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Full Case Details
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,
- 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. - 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.
