Full Judgment Text
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PETITIONER:
MUNICIPAL CORPORATION OF DELHI
Vs.
RESPONDENT:
LAXMI NARAIN TANDON ETC. ETC.
DATE OF JUDGMENT17/12/1975
BENCH:
SARKARIA, RANJIT SINGH
BENCH:
SARKARIA, RANJIT SINGH
CHANDRACHUD, Y.V.
BHAGWATI, P.N.
CITATION:
1976 AIR 621 1976 SCR (2)1050
1976 SCC (1) 546
CITATOR INFO :
RF 1980 SC 674 (4)
ACT:
"Sale"-Distinction between-Prevention of Food
Adulteration Act, 1954, and Punjab General Sales Tax Act.
Storing an article of food for purposes other than
sale-If constitutes an offence-Supply and offer of food by a
hotelier to a customer under a consolidated charge-If
constitutes sale within the meaning of Prevention of Food
Adulteration Act,
HEADNOTE:
The respondents were charged with an offence under s. 7
read with s. 16 of the Prevention of Food Adulteration Act,
1954, on the ground that they had stored for sale articles
of food, which were adulterated and of sub-standard quality.
Before the Magistrate, the respondents contended that no
articles of food were sold in the hotel to non-resident
visitors or the public generally and that the hotel provided
residential services and other amenities including meals
only to resident customers against a composite charge and
that no rebate was allowed for food if a resident customer
chose not to eat it. The Magistrate acquitted the
respondents.
On appeal the Division Bench of the High Court referred
two questions to the Full Bench, namely, (i) whether for the
purposes of the Prevention of Food Adulteration Act, 1954,
there was no sale of food provided by a hotelier to a guest
when a consolidated charge was made; and (ii) whether the
expression "store" used in ss. 7 and 17 of the Act means
storage simpliciter or storing for sale ?
The Full Bench held (1) that there was no ’sale’ of
food to the customer within the contemplation of the Act and
(2) that the word "store" used in ss. 7 and 16 means storage
for sale.
Allowing the appeals,
^
HELD : (1) The High Court has over-looked the important
distinction between the connotation of "sale" for the
purposes of Sales Tax Act and the one under the Prevention
of food Adulteration Act. The supply of food by a hotelier
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to a customer when a consolidated charge is made for
residential accommodation and other amenities, including
food, amounts to a "sale" of an article of food for the
purposes of the Prevention of Food Adulteration Act. [1057 B
and 1058 F]
(a) A comparative study of the definition of ’sale’ in
the Sales Tax Act and the Prevention of Food Adulteration
Act would show that the connotation of "sale" for the
purposes of Prevention of Food Adulteration Act is far wider
than the meaning assigned to it in the Sales Tax Act. [1056
B]
(b) The object of the Sales Tax Act is to levy tax on
sales or purchases of certain articles of commerce. The
object of the Prevention of Food Adulteration Act is to
prevent, in the interest of the health of the community,
supply of adulterated foodstuffs by a person as a part of
his business activity. [1056 F & H]
(c) For the purposes of the Prevention of Food
Adulteration Act the broad test applicable would be, whether
the article of food was offered by the hotelier to the
resident customer for a money consideration, it being
immaterial whether such consideration was a distinct item or
was an inseparable element of the consolidated charge made
by the hotelier for providing residential accommodation,
services, amenities and food. The mere fact that the
property in the food article does not pass to the customer
before he eats it does not take it out of the definition of
"sale" under the Food Act. In the case of food actually
consumed, the property does pass to the customer. In other
cases, even when the
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resident customer does not eat the food offered to him by
the hotelier, such an offer by itself would be sufficient to
constitute a "sale" of that article of food within the
contemplation of s. 2(xiii) of the Food Act. The fact
remains that the supply or offer of food to a customer is
for a money consideration as a part of business activity
and, as such, constitutes "sale" under the Prevention of
Food Adulteration Act. [1057 C-D 1058 C]
(d) The object of assigning so extensive a meaning to
the term "sale" is to bring within the ambit of the
Prevention of Food Adulteration Act all commercial
transactions whereunder an adulterated article of food is
supplied for consumption by one person to another. [1056 D]
Municipal Corporation of Delhi v. Shri Kacheroo Mal
[1976] 2 S.C.R. 1, referred to.
