State of Karnataka v. Udipikrishna Bhavan(1981) 3 SCC 76

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GUPTA, J. – These two appeals arise out of two revision petitions dismissed by the Karnataka
High Court which were preferred by the State of Karnataka under Section 8(4) of the Karnataka
Appellate Tribunal (Amendment) Act, 1976 read with Section 23 of the Karnataka Sales Tax Act,

1957. The revision petitions were directed against a common order of the Karnataka Appellate
      Tribunal by which the Tribunal allowed two appeals preferred by the assessee relating to the
      assessment for the years ended March 31, 1976 and March 31, 1977 respectively. Following the
      decision of this Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [(1979) 1
      SCR 557], the Tribunal had held that the supply of refreshments to the visitors of the two hotels
      owned by the respondent before us was “part of a social service and not a sale”. The High Court
      taking the same view dismissed the revision petitions. The finding of the Appellate Tribunal, as
      summarised by the High Court, on which its decision rests is: “The assessee runs a hotel wherein
      food and drinks are served to the visitors.” We do not think that this finding only is sufficient to
      justify the conclusion reached by the Tribunal and the High Court. It appears that the attention of
      the High Court was drawn to the judgment of this Court disposing of a review petition in the
      Northern India Caterers case (1980) 2 SCR 650. The following extract from that judgment to
      which the High Court itself has referred is relevant:
      Indeed, we have no hesitation in saying that where food is supplied in an eating-house or
      restaurant, and it is established upon the facts that the substance of the transaction,
      evidenced by its dominant object, is a sale of food and the rendering of services is merely
      incidental, the transaction would undoubtedly be exigible to sales tax. In every case it
      would be for the taxing authority to ascertain the facts when making an assessment under
      the relevant sales tax law and to determine upon those facts whether a sale of the food
      supplied is intended…
      Clearly therefore the only finding recorded in this case that the assessee runs a hotel wherein food
      and drinks are served to the visitors is not sufficient.
1958. We set aside the impugned order and send the case back to the Sales Tax Officer
      concerned for a fresh assessment according to law following the guidelines appearing in the
      judgment of this Court disposing of the review petition in the Northern India Caterers case.