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1986 Supreme(Mad) 35
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE SINGARAVELU & THE HONOURABLE MR. JUSTICE RAMASWAMI
Sree Annapoorna and Another - Appellant
Versus
State of Tamil Nadu and Another - Respondent
Case No : Writ Appeals Nos. 750 to 754 and 756 of 1985 and Tax Cases Nos. 19, 101, 103, 106, 111, 115, 116, 965 and 1060 of 1982
Decided On : 21 January 1986
The supply of food and drinks in restaurants is not a sale and merely on the ground that sales tax has been collected by the assessees, the turnover cannot be treated as relating to sales liable to sales tax.
Headnote:
The supply of food and drinks in restaurants is not a sale and merely on the ground that sales tax has been collected by the assessees, the turnover cannot be treated as relating to sales liable to sales tax.
Fact of the Case:
The assessees are running restaurants. They supply food and drinks to the customers who come to the restaurants and also provide service to them. The customers are not entitled to remove or carry home any unconsumed portion of the food. There were also certain cases of sales across the counter which are referred to as parcel sales and in respect of those cases, the customers do not eat in the restaurants but the food or drinks sold are handed over to them to be carried away.
Finding of the Court:
The supply of food and drinks in the restaurants is not a sale and that if any definition of “sale” in a State law included those transactions it would be ultra vires on the ground of want of legislative competence.
Issues: Whether the supply of food and drinks in restaurants is a sale and liable to sales tax.
Ratio Decidendi: The definition of “sale” in the Tamil Nadu General Sales Tax Act, 1959, as it stood prior to the amendment of the same by Madras Act 19 of 1960 read as follows : ‘sale’ with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of business for cash or for deferred payment or other valuable consideration and includes a transfer of property in goods involved in the execution of a works contract but does not include a mortgage, hypothecation, charge or pledge.
Final Decision: The writ appeals are allowed, setting aside the order of the learned single Judge. There will, however, be no order regarding costs.
RAMASWAMI, J.
The appellants in the writ appeals are two hoteliers, one known as Sree Annapoorna and the other known as Sree Gowrisankar. All the tax cases have been filed by the department against the orders of the Sales Tax Appellate Tribunal, Coimbatore. The assessees in these tax cases are the two writ appellants above referred to. The assessment years relating to these tax cases and the writ appeals are 1973-74, 1974-75 and the period from 1st April, 1975, to 31st May, 1975, in 1975-76. The appellants in the writ appeals as also the respondents in the tax cases will hereafter be referred to as the assessees.
The assessees are running restaurants in Coimbatore. They were supplying food and drinks inside their restaurant premises to the customers providing seating facilities and other facilities like fan, light, music, etc. The Joint Commercial Tax Officer, Coimbatore, assessed these transactions as sales in his orders dated 21st November, 1974, 28th August, 1975, and 7th August, 1975, for the assessment years 1973-74, 1974-75 and the broken period in 1975-76. The assessees went in appeal in all these cases. The Appellate Assistant Commissioner applying the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi 1978 (7) CTR 130, 1978 AIR(SC) 1591, 1978 (42) STC 386, 1978 (4) SCC 36, 1979 (1) SCR 557, 1979 UPTC 826, 1978 TaxLR 2316, 1978 SCC(Tax) 198(SC) held by his orders dated 18th March, 1980, in all these cases that the supply of food and drinks for those customers who consume the eatables inside the premises cannot be held to be sale liable to be taxed under the provisions of the Tamil Nadu General Sales Tax Act, 1959. However, packet or parcel sales effected by the assesses are liable to be taxed. Since the bills issued to the customers did not make any difference between the packet or parcel sales and those cases where the customers consume eatables inside the premises, the Appellate Assistant Commissioner said that the packet or parcel sales can be reasonably fixed at 5 per cent. of the total turnover. The assessment orders were revised on those basis. The Appellate Assistant Commissioner also found that the assessee have collected the tax and in regard to this matter he held that it is for the department to take appropriate action for such illegal collection of tax. The assessees preferred further appeals to the Tribunal against the order of the Appellate Assistant Commissioner estimating the packet or parcel sales at 5 per cent. and contended that the entire turnover in the restaurants is exempt from tax. The department also filed applications in each appeals, before the Tribunal, for enhancement and revision of the turnover contending that the entire turnover is taxable and that the J.C.T.O.'s order shall be confirmed. In support of this contention the department relied on mainly the decision reported in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi 1980 AIR(SC) 674, 1980 (45) STC 212, 1980 (2) SCC 167, 1980 (2) SCR 650, 1980 UJ 494, 1980 TAXLR 1657, 1980 UPTC 326, 1980 SCC(Tax) 222 (SC). The assessee also disputed the opinion or direction of the Appellate Assistant Commissioner regarding the collection of tax and action to be taken on the same and contended that such an opinion or direction is not valid and it has to be quashed. The Tribunal in a common order dated 30th December, 1980, accepted the contention of the assessees that the turnover relating to the supply of food and drinks in the restaurants is not liable to tax. However, the Tribunal did not agree with the assessees in their contention that the entire turnover was exempt from tax. The Tribunal confirmed the finding of the Appellate Assistant Commissioner that the turnover relating to packet or parcel sales is liable to tax. However, on the basis of materials placed before them, they determined the parcel sales at 13 per cent. of the total turnover. The direction relating to taking of proper action for ille