(e) The dominant object of the transaction and the
intention of the parties, while entering into the
transaction in question, was to provide against payment
wholesome food for consumption, besides residential
accommodation and services. [1058 B]
State of Punjab v. M/s Associated Hotels of India Ltd.
[1972] 2 S.C.R. 937, referred to.
(2) (a) The Full Bench has rightly answered the second
question. The expression "store" in s. 7 means "storing for
sale" and consequently, storing an adulterated article of
food for purposes other than for sale would not constitute
an offence under s. 16(1)(a). [1054-H]
(b) The terms "store" and "distribute" take their
colour from the context and the collocation of words in
which they occur in ss. 7 and 16. "Storage" or
"distribution" of an adulterated article of food for a
purpose other than for sale, does not fall within the
mischief of this section. Under s. 10, the Food Inspector is
authorised to take samples of an article of food only from
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particular persons indulging in a specified course of
business activity, the immediate or ultimate end of which is
the sale of an article of food. The section does not give a
blanket power to the Food Inspector to take samples of an
article of food from a person who is not governed by any of
the sub-clauses of s. 2(i) (1)(a). Sub-s. 2 makes it clear
that a sample can be taken only of that article of food
which is "manufactured", "stored" or "exposed for sole". If
an article of food is not intended for sale and is in the
possession of a person who does not fulfil the character
such as is referred to in s. 10, the Food Inspector will not
be competent under the law to take a sample, and on such
sample being found adulterated, to validly launch
prosecution thereon. [1054 D-G]
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos
101, 104 of 1971.
From the Judgment and Order dated the 24th April, 1970
of Delhi High Court in Criminal Appeal Nos. 11,6, 63 and 64
of 1968.
V. S. Desai, D. P. Maheshwari and Naresh Sethi for the
Appellants.
A. K. Sen, M. C. Bhandare, Rameshwar Nath and M. K.
Gupta for Respondents.
The Judgment of the Court was delivered by
SARKARIA, J. The common questions that arise for
determination in these appeals on certificate directed
against the judgments of the Delhi High Court are :
(1) Whether for purposes of the Prevention of
Food Adulteration Act, 1954 (for short, the
Food Act)
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there is no sale of food which is provided by
a hotelier to a guest when a consolidated
charge is made for room and the other
amenities, including food, and when no rebate
is allowed for any meal which may not be
taken by the guest ?
(2) Whether the expression "store", as used in
section 7 and section 16 of the Act, means
storage simpliciter or storing for sale ?
In answer to the first question, the Full Bench of the
High Court, to which these questions were referred, held
that when a composite charge is made for residential
accommodation and food by a hotelier, there is no sale of
food to the customer within the contemplation of the Food
Act. On the second question, its answer was that the word
"store" used in s. 7 and s. 16 of the Act means storage for
sale.
The questions arose in these circumstances:
M/s. Associated Hotels of India Ltd. (for short,
Associated Hotels) runs Hotels, one of them is Oberoi
Maidens Hotel, 7, Alipur Road, Delhi. Respondent 1 (L. N.
Tandon) is the Manager of that Hotel, while Respondent 2 is
the Managing Director of the Associated Hotels. According to
the prosecution case, on July 25, 1966, Shri P. P. Sinha, a
Food Inspector of the Municipal Corporation of Delhi, got
from Respondent 1, the samples of ice-cream, milk, curd and
butter for the purpose of analysis. The sealed samples were
sent to the Public Analyst for examination and were found to
be sub-standard and, as such, ’adulterated articles of food’
within the purview of s. 2(i) (i). In the case of ice-cream;
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there was 1.6% deficiency in total solids and 2.9%
deficiency in fat.
