The main legal point established in the judgment is that the amount deducted for food supply constituted part of wages and not a separate contract of sale of food.

The judgment of the Court was delivered by

S. RAJENDRA BABU, J. - In these two petitions a hotelier is the petitioner. For the assessment years 1984-85 and 1985-86 a sum of Rs. 2,64,850.25 and Rs. 2,40,700 respectively were deducted by the petitioner from the salaries of the employees towards supply of food to them. Whether such amount would constitute consideration for the sale of food is a question posed for our consideration.

2. It is submitted on behalf of the petitioner that it is by way of wages that food was supplied customarily and in such cases the notification issued under the Minimum Wages Act, 1948, on February 14, 1986, made it clear that where food is supplied to workmen certain sums could be deducted from their wages depending upon the category in which they come. It is therefore contended on behalf of the petitioner that the sums deducted from the wages for supply of food is part of wages and not consideration for sale of food. But, it is the stand of the department that the said amount is in the nature of consideration for supply of food.

The assessing authority took the view that though the assessee has referred to minimum charges deductible, the difference between the actual charges and from the sales effected to the customers would make up appropriate charges. However, it also held that the amount received as per the lodging section towards supply of food to workers at Rs. 2,64,250.25 is exigible to tax following the decision of the Karnataka Appellate Tribunal in Hotel Harsha v. State of Karnataka. The appellate authority was of the view that the argument of the petitioner has got to be rejected in view of the decision of the Tribunal and therefore the assessing authority was justified in levying the tax on that part of the turnover. When the matter was carried to the Appellate Tribunal in second appeal it was noticed therein that the petitioner was entitled to recover feeding charges from the salary of the employees and the said recovery is in lieu of value of food supplied to the workmen. If it was treated to be a compulsory acquisition, the same would amount to sale. Since the petitioner is entitled to deduct certain sums on account of and in lieu of food supplied to workmen, the recoveries will have to be treated as sales. It was also noticed that the petitioner has supplied food to the workmen and instead of recovering the sale proceeds on the spot depending upon the item consumed, it has recovered the sale proceeds of food from their salary on monthly basis. In the opinion of the Tribunal there is no difference between the sale of food to workmen and sale of food to others. The Tribunal did not agree with the proposition that the petitioner had given their workmen wages in kind and if they were to be wages in kind then the salary would have been fixed with a condition of free meals, whereas that is not so. The conditions of employment clearly specify that in the event of worker choosing to take food he would be liable to pay feeding charges at specified rate. This amounts to supply of food at a fixed rate throughout the month and deferring recovery till the payment of wages. In their view there is no difference between an outright sale and sale of food and drinks to a worker and the only difference, if any, would be that a regular bill is issued in respect of sale to a customer, whereas an adjustment of book entry is passed in respect of food supplied to workmen.

3. The learned counsel for the petitioner relied upon a decision in State of Andhra Pradesh v. Hotel Sri Lakshmi Bhavan, Visakhapainam [1974] 33 STC 444. When an identical question came up for consideration, the Andhra Pradesh High Court took the view that the supply of food by a hotelier to its employees was essentially an amenity and an incident of contract of service entered in to between the parties and was not made in pursuance of contract of sale, the concept of sale is different from that of service and therefore took the vie