- (1.) The parties in these two petitions are common. These petitions have arisen out of the orders passed by the Judicial Magistrate F. C. (I Court), Gadag, in C. Mis. No. 72 of 1980 and C.C. No. 73 of 1980, on 5-2-1981. The facts are that the Assistant Commercial Tax Officer, Gadag, applied to the Magistrate, as per S. 13 of the Karnataka Sales Tax Act, 1957 (to be hereinafter referred to as the Act), producing assessment orders and demand notices passed and issued against the petitioner, and praying that the amount stated therein be recovered as if it were a fine imposed by him in accordance with S. 13 (b) of the Act.
(2.) The two cases cover two different periods of assessment. That is all the distinction between the two. An objection was raised before the Magistrate, by way of an application in both the cases, that the amount could not be recovered as the petitioner runs a restaurait and renders service by supplying food and eatables to the customers, but does not do transactions amounting to sale which is taxable under the provisions of the Act. The learned Magistrate over-ruled the objection raised by the petitioner and rejected the application, by relying on S. 32 of the Act, which reads as follows : "32. Assessment etc., not to be questioned in prosecution : The validity of the assessment of any tax or of the levy of any fee or other amount, made under this Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied, shall not be questioned in any criminal Court in any prosecution or other proceeding whether under this Act or otherwise." It is apparent that the Magistrate has relied on the last clause viz., 'other proceeding whether under this Act or otherwise'. Sri V. T. Raya Reddy, learned Advocate appearing on behalf of the petitioner, argued that the Supreme Court has, in the decision in Northern India Caterers (India) v. Lt. Governor of Delhi (1) held that service of meals is not taxable as a sale under the Act, and has observed that such sales in restaurants are also not taxable. He further argued that in view of this principle laid down by the Supreme Court, the Magistrate ought to have rejected the application of the respondent. He lastly contended that the learned Magistrate has wrongly applied the provisions of S. 32 of the Act.
(3.) The decision in Northern India Caterer's case (1) his been gone into by the Supreme Court once again as review petitions were filed on behalf of the Lt. Governor of Delhi (2). In the review petitions filed before the Supreme Court, the position of law has been clarified, in paragraphs 12, 16 and 17 as follows : "12. It appears from the submissions now made that the respondents 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". "16. It sometimes happens that high-style restaurants or residential hotels render a bundle of special services like ball dance, rare music, hot drinks, 'viands of high regale', glittering crockery, regal attention or 'bikini' service and even sight- seeing transport or round the-city visits, shoe shining, air-conditioning, massage in the room etc., on a consolidated sum. You cannot dissect the items or decode the hill to discover separately the components of goods sold. This situation may obtain even in India with the throng of foreign tourists who want to be taken care of and pay ail-inclusively. This may happen in some fashionable restaurants where you cannot, as of right, remove from the table what is left over. In these cases, the decision under review squarely applies. My learned brother has clarified and confined the ratio to the contours so set out. He has also pointed out that counsel, at the earlier hearing, did not contest this factual matrix. A review in counsel's mentation cannot repair the verdict once given. So the law laid down must rest in peace. "17. The learned Solicitor General took us through English and American legal literature of vintage value and alien milieu. They enlightened us but did not apply fully, as explained by my learned brother. Had they been earlier cited, had been seriously considered. But India is India. It lives in its one lakh villages, thousands of towns, millions of pavement pedlars and way-side victuallers, corner coffee shops and tea stalls, eating houses and restaurants and some top notch parlours. Habits vary, conventions differ and one rigid rule cannot apply in diverse situations. If you go to a coffee house, order two dosas, eat one and carry the other home, you buy the dosas. You may have the cake and eat it too, like a child which bites a part and tells daddy that he would eat the rest at home. Myriad situations, where the transaction is a sale of a meal, or item to eat or part of a package of service plus must not be governed by a standard rule. In mere restaurants and non- residential hotels, many of these transactions are sales and taxable. Nor are additional services invariably components of what you pay for. You may go to an air-conditioned cloth shop or sweet-meat store or handicrafts emporium where cups of tea may be given, dainty damsels may serve or sensuous magazines kept for reading. They are devices to attract customers who buy the commodity and the price paid is taxable as sale. The substance of the transaction, the dominant object, the life-style and other telling factors must determine whether the apparent vendor did sell the goods or only supply a package of services. Was there a right to take away any eatable served, whether it be bad manners to do so or not ? In the case we have, the decision went on the ground that such right was absent. In cases where such a negative is not made out by the dealer-and in India by and large, the practice does not prohibit carrying home-eligibility is not repelled".;