The Assistant Municipal Prosecutor thereupon filed four
separate complaints under s. 7 read with s. 16 of the Act
for prosecution of the Respondents in the court of the
Magistrate 1st Class, Delhi. It was alleged in the
complaints that the articles of food of which samples were
taken, had been stored for sale in the said Hotel. The
accused raised factual as well as legal pleas in defence.
Respondents inter alia contended that the sampling was not
done in their presence, and consequently, the entire
proceedings, being violative of the mandatory requirement of
law, were vitiated and illegal. A common stand taken by both
the Respondents, was that no articles of food are sold in
this Hotel to the non-resident visitors, or the public
generally, that the hoteliers provide residential
accommodation, services and other amenities, including
meals, only to the resident customers against a composite
charge and that no rebate is allowed for food if a resident
customer chooses not to eat it.
The Magistrate accepted the defence plea that the
samples had been taken in the absence of Respondent 1 and
there had been breach of the law on that score. He further
held that the food articles of which samples were taken had
not been stored for sale. In the result the Magistrate
acquitted both the Respondents. Against this acquittal. the
Municipal Corporation of Delhi carried an appeal to the High
Court. The Division Bench before which that appeal came up
for
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hearing, referred three questions (including the two set out
above) to a Full Bench for opinion. Thereafter, the Division
Bench, merely on the basis of the answers returned by the
Full Bench upheld the acquittal and dismissed the appeals.
It will be useful at the outset to have a look at the
scheme and content of the relevant provisions of the Act.
The broad aim of the Act is to ensure the sale and
supply of pure food to the public. With that end in view,
the Act prevents adulteration of food articles.
For the purpose of the Act an article of food is deemed
to be adulterated, if it falls under any of the clauses (a)
to (1) of s. 2 (i) This definition of "adulterated article
of food" is of very wide amplitude. Even a sub-standard
article would fall within the mischief of sub-clause (1) "if
the quality or purity of the article falls below the
prescribed standard or its constituents are present in
quantities which are in excess of prescribed limits of
variability".
Section 7 prohibits a person to "manufacture" for sale
or "store", "sell", or "distribute", inter alia, any: "(i)
adulterated food".
Contravention of this prohibition is punishable as an
offence under s. 16. The relevant part of the sections
reads:
"(1) If any person-
(a) whether by himself or by any other person on
his behalf imports into India or manufactures
for sale, or stores, sells or distributes any
articles of food-
(i) which is adulterated or misbranded, or the
sale of which is prohibited by the Food
(Health) authority in the interest of public
health...................... he shall in
addition to the penalty to which he may be
liable under the provisions of s. 6, be
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punishable with imprisonment for a term which
shall not be less than six months but may
extend to six years, and with fine which
shall not be less than one thousand rupees :"
Then, there is a Proviso to this sub-section which
gives a discretion to the Court for any adequate and special
reasons to be recorded, to award a sentence less than the
minimum prescribed, only if the offence is under cl. (a) (i)
and is with respect to an article adulterated under s.
2(i)(1).
Section 10 confers powers on the Food Inspector to take
samples and also indicates the scope of these powers.
Sub-section (1) authorises him-
(a) to take samples of any articles of food from-
(i) any person selling such article;
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(ii) any person who is in the course of conveying,
delivering or preparing to deliver such
article to a purchaser or consignee;
(iii)a consignee after delivery of any such
article to him; and
(b) to send such sample for analysis to the
public analyst for the local area within
which such sample has been taken.
".
Sub-section (2) gives power to the Food Inspector to
enter and inspect any place where any article of food is
manufactured, stored or exposed for sale and take samples of
such articles of food for analysis.
From a conjoint reading of the above referred
provisions, it will be clear that the broad scheme of the
Act is to prohibit and penalise the sale, or import,
manufacture, storage or distribution for sale of any
adulterated article of food. The terms "store" and
"distribute" take their colour from the context and the
collocation of words in which they occur in ss. 7 and 16.
