VERY IMPORTANT POINT
Supply of food or drink in a hotel or restaurant would amount to sale under the Delhi Sales Tax Act and as such liable to sales tax.

Headnote:Delhi Sales Tax Act, 1975-Sections 2(g), 2(1), 3 and 4-Restaurant situated in hotel-Sale made in-Whether could be subjected to sales tax?-Food and drink would fall within definition of goods -In respect of food or drink served for consumption in a hotel or restaurant or part thereof would be regarded as a sale and taxable turnover in respect thereto would be taxed.
       From a reading of Section 2(e) , it is clear that, though it is an inclusive definition and not an exhaustive one, even in case of the supplies made by a club or an association to its members, whether or not in the course of business, the club or association is regarded as a dealer. According to Section 2(g), all movable properties, materials, articles or commodities are goods. Therefore, food in a restaurant has necessarily to be regarded as goods. According to Section 2(1), transfer of property in goods by one person to another would amount to sale. With cooked food or food which is supplied in a restaurant falling within the definition of the word goods in Section 2(g), transfer of property in the same would amount to sale as provided by Section 2(1). These definitions have to be read along with Sections 3 and 4. Section 4(1) (c) clearly shows that in respect of food or drink served for consumption in a hotel or restaurant or a part thereof, the same would be regarded as a sale and taxable turnover in respect thereto would be taxed. (Para 9)
       The argument that Section 4(1)(c) is only relatable to hotels or restaurants where there is cabaret or floor show or similar entertainment and this cannot lead one to the conclusion that in the case of restaurants other than those which fall under this category when the customer takes food the same can be regarded as a sale to him cannot be accepted. An Act has to be read as a whole, the different provisions have to be harmonised and the effect has to be given to all of them. Reading the said provisions together, it is clear that food and drink would fall within the definition of goods under Section 2(g). There would be a transfer of property in the same by a hotelier in favour of the customer. (Para 10)
       When a customer goes to a restaurant and orders food and in respect of which he pays the price indicated therein and the said food items are supplied to him, it would clearly be a case of transfer of property in goods to the customer. Whether the customer eats the entire or part of the dish or chooses not to eat at all would make no difference if he pays for the dishes supplied. The moment the dish is supplied and sale price paid, it would amount to a sale. (Para 12)
       In a case like this if the food or drink is supplied in a hotel or restaurant where there is a cabaret, floor show or similar entertainment, the rate of tax would be under Section 4(1)(c) and where there is no such cabaret, floor show or similar entertainment the rate of tax would be the one stipulated in Section 4(1)(d). (Para 13)

JUDGMENT

Kirpal, J.-This appeal by way of special leave arises from assessment order in respect of the year 1982-83 passed by the Sales Tax Officer, Delhi, subjecting to tax sales made by the appellants in the restaurants owned by them which are situated in the appellants hotels.

2. In the appeal which was filed, the two grounds which were taken were firstly challenge to the 46th Amendment to the Constitution whereby definition of expression sale of goods was amended and the second ground taken was that on a correct interpretation of the Delhi Sales Tax Act, 1975, the sales made in the restaurants could not be taxed.

3. Mr. Gopal Subramaniam, learned senior counsel for the appellants, has not argued or urged the first contention with relation to the challenge to the 46th Amendment. His contention is that on a correct interpretation of the provisions of the Delhi Sales Tax Act, 1975 and Section 2(1) in particular, there is no sale in a restaurant in a hotel and, therefore, no sales tax could be levied. He submits that after the 46th Amendment it was open to the legislature to amend the law and bring it in line with the said Amendment to the Constitution which permitted such transactions being subjected to sales tax where food is supplied in a restaurant. Relying upon the decision of this Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi1, he contends that meals which are served by a hotel in a restaurant to non-residents does not constitute sale of foodstuffs and, therefore, no sales tax could be levied.

4. The sheet-anchor of Mr. Subramanium s submission is this decision of Northern India Caterers case. That was a case where this court was concerned with the assessment proceedings in respect of the assessment years 1957-58 and 1958-59. It was contended by the appellant therein that this Court in an earlier decision in The State of Punjab v. M/s. Associated Hotels2, had held that no sales tax was leviable in respect of the food which was supplied by a hotel to its residents. Applying the same principle, this Court in Northern India Caterers case referred to the definition of the word sale in Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, and observed that when a hotel serves food to a non-resident it does not amount to sale.

5. Mr. Subramanium submits that what was held in Northern India Caterers case was reiterated by the Court in the review judgment reported as Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi (supra).

6. In the present case, we are not concerned with the provisions of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi. What is applicable in the present case are the provisions of the Delhi Sales Tax Act, 1975 (for short "the 1975) Act" ). Keeping in mind the provisions of Article 246(4) of the Constitution which enabled the Parliament to enact laws with regard to Delhi even on matters relating to subjects enumerated in List II as well as List I and which entitled an artificial definition being given to the word sale or which enabled a service of works contract to be split up so as to entitle the imposition of sales tax on the transfer of the materials or goods in the execution thereof, we find that on a correct interpretation of the 1975 Act the ratio of the decision of this Court in Northern India Caterers case would not be applicable,

7. Section 2(e) defines dealer , Section 2(g) goods and Section 2(i) sale . The said provisions are as follows :

"2(e) "dealer means any person who carries on business of selling goods in Delhi and includes-

(i) the Central Government or a State Government carrying on such business;

(ii) an incorporated society (including a co-operative society), club or association which sells or supplies goods, whether or not in the course of business, to its members for cash or for deferred payment or for commission, remuneration or other valuable consideration;

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2000 Supreme(SC) 1821

VERY IMPORTANT POINTSupply of food or drink in a hotel or restaurant would amount to sale under the Delhi Sales Tax Act and as such liable to sales tax.

Cases Referred (2)

VERY IMPORTANT POINT
Supply of food or drink in a hotel or restaurant would amount to sale under the Delhi Sales Tax Act and as such liable to sales tax.