Karnataka High Court
The State Of Karnataka vs Udipi Krishna Bhavan on 20 June, 1980
Equivalent citations: [1981]48STC177(KAR)
JUDGMENT Rama Jois, J.
1. These are two sales tax revision petitions presented under section 8A of the Karnataka Appellate Tribunal (Amendment) Act (59 of 1976) read with section 23 of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the Act).
2. The assessee in both the cases is Udipi Krishna Bhavan, Kolar. For the assessment years ending 31st March, 1977, and 31st March, 1976, the respondent was assessed to tax on the turnover of food and drinks supplied by it to the visitors. The turnover included similar transactions at M/s. Sweekar Hotel which is said to be a branch of the main hotel at Kolar. The respondent preferred two appeals before the Deputy Commissioner of Commercial Taxes who reduced the turnover to some extent. Aggrieved by the said orders of the appellate authority, the respondent preferred two second appeals before the Karnataka Appellate Tribunal. Before the Tribunal, the respondent placed reliance on the judgment of the Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi in which the Supreme Court had held that supply of food-stuffs in a hotel or restaurant accompanied by service does not constitute sale as defined under section 2(g) of the Bengal Finance (Sales Tax) Act (6 of 1941) as in force in the Union Territory of Delhi. The Tribunal applied the ratio of the said judgment and held that the turnover of the respondent does not constitute the turnover under the Act. Aggrieved by the said common order of the Tribunal, the State has presented these two revision petitions.
3. Shri R. G. Devadar, the learned High Court Government Pleader, contended that in view of the observations of the Supreme Court in its judgment on the review petition filed in the case of Northern India Caterers , it should be held that the ratio in the main judgment is in applicable to the case of the assessee and, therefore, the order of the Appellate Tribunal is liable to be set aside.
4. In order to appreciate the contention, it is necessary to set out the findings of the Appellate Tribunal and the question of law arising for consideration in the revision petition, as set out in the revision petition. It reads :
"5. Findings of the Appellate Tribunal :
(a) The assessee runs a hotel wherein food and drink are served to the visitors. The assessee declared a turnover of Rs. 5,27,927.01. The assessing authority rejected the declared turnover and has estimated the total and taxable turnover at Rs. 8,91,699.81. The first appellate authority dismissed the appeal. The assessee filed a second appeal to the Appellate Tribunal challenging the order in assessment and the first appeal;
(b) Before the Tribunal, the assessee objected to the addition of entire turnover. The Tribunal relying on a decision in Northern India Calerers (India) Ltd. v. Lt. Governor of Delhi , held that supply of refreshments in restaurant or catering house for consumption by the visitiors is part of the Service and not sale and set aside the order of the assessing authority directing to delete the disputed turnover.
The question of law raised for decision of this Honourable Court :
(i) Whether the Tribunal was right in holding that the supply of food and drinks by the assessee was in the nature of service and not sale ?
(ii) Whether the Tribunal was right in granting a relief larger than what was sought for ?"
From the contents of the revision petitions, it is clear that the assessee runs a hotel wherein food and drink are served to the visitors. On the basis of this fact, the question of law as arising for consideration and as set out in the revision petition is as to whether the Tribunal was right in holding that supply of food and drinks by the assessee was in the nature of service and not sale. In our view, the answer to this question has to be in the affirmative and in favour of the assessee in view of the ratio in the main judgment in the case of Northern India Caterers (India) Ltd. The Tribunal was therefore right in applying the said ratio and setting aside the assessment orders.
5. The learned counsel for the petitioner, however, relied on the judgment in review petition filed in the Northern India Caterers' case . We do not think that the judgment in the review petition makes any difference as far as this case is concerned. In the review judgment, Pathak, J., for himself and Tulzapurkar, J., for observed as follows :
"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."
The clarification made in the above observation is that if in a given case, there is only sale of food unaccompanied by any service or rendering of service is merely incidental, the transaction would be exigible to sales tax. In all other respects the view taken in the main judgment remains unaffected. These observations were made obviously for the reason that it was urged for the State that the ratio of the main judgment would be invoked by restaurant owners in those cases also, where there was only a sale of food and title passed to the customers. As the finding in this case is that the assessee was serving food and drinks to visitors for consumption in the premises of the assessee, the transactions of the assessee are similar to those in the Northern India Caterers case and the Tribunal was right in applying the said decision.
6. In these circumstances, the revision petitions fail and are accordingly dismissed. No costs.
7. Petitions dismissed.