"Storage" or "distribution" of an adulterated article of
food for a purpose other than for sale does not fall within
the mischief of this section. That this is the right
construction of the terms "store" and "distribute" in s.16
(1) will be further clear from a reference to s. 10. Under
that section, the Food Inspector, to whom the Act assigns a
pivotal position for the enforcement of its provisions, is
authorised to take samples of an articles of food only from
particular persons indulging in a specified course of
business activity. The immediate or ultimate end of such
activity is the sale of an article of food. The section does
not give a blanket power to the Food Inspector to take
samples of an article of food from a person who is not
covered by any of the sub-clauses of sub-s. 1 (a) of sub-s.
2. The three sub-clauses of sub-section 1(a) apply only to a
person who answers the description of a seller or conveyer,
deliverer, actual or potential, of an article of food to a
purchaser or consignee or his consignee after delivery of
such an article to him. Sub-section (2) further makes it
clear that sample can be taken only of that article of food
which is "manufactured", "stored" or exposed for sale. It
follows that if an article of food is not intended for sale
and is in the possession of a person who does not fulfil
the character of a seller, conveyer, deliverer, consignee,
manufacturer or storer for sale such as is referred in sub-
ss. 1(a) and (2) of the section, the Food Inspector will not
be competent under the law to take a sample, and on such
sample being found adulterated, to validly launch
prosecution thereon. In short, the expression "store" in s.
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7 means "storing for sale" and consequently storing of an
adulterated article of food for purposes other than for sale
would not constitute an offence under s. 16(1) (a).
The Full Bench of the High Court has thus rightly
answered the second question.
1055
The stage is now set for considering the main question,
whether food made available to a resident customer in a
hotel by a hotelier against a consolidated charge for all
the services and amenities and food amounts to a sale of an
article of food for the purposes of the Food Act ?
The High Court has considered this question entirely in
accordance with the norms and tests applied in the context
of Punjab General Sales Tax Act, 46 of 1948 (for short, the
Sales-tax Act) by a Division Bench of the High Court of
Punjab in State of Punjab v. M/s. Associated Hotels of India
Ltd. (i) which was subsequently affirmed in appeal by this
Court on January 4, 1972 in State of Punjab v. M/s.
Associated Hotels of India Ltd. (2).
The High Court has adopted two main criteria for
holding the transaction or the arrangement in question not
to be a ’sale’ of an article of food. First, under such an
arrangement, there is no transfer of the property in the
food to the customer unless it is actually consumed by him.
Second, the predominant character which the transaction
bears is not that of a sale of an article of food but of a
contract for work or services, and the food supplied by the
hotelier pursuant to such a transaction, is only a part of
the amenities or services rendered to the customer.
In our opinion, neither of these reasons holds good, if
the matter is considered in the context of the Food Act. For
a proper appreciation of the points for determination, it is
important to bear in mind the distinction between the
definition of the term ’sale’ in the Sales-tax Act and the
Food Act, and also the fact that the purpose, scheme and the
content of the two Acts are entirely different.
Under s. 2(h) of the Sales-Tax Act ’sale’ has been
defined as follows:
"In this Act, unless there is anything repugnant
in the subject or context,-
(h) "sale" means any transfer of property in
goods other than goods specified in Schedule
for cash or deferred payment or other
valuable consideration, but does not include
a mortgage, hypothecation, charge or pledge.
Explanation-(1) A transfer of goods on hire-
purchase or other instalment system of payment shall,
notwithstanding that the seller retains a title to any
goods as security for payment of the price, be deemed
to be a sale."
In the Food Act "sale" has been defined as under:
"In this Act unless the context otherwise
requires-
"sale" with its grammatical variations and cognate
expressions means the sale of any article of food,
whether for cash or on credit or by way of exchange and
whether by wholesale or retail, for human consumption
or use, or for analysis, and includes an agreement for
sale, an offer for
1056
sale, the exposing for sale or having in possession for
sale of any such article, and includes also an attempt
to sell any such article."
