Orissa High Court
Sagarika Hotel And Ors. vs Union Of India (Uoi) And Ors. on 22 February, 1988
Equivalent citations: [1988]70STC269(ORISSA)
JUDGMENT K.P. Mohapatra, J.
1. These writ petitions were heard together as common points of law and fact are involved, and this judgment will govern them all.
2. The petitioners run hotels on the sea beach at Puri with facilities for lodging and boarding of the guests. Assessments for the year 1983-84 for all the hotels and assessment for M/s. Puri Hotel Private Limited for the year 1982-83 in addition were completed. The assessments were based on daily estimate of sales of food, eatables and beverages sold to the guests. It was noticed that composite bills including charges for lodging and boarding were issued to the guests.
3. The case of the petitioners in short is that they did not sell or serve food, eatables and beverages to outsiders and those who do not stay in the hotels. Food, eatables and beverages were also not sold separately and permitted to be taken out of the hotels in packets and parcels. Even if the guests stay in the hotels but do not take food, there is no reduction of the lodging and boarding charges. In these circumstances, the dominant object of the petitioner being service and not sale, in accordance with the decisions reported in [1972] 29 STC 474 (SC) (State of Himachal Pradesh v. Associated Hotels of India Ltd.), [1978] 42 STC 386 (SC) [Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi], [1980] 45 STC 212 (SC) [Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi] and [1985] 58 STC 241 (AP) (Hotel Dwaraka, Hyderabad v. Union of India), they were not liable to pay sales tax or additional sales tax on the annual turnover for the years under assessment.
4. The Constitution (Forty-sixth Amendment) Act, 1982 which was assented to by the President on 2nd February, 1983 gave legislative competence to the States to levy sales tax on the sale turnover of food, eatables, beverages and drinks meant for human consumption. In consonance with the said amendment, the definition of "sale" in Section 2(g) was substituted by the Orissa Sales Tax (Amendment) Act, 1984 making it much more comprehensive, whereby, under Sub-clause (vi), turnover of sale of food or any other article for human consumption or any drink (whether or not intoxicant) is exigible to sales tax and became effective from 7th April, 1984. By virtue of this amendment, sales tax was not exigible on the sale turnover of food, eatables and beverages prior to 7th April, 1984, which means, up to the end of the assessment year 1983-84 such turnover was not exigible either with sales tax or additional sales tax.
5. The assessing officers who examined the accounts of the petitioners took the view that soon after the 46th Amendment of the Constitution of India by which sale was given a new comprehensive meaning and by which turnovers of sale of articles of food and drinks meant for human consumption were made exigible for sales tax, they were competent to levy sales tax and additional sales tax even for the assessment years 1982-83 and 1983-84.
6. Mr. Arijit Pasayat, learned counsel appearing for the petitioners, placed reliance on the decisions of Associated Hotels of India Limited [1972] 29 STC 474 (SC), Northern India Caterers [1980] 45 STC 212 (SC) and Hotel Dwaraka [1985] 58 STC 241 (AP) and urged that the 46th Amendment of the Constitution of India gave legislative competence to the States to amend the definition of "sale" in the State Sales Tax Acts, but by itself, it did not make amendment to the State laws. Therefore, the State Governments became competent to levy sales tax on the sale turnover of articles of food, beverages and drinks meant for human consumption with effect from the dates when the State sales tax laws were amended by including the comprehensive definition of "sale" in terms of the definition occurring in the 46th Amendment of the Constitution of India. Mr. A. B. Misra, learned Standing Counsel for the sales tax department, on the other hand, urged that .after the 46th Amendment was enshrined in the statute book with effect from 2nd February, 1983, the States became competent to levy sales tax in accordance with the definition of "sale" on the sale turnover of articles of food, beverages and drinks.
7. In the review decision of the Northern India Caterers case [1980] 45 STC 212 (SC) it was held as follows :
...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.
Although the above declaration of law was made on 21st December, 1979, this legal proposition must be deemed to be always in existence. Law was stated in unambiguous terms that where the sale of food happens to be the dominant object in a hotel, then the transaction would be exigible to sales tax. In a recent decision of our own Bench in 0. J. C. Nos. 1631 and 1632 of 1980, Piplani Sweets v. Sales Tax Officer [1988] 70 STC 153 (disposed of on 3rd February, 1988), it was held that where the dominant object was service and not sale, sales tax could not be assessed on the composite turnover, but where the dominant object is sale of food, eatables, beverages and drinks even to customers in packets and parcels, then sales tax is exigible. In all these cases in hand, the Sales Tax Officers were obsessed with the definition of "sale" in the 46th Amendment of the Constitution of India with regard to tax on the sale or purchase of goods which included food or any other article for human consumption or any drink, whether or not intoxicant. They did not examine the accounts in the light of the principle laid down in the review decision of the Northern India Caterers case [1980] 45 STC 212 (SC) nor found out whether the dominant object was service or sale and as to whether the petitioners sold food packets and parcels to outsiders. It is, therefore, necessary that the cases be remanded for fresh examination of accounts of the petitioners.
8. The assessing officer on remand will make attempts to ascertain as to whether the dominant object of the petitioners was "service" or "sale". If they did not sell food, eatables, beverages and drinks in packets and parcels they shall not be liable for sales tax on the turnover for the assessment year 1983-84 and in one case in respect of M/s. Puri Hotel Private Limited for the assessment year 1982-83, but on the other hand if it will be found that they effected packet or parcel sales to outsiders and the sale turnover could be bifurcated having been separately charged by bills, on the ratio of the decision in the case of Piplani Sweets [1988] 70 STC 153 (Orissa) such turnover shall be exigible to sales tax.
9. In the result, the writ petitions are allowed and the assessment orders are hereby quashed. The cases are remanded back to the respective Sales Tax Officers for reassessment according to law in the light of the observations made above. In the circumstances of the case, there shall be no order as to costs.
H.L. Agrawal, C.J.
10. I agree.