. It is true that the concept of the word 'at' was subsequently expanded but the fact remains that the word 'served' has been used throughout the legislative development as connoting the type of service which is rendered at eating houses, restaurants, hotels, refreshment rooms and boarding establishments. The meaning, which can be attributed to the word 'served' has, therefore, not changed in any manner with the change in the entry itself, at different stages. In our opinion, this particular background of the legislative history, therefore, supplies a dependable clue for determining the real meaning of the word 'served', which at present appears in entry No. 14

13. Having thus referred to the legislative history, we shall now proceed to consider the meaning of the word 'served', as it appears at present in the entry.

14. The plain and general meaning of the word 'serve' is to perform a service. But what is meant by 'service' The word 'service' is derived from the verb 'serve'. But both the words are of such varied and wide implications that it is practically impossible to provide for them a general definition, which would cover every type of contingency. Therefore, it necessarily follows that the meanings, which can be attributed to these words should be determined only in accordance with the context in which they are found used in the entry. In this connection, we find some very pertinent observations at page 1139 of Corpus Juris Secundum, Volume 79. It says :

The word 'service' has a multiplicity and a variety of meanings and different significations. It is not a simple word with a simple meaning, leaving no room for construction, but rather it is a broad term of description, which varies in meaning according to the sense in which it is used and, the context in which it is found, and the sense in which it is used must be determined from the context. Thus, the courts have found it impracticable to attempt a definition by which to test every case that may arise.

15. In spite of the above referred difficulty in giving any general or comprehensive definition of these terms, it would be of some advantage to refer to the dictionary meanings which are given to them by some well-known authors. We may first refer to Webster's Dictionary. That dictionary at page 1658 gives more than 20 meanings to the verb 'serve' and 22 meanings to the noun 'service'. It is not necessary to repeat all these different meanings which are given in the dictionary but the meanings of the verb 'serve', which are relevant to the point involved in this reference are as under :

Serve: (1) to wait on (customers), as in a store; (2) to provide (customers or users) with goods or service; (3) to provide (goods) for customers; to supply; (4) to prepare and offer (food, etc.) in a certain way to others, etc. as, she served cock-tails to us ; he served the chicken with chestnut dressing; (5) to offer or set food etc. before (a person); to help (a person) to food, etc.,

These different meanings show that to serve would mean to wait on a customer as in a store, as well as to offer food at a table. Shorter Oxford Dictionary exhaustively gives 15 meanings to the verb 'serve'. At page 1850 it gives under the classification (iii) the following meaning:

To wait upon (a person) at table ; hence, to set food before, help (a person) to food.'

Then as against the classification (iv), it gives the following meaning:

To set (meat or drink) on the table or before a person; to bring in or dish up (a meal).

It is thus apparent that the dictionary contains many meanings of the verb 'serve' and the noun 'service'. The important question is which of these meanings should be accepted. True answer to this question is provided by the above-quoted observations taken from Corpus Juris Secundum, which shows that the sense in which the word is used must be determined from the context in which it appears. It is, therefore, necessary to scrutinise the context in which this word is found in entry No. 14.

15. If again a reference is made to the said entry it will be found that it is unequivocal in stating that the article in question should be served 'for consumption'. In our opinion, the condition that the service should be 'for consumption' makes it clear that the service, which is contemplated by the entry is service 'for consumption', and not for any other purpose, and if once it is believed that the service should be 'for consumption', the question which arises to be considered is, can such a service be properly effected at the counter of the concerned eating establishment or at one of its tables If service can be effected at a counter, then the next question would be what should be taken as a demarcating line which would distinguish a sale from such a service. In our opinion, it cannot be gainsaid that every service rendered in a sale does not partake of the character of a service which is rendered 'for consumption'. A service which is rendered 'for consumption' of a particular article postulates an arrangement which enables the customer to avail of the facilities which are ordinarily required to consume the said article. These facilities ordinarily consist of arrangement of necessary plates and dishes on a table at a place and in the atmosphere suitable for eating. These facilities would also include the services of some waiters who would look after other needs of the customer to whom the articles are offered 'for consumption'. These requirements have to be satisfied if a service is 'for consumption'. Therefore, the pertinent question which arises to be considered is whether any of these requirements can be satisfied if the service is to be made at the counter of the concerned eating establishment. Looking to the facts of this case, it is evident that the service which is to be rendered at the counter would essentially be the service 'for delivery' and not 'for consumption' of the articles in question.

16. In our opinion, therefore, the fact that the word 'served' is used in the context of the expression 'for consumption' supplies us a strong indication that the service, which is meant by the Legislature in entry 14 of Schedule A is service at table and not the service at counter.