A comparative study of the above-quoted definitions
would show that the connotation of "sale" for purposes of
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the Food Act is far wider than the meaning assigned to it in
the Sales-tax Act. While under the Food Act "sale" would
include a mere "offer for sale", "exposing for sale" or
having in "possession for sale", under the Sales-tax Act,
the transfer of property in the goods, except where it falls
within the Explanation, is an essential feature of "sale".
Further, the legislature has advisedly left the word "sale"
occurring in the first part of the definition under the Food
Act to be interpreted in its widest amplitude. According to
the Oxford Dictionary "sale" means "action or an act of
making over to another for a price", "the exchange of a
commodity for money or other valuable consideration",
"disposal of goods for money".
It will be seen that the definition of ’sale’ in s.
2(xiii) of the Food Act with which we are concerned, is
wider even than its dictionary meaning. The object of
assigning so extensive a meaning to the term ’sale’ appears
to be to bring within the ambit of the Food Act all
commercial transactions whereunder an adulterated article of
food is supplied for consumption by one person to another.
In the context of the Food Act, therefore, the term ’sale’
has to be construed according to the "mischief rule"
enunciated in Heydon’s case. As pointed out by this Court in
Municipal Corporation of Delhi v. Shri Kacheroo Mal (1),
wherever possible, without unreasonable stretching or
straining, the language of this statute should be construed
in a manner which would suppress the mischief, advance the
remedy, promote its object, prevent its subtle evasion and
foil its artful circumvention.
The object of the Sales-tax Act is to levy tax on sales
or purchases of certain articles of commerce. The taxable
event under that Act is the sale or the purchase and to
constitute a taxable sale or purchase to use the words of
Shelat J. who spoke for the Court in Associated Hotels Case,
supra, "the Revenue has to establish that there was a sale,
distinct from the contract of work or service of the
property so passing to the other party." A transaction to
attract liability under the Sales-tax Act, therefore, must
be wholly and solely a ’sale’ of a taxable article as a
distinct entity. If it is inseparably submerged in or
amalgamated with a contract for work or services, then it is
not possible to fasten it with liability as a sale under the
Sales-tax Act, much less can such liability be quantified as
an item of taxable turnover for the relevant account year.
Such considerations or difficulties do not arise for the
purpose of the Food Act.
The primary object of the Food Act is to prevent, in
the interest of the health of the community, the supply of
adulterated foodstuffs by a person as a part of his business
activity.
1057
The definitions of the term ’sale’ have in terms, been
made subject to the context of the respective Acts in which
they occur. Consequently, in judging whether a transaction
is a sale or not, due regard must be had to the purpose,
scheme and context of the particular Act under which the
question arises. The learned Judges of the High Court appear
to have overlooked the important distinction between the
connotation of ’sale’ for purposes of the Sales-tax Act and
the one under the Food Act.
For the purposes of the Food Act, the broad test
applicable would be whether the article of food was offered
by the hotelier to the resident customer for a money
consideration, it being immaterial whether such
consideration was a distinct item or was an inseparable
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element of the consolidated charge made by the hotelier for
providing residential accommodation, services, amenities and
food?
The mere fact that the property in the food article
does not pass to the customer before he eats it, does not
take it out of the definition of ’sale" under the Food Act.
In the case of food actually consumed, the property does
pass to the customer. In other cases, even when the resident
customer does not eat the food offered to him by the
hotelier, such an offer by itself, would be sufficient to
constitute a "sale" of that article of food within the
contemplation of s. 2(xiii) of the Food Act.
Mr. Ashok Sen, relying on the observations of this
Court in Associated Hotels’ case (supra) contends that the
true test to be applied even in a case under the Food Act,
is; What was the primary object of the transaction and the
intention of the parties while entering into it? It is
maintained that the predominant character of the transaction
in question was to provide a number of amenities and
services to resident customers and that the meals supplied
were only incidental to those services. In such a case, it
is submitted, it cannot be said that the transaction amounts
to a ’sale’ of meals as an article of commerce to the
customer. Mr. Sen cites instances of Hospital, Nursing Home,
College Hostel, Nursery School, Passenger Airliner,
Passenger Ocean-going Ship where meals are provided to the
residents or passengers, as the case may be, as part of the
services against a consolidated charge. Counsel concedes
that if the respondents had been supplying food to the
members of the public who were not residents of the Hotel,
against charges, from the same kitchen or store from which
they supplied it to the resident customers against a
consolidated charge, that would be hit by the Food Act
because in such a case mere storage of food in the Hotel,
would be ’storage for sale’ attracting the penal provisions
of the Food Act.
