1966 Supreme(P&H) 13

PUNJAB & HARYANA HIGH COURT
R.S.Narula, J.
Associated Hotels Of India Ltd.
Versus
Excise And Taxation Officer
Civil Writ No. 32 of 1964,
Decided On : JANUARY 14, 1966

The service of food in the admitted circumstances of this case does not amount to sale.

Headnote:

PUNJAB GENERAL SALES TAX ACT - Whether supply of meals to residents in the petitioner's hotel in the admitted circumstances of this case amounts to sale of foodstuffs in question within the meaning of Section 2(h) of the Punjab Act; If so, whether allowing 75 per cent rebate for charges other than those relating to food in the case of other hoteliers and only 50 per cent rebate being allowed to the petitioners amounts to an objectionable discrimination against them and is liable to be restrained on that account or not; Whether supply of meals or other eatables to casual and non-resident visitors in the restaurant of the petitioner-company is sale or mere service.

Fact of the Case:

The petitioners are hoteliers who make one consolidated charge from their clients for providing them with residential accommodation, services, linen, food, etc. and who do not allow any rebate if food is not taken or served. The question arose whether the approximate cost of food included in the consolidated charge made by a hotelier from a resident client during his stay in the hotel is liable to tax under the Punjab General Sales Tax Act, 46 of 1948.

Finding of the Court:

1. The supply of meals to residents in the petitioners' hotel in the admitted circumstances of this case does not amount to sale of foodstuffs in question within the meaning of Section 2(h) of the Punjab Act. 2. Allowing 75 per cent rebate for charges other than those relating to food in the case of other hoteliers and only 50 per cent rebate being allowed to the petitioners does not amount to an objectionable discrimination against them and is not liable to be restrained on that account. 3. Supply of meals or other eatables to casual and non-resident visitors in the restaurant of the petitioner-company is sale and not mere service.

Issues: 1. Whether the supply of meals to residents in the petitioners' hotel in the admitted circumstances of this case amounts to sale of foodstuffs in question within the meaning of Section 2(h) of the Punjab Act? 2. If so, whether allowing 75 per cent rebate for charges other than those relating to food in the case of other hoteliers and only 50 per cent rebate being allowed to the petitioners amounts to an objectionable discrimination against them and is liable to be restrained on that account or not? 3. Whether supply of meals or other eatables to casual and non-resident visitors in the restaurant of the petitioner-company is sale or mere service.

Ratio Decidendi: 1. A transaction between a hotelier and its resident client is an indivisible contract of multiple service and does not involve any sale of food inasmuch as it does not involve any lease of the room made available for the residence of the client. 2. It is not open to the taxing authorities under the Punjab Act after its amendment by Act 18 of 1960 to split up the composite contract so as to make out an agreement of sale where in fact none exists. The transaction as a whole has to be seen to find out if it is a sale or not. Seen in that perspective the service of food in the admitted circumstances of this case does not amount to sale. 3. Food given by a first class hotel to its client who makes one consolidated payment per day or periodically for residence in that hotel is not "sold" by the hotel but merely "served" to the resident. This does not constitute "sale" of the food within the meaning of the Sale of Goods Act nor falls within Section 2 (h) of the Punjab Act. It partakes more of the nature of a service than a sale for the following amongst other reasons: (a) No price is paid or agreed to be paid for the food. (b) The predominant purpose of the agreement is to reside in the hotel and not to get food. (c) It is clearly stipulated in the relevant chart of the hotel produced before the revising authority that service of food would not constitute a sale of the food. (d) There is no understanding or contract for the supply of any particular food nor even of any kind of food. The guest cannot ask for any particular diet or dish. The choice is entirely one-sided, i.e., of the hoteliers. (e) If the food is not to the taste of the guest or if he is to be away at the time of lunch or dinner he may not take it but he gets no rebate or remission in the overall charges made from him. (f) Property in the food does not pass to the guest at any stage. At no stage can a guest say that he has paid for the food or agreed to pay for it and that he would, therefore, take it away or keep it for being taken later or give it to a friend. (g) The guest has to pay the same amount even if he does not take the food. He cannot ask for the food offered to him to be served out even to another resident in the hotel. (h) The guest has no right to reject the food. This salient feature of the sale of goods is wholly wanting. (i) The food is not appropriated to the guest at any time so long as it retains the nature of an eatable. At no stage can the guest say that he may do anything with the food which is meant for him A guest cannot remove the food and he can only take as much as he can consume on the board He cannot remove from the table even an uneaten part of the food supplied to him Dominion or control over the articles of food is not parted with by the petitioner till it is eaten. (j) Food forms a very insignificant part of the services rendered by a hotelier for which a guest pays so heavily (k) A hotelier does not extend or imply any warranties normally attached to sale of goods, while serving food.

Final Decision: Writ petition allowed.