JUDGMENT

S.P. Bharucha, J.

(1) THE issues in these appeals and writ petitions relate to the entitlement of the State to levy tax on the sale of food and drink. Entry 54 of List-II of the Seventh Schedule to the Constitution empowers the State to levy "taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List-I." (Entry 92A of List-I deals with taxes on the sale or purchase of goods in the course of interstate trade or commerce and does not concern us here).

(2) IN the decision in State of Punjab v. M/s Associated Hotels of India Ltd., 1972(2 SCR 937, this court considered the plea of Associated Hotels of India Ltd., which ran the Cecil Hotel in Shimla, that it was not liable to pay sales tax in respect of meals served to guests who came there to say. Posing the questions, what was the nature of the transaction and the intention of the parties when a hotelier received a guest in his hotel and was there in that transaction an intention to sell him the food contained in the means served to him during his stay, this court held that the transaction was essentially one and indivisible, namely, to receive customers in the hotel to stay. Even if the transaction was to be disintegrated, there was no question of the supply of meals during such stay constituting a separate contract of sale since no intention on the part of the parties to sell and purchase food-stuff supplied during meal times could realistically be spelt out. The transaction, essentially, was one of service by the hotelier, in the performance of which meals were served as part of and incidental to that service, such amenities being regarded as essential in well conducted modern hotels. Such amenities, including meals, were part and parcel of service, which was in reality the transaction between the parties. The Revenue, therefore, was not entitled to split the transaction into two parts, one of service and the other of sale of food-stuffs, and to split up also the bill charged by the hotelier as consisting of charges for lodging and charges for food-stuff served.

(3) THE case of Northern India Caterers (India) Ltd. v. Lt. governor of Delhi, 1978(4) SCC 36, dealt specifically with the levy of sales tax upon the service of meals to casual visitors in a restaurant. The question was whether the service of meals to non resident customers in the appellants restaurant constituted a sale of food stuff. This court said that the view taken in the case of Associated Hotels of India Ltd. indicated the approach to the question. This court considered the origin and historical development of the institution of a restaurant and found it akin to what, historically, was an inn. An innkeeper or hotelier "does not lease his rooms, so he does not sell the food he supplies to the guest. It is his duty to supply such food as the guest needs, and the corresponding right of the guest is to consume the food he needs, and to take no more. Having finished his meal, he has no right to take food from the table, even the uneaten portion of food supplied to him, nor can he claim a certain portion of food as his own to be handed over to another in case he chooses not to consume it himself. The title to food never passes as a result of an ordinary transaction of supplying food to a guest," This principle, put in the words of Professor Beale, had been extended in England to the service of food at restaurants. The restaurateur was regarded fundamentally as providing sustenance to those who ordered food to eat in the premises. Like the hotelier, the restaurateur provided many services in addition to the supply of food. He provided furniture and furnishings, linen, crockery and cutlery and, perhaps, music, a dance floor and a floor show. The court held, accordingly, that the service of meals to visitors in the appellants restaurant was not liable to sales tax and this was so whether the charges were imposed for the meals as