- (1.) M. C. AGARWAL, J. These three revision petitions under section 11 of the U. P. Sales Tax Act, 1948 have been preferred by the dealer against a common order dated September 1, 1987, passed by the Sales Tax Tribunal, Saharanpur, in respect of the revisionist's assessment for the assessment years 1978-79, 1979-80 and 1980-81.
(2.) THE revisionist runs a residential hotels as well as a restaurant. It supplies cooked food and drinks to those who stay in the hotel and also to outsiders. During the assessment proceedings, it claimed that its activity in providing food and drinks was by way of service and not by way of sales. This contention was not accepted by the assessing officer. On first appeals, the Assistant Commissioner (Judicial), Sales Tax, held that a part of the supplies of food and drinks was by way of counter-sales that were taxable under the Act while the rest of the supplies to the residents in the hotel and to outsider in the restaurant was by way of service. THE dealer as well as the Commissioner appealed to the Tribunal which held that the dominant object in the entire activity was sale of goods and, therefore, the entire receipts on account of supply of food and drink was taxable turnover under the Act. Feeling aggrieved, the dealer has preferred these revision petitions : The question whether service of meals, etc. , to customers amounts to sale came up for decision before the honourable Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386; 1979 UPTC 826. That was a case in which the applicant ran a hotel in which lodging and meals were provided on inclusive terms to residents and meals were served to non-residents also in the restaurant. The honorable Supreme Court held that this activity was essentially in the nature of service irrespective of whether the supplies were made to residents in the hotel or to outsiders visiting the restaurant. A review petition against the aforesaid judgment of the honorable Supreme Court was moved and the judgment on the review petition is reported in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1980] 45 STC 212; 1980 UPTC 326. The honourable Supreme Court held that the dominant object in the activity will determine whether it is rendering of service or sale of goods. It was observed as under : " It seems to us that having regard to the facts upon which our judgment rests - undisputed as they 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. " " But India is India. It lives in its one lakh villages, thousands of towns, millions of pavement pedlars and wayside victuallers, corner coffee shops and tea-stalls, eating-houses and restaurants and same 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 keep 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 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 sweetmeat 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 - exigibility is not repelled. " Thus, the law, ultimately, settled by the honourable Supreme Court is that the dominant object in the activity is to be seen. In the present case, the Tribunal, on a perusal of the entire evidence, held that the dominant object in the supply of food and drinks is sale of goods. The learned counsel for the revisionist challenged this finding of fact. It was contended that this Court has laid down that where the customer has no right to take away the food outside the restaurant, the activity has to be deemed to be rendering of service. Reliance is placed on a judgment of a learned single Judge in Commissioner of Sales Tax v. Elchico (1982) UPTC 789. In this Case, the learned single Judge observed as under : " 3. Music, light, air-cooling, elegant furniture, fine linen, costly crockery, etc. , are modern must for an urban restaurant for survival. These are amenities provided to attract customers in a competitive market. In inferring from these, 'service oriented industry' Tribunal lost sight of nature of business and how it is understood by a common man or a socialite. Dance and music charged compulsorily do not render sale effected in a restaurant into service to customers. Essential character of business and commerce do not undergo change. To clarify the legal position and alloy any apprehension of abuse even by those hoteliers and restaurant owners who made sale of food-stuffs, honourable Justice Pathak in review judgment narrowed scope of inquiry to ascertaining if the dominant object, 'is a sale of food and the rendering of service is merely incidental. ' But after the decision in this case every restaurant big or small having only tables, chairs, or even benches is coming up with affidavit of manager or even proprietor - where he is all in one - that its restaurant has fans, light and servants, therefore, it is rendering service leaving department as helpless spectator for it obviously cannot deny the obvious leaving scope for reliance on Sohan Lal Gupta v. Commissioner of Income-tax [1958] 33 ITR 786, a decision wrongly understood and erroneously applied. " " 4. . . . . . . The argument is no doubt attractive but it stands concluded against the department by the decision in Northern India Caterer's case. A decision given by Supreme Court cannot be distinguished on ground that some other aspects which should have been examined were not placed before the court. In fact the test for determining whether dominant objective was sale or service has been narrowed, by, what has been said, supply and service of food to a customer to be eaten in the restaurant was not a sale for the reasons that he was merely entitled to eat the food served to him and not to remove and carry away the unconsumed portion of the food. As in this case it has been found as a fact that customers were prohibited from carrying away the unconsumed portion of food the case of assessee was squarely covered in the ration laid down in it. "
(3.) THE same view was repeated by the learned single Judge in Commissioner of Sales Tax v. Moti and Jawahar [1982] 50 STC 172 (All.); 1981 UPTC 1132. THE earlier judgment of the honourable Supreme Court having been explained in the subsequent judgment, that is Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1980] 45 STC 212; 1980 UPTC 326 it is the law, as explained in the latter judgment that has to be followed. In the subsequent judgment, there is no averment to the effect that if the customers are not allowed to take food outside the restaurant then the activity has necessarily to be treated as rendering of services. Further, in the present case, there is no finding by the Tribunal that the customers were prohibited from taking the things served to them outside the restaurant. The Assistant Commissioner (Judicial) had held that there were counter sales as well. This finding has not been reversed and if a customer can be sold goods at the counter to be taken away and consumed at his ease, the restaurateur has no justification if a customer, after having been served the food, transfers the same into his own wares and wishes to take them away. In this case, the Tribunal has considered the matter in detail. It has found that when food is served in the rooms to those residing in the hotel, separate service charges are levied. It has also looked into the trading account of the dealer and found that the profit structure is the same as in any eating house where sale of food is the dominant object. The Tribunal has also noted that the dealer had charged sales tax from the customers. It shows that initially the dealer itself had an impression that its activity was sale of goods and the turnover was taxable under the Act and it is after the judgment of the honourable Supreme Court, REFERRED TO above, that like all others, it too started asserting that its dominant object was rendering of service.;