It appears to us that the contention cannot be
accepted. We have already indicated above that for purposes
of the Food Act, the mere offer of an article of food for a
money consideration, irrespective of whether such
consideration is ascertainable, as a distinct item, or is an
inseparable element of a consolidated charge for a number of
things, would bring it within the mischief of "sale" under
s. 2(xiii) of the Food Act.
1058
The test suggested by Mr. Sen is not decisive for the
purposes of the Food Act. Even so, if such a test is applied
consistently with the object of the transaction and the
intention of the parties while entering into is nevertheless
a commercial transaction. Surely, the dominant object of the
transaction and the intention of the parties while entering
into the transaction in question was to provide against
payment, whole some food for consumption besides residential
accommodation and services. Good residential accommodation
and good food against one consolidated charge were the main
considerations which must have weighed with the parties
while entering into this transaction. It is therefore not
correct to say that the supply of food under such a
composite transaction entered into between the hotelier and
his resident customer does not amount to supply of food as
an article of commerce. The fact remains that the supply or
offer of food to such a customer is for a money
consideration as a part of business, activity, and as such,
constitutes "sale" under the Food Act.
It is true that in pursuance of such a transaction, the
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bill prepared by the hotelier is one and indivisible; it is
not capable of being proximated or split into charges for
food and charges for other amenities. But the fact remains
that such a composite bill is prepared after taking into
account the cost of the meals, also.
The illustrations given by Mr. Sen are not apposite.
Hotel business is very different from that of a Hospital or
a Nursing Home, or College Hostel, or Passenger Airliner
etc. Moreover, the question whether a particular transaction
in the context of the Food Act constitutes a sale or not, is
largely a question of fact depending on the circumstances of
each case. It is therefore not proper to enunciate any hard
and fast rule of universal application on the basis of
purely hypothetical instances cited by Mr. Sen.
For the foregoing reasons we would reverse the answer
given by the High Court and hold that the supply or offer of
food by a hotelier to a customer when a consolidated charge
is made for residential accommodation and other amenities,
including food, amounts to a ’sale’ of an article of food
for the purpose of the Food Act.
The last submission of Mr. Sen was that this case has
been pending for the last 15 years; that the trial
Magistrate had acquitted the respondent not only on the
ground that there was no "sale" within the meaning of the
Food Act but also on the ground that the samples of the
articles in question were not taken in accordance with law
in the presence of Respondent No. 1. It is stressed that the
law on the point was anything but clear and this is not a
case where articles of food were found contaminated or mixed
with any deleterious or injurious substance; but the
articles of food being sub-standard, were only technically
adulterated under cl. (1) of s. 2 (i) of the Act. In these
premises, counsel maintains, the acquittal should not be
converted into a conviction. Reliance has been placed on
this Court’s dicta in Food Inspector Calicut Corporation’s
case (1) and M/s. Bhagwan Das Jagdish Chander v. Delhi
Administration and anr.(2) in support of this contention.
1059
Although this last contention is not wholly devoid of
force, we find it difficult to accept it because the High
Court has not recorded any finding on the merits of these
cases. It has maintained the acquittal merely on the ground
that the transaction in question did not amount to "sale" of
article of food within the meaning of the Food Adulteration
Act. The case would therefore have to go back to the High
Court for deciding the appeals on merits.
Accordingly, we allow these appeals, set aside the
judgment of the High Court and remit the cases to it with a
direction to dispose them of in accordance with law. It
would be open to the respondents to urge before the High
Court all the contentions which are available to them. Since
the cases are quite old, the High Court will dispose them of
with utmost expedition.
P.B.R. Appeals allowed.
1060