17. We further find that there is another context which appears from the entry and which leads us to the same conclusion. It should be noted that the entry contemplates service 'for consumption' at or outside 'any eating house, restaurant, hotel, refreshment room or boarding establishment'. In other words, the idea of 'consumption' is related to only certain category of business establishments. It should be marked that each of the establishments enumerated in the entry falls within the category of those establishments which serve food at table. They are, therefore, contradistinguished from shops, stores and other like establishments where goods are sold on counters. Therefore, when the entry speaks of service, it is only that kind of service, which is rendered at eating house, restaurant, hotel, refreshment room and boarding establishment. Thus, in our opinion, the word 'served' takes its meaning even from the nature of the place at or outside which the service is contemplated by the entry.

18. Thus, we find that the context in which the word 'served' is used by the Legislature in the disputed entry leaves no doubt about its nature and meaning. The fact that this word is used in the context of consumption and establishments of a particular type, would go to establish clearly that the service contemplated by it is the service only at table.

19. Again by reference to Volume 79 of Corpus Juris Secundum, page 1138, we find a good deal of support for the view, which we are taking. On that page we find that while denning the verb 'serve', the following observations are made :

In a more restricted sense, 'serve' means to bring and arrange on the table or distribute among guests, as food.

These observations are followed by foot-note No. 32, which is more pertinent to the facts of the case under our consideration. This footnote reads as under :

It may not be said that one has 'served' a meal who merely prepares a sandwich for consumption, wraps it in a paper napkin and hands it to a purchaser without offering any facilities for its consumption on the premises and with the intention that it be consumed elsewhere : Treasure Island Catering Co. v. State Board of Equalization 120 P 2d. 1, 5, 19 Col. 2d. 181.

Again at page 1141 of the same volume, the following observations are found at foot-note No. 8:

The sale of food by restaurants is usually referred to as 'service' although an actual sale is involved: Central Power & Light Co. v. State, supra.

The law reports are not before us but we find that the observations which are quoted above do lend a general support to the view which we are taking.

20. Shri Modi, who appeared on behalf of the assessee-applicant contended that if the word 'served' connotes 'service at the table', it was not necessary to connect that word with the idea of 'consumption' by using the words 'for consumption'. We do not find that by using the words 'for consumption' the Legislature has said anything which is redundant because the idea of service at the table is connoted by necessary implication only by the use of the words 'for consumption'.

21. Apart from the above referred dictionary meanings and the observations found in Corpus Juris Secundum, we find that it would also be useful to apply the common parlance test, which is applied by the Supreme Court in the case of Ramavatar Budhaiprasad v. The Assistant Sales Tax Officer, Akola, and Anr. [1961] 12 S.T.C. 286 (S.C). In that case, the Supreme Court has preferred to be guided less by dictionary meanings and more by the manner in which a particular word found in the schedules of the Sales Tax- Act, is understood by the persons, who are associated with the goods in question, and has observed that only that meaning should be attributed to a particular word, which is prevalent in common parlance. Now, if this test is applied to a 'service', which is meant for 'consumption' of the articles in question, and which is of the kind performed only at eating houses, restaurants, etc., then we have no doubt in our mind that it is only the service which is rendered at the table which is meant by the entry, and which should be presumed to be in the mind of the Legislature at the time of enacting this entry.

22. Shri Shah, who appeared on behalf of the department, contended that entries appearing in Schedule A read with Section 5 of the Act provide an exemption from the claim of taxes and if it is so, only that construction would be accepted which is in favour of the department in case of a doubt with regard to the true interpretation and meaning of exempted entries. We, however, find that in view of the unequivocal meaning of the word 'served' in the context in which it is used in the entry, as found by us above, we are not called upon to express any opinion on this point. We find that the question whether the entries appearing in Schedule A attached to the Act provide for exemption or not as also the question as to the real function of Section 5 in the scheme of the Act are debatable questions in view of the decision given by the Supreme Court in A.V. Fernandez v. State of Kerala [1957] 8 S.T.C. 561 (S.C.). In this judgment, we have used the expression 'exemption' at certain places while referring to entry 14 of Schedule A, but this expression is used by us with a limited purpose of showing that the article in question does not invite tax liability if it satisfies the conditions and exceptions mentioned in entry 14 and, therefore, the mere use of the word 'exemption' should not be construed as expressing any opinion on the question whether Section 5 of the Act takes out of the purview of the Act all those entries which are mentioned in Schedule A or as to the legal effect of granting exemption to those articles.

23. In the result, we find that the view taken by the Tribunal is correct and, whatever we have said above regarding the service of jalebis, dal and shak applies equally to tea supplied by the assessee to its customers to be carried home. Therefore, our answer to the question which is referred to us is in the negative. This reference is accordingly disposed of. The applicant shall bear the costs of the opponent in this reference.


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