Full Judgment Text
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PETITIONER:
MOULIN ROUGE PVT. LTD.
Vs.
RESPONDENT:
THE COMMERCIAL TAX OFFICERS & ORS.
DATE OF JUDGMENT: 12/11/1997
BENCH:
S.P. BHARUCHA, SUHAS C.SEN
ACT:
HEADNOTE:
JUDGMENT:
THE 12TH DAY OF NOVEMBER,1997
Present:
Hon’ble Mr. Justice S.P.Bharucha
Hon’ble Mr. Justice Suhas C.Sen
S.B. Sanyal, Sr. Adv. and B.B.Singh, Adv. for the appellant
N.Santosh Hegde, Sr. Adv., J.R. Das, D.K.Singh, D.Krishnan,
for M/s. Sinha & DAs, Advs. with him for the Respondents.
J U D G M E N T
The following Judgement of the Court was delivered:
SEN,J,
The Appellant, Moulin Rouge, is a company registered
under the India companies Act. Its business consists of
running a restaurant at 20, park Street, Calcutta-16. Apart
from food and drink, it provides the customers with various
services and amenities. The restaurant is air-conditioned.
It provides upholstered cushioned seating subdued lighting
and also music. High class crockery and cutlery are
provided. The restaurant also employs highly trained
individual attention is given to the customers . The
customers cannot take away and food from the restaurant fro
home consumption. Even unused or unconsumed portions of food
and drink are to allowed to be taken away by the customers.
There is no sale of any food or foodstuff across the
counter.
This Court in the case of State of Punjab vs.
Associated Hotels of India Ltd. (1972) 1 SCC 472 held
that a transaction between a hotelier and a visitor to hotel
was essentially of service. As part of the amenities
incidental to that service, meals are provided in the hotel
at stated hours. The Revenue was not entitled to split up
the bills of the hoteliers on the ground that the bills
included not only charges for lodging but also charges for
foodstuff with a view to bring the latter under the province
of Punjab General Sales Tax Act. It si to be noted that the
case dealt with the question of levy of sales tax on supply
of food by a hotel to its residents.
The case of the appellant is that, on legal advice, and
on the basis of the aforesaid judgment is did not collect
nay sales tax for food and drinks provided by it to its
customers. The appellant had no liability to pay or to
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collect any sales tax on the food and drinks supplied by it
as these were not separately charged for but were include in
the bills for various services and amenities provided by it
to its customers. However, On 26.4.78, the commercial Tax
Officer passed an ex-parte, best judgment assessment in
respect of the four quarters ending on 31.3.74, 31.1.75
31.3.76 and 31.3.77 imposing sales tax and penalty on the
appellant. Since the appellant failed to pay the tax
demanded, a certificate case was started. The appellant’s
case is that is not liable to pay sales tax on food and
drink sold by it in its restaurant. The principals laid down
in the case of Associated Hotels (supra) apply in full force
to its case.
The question of leviability of food sold by a
restaurant to its customers directly came up for
consideration in the case of Northers India Caterers (India)
Ltd. vs. Lt.Governor of Delhi (1978) 4 SCC 36 decided on
September 7, 1978. That was a case under Bengal Finance
(sales Tax) Act, 1941 as extended to the Union Territory of
Delhi. The question was whether service of meals to casual
visitors in the restaurant was taxable as a sale - (a) when
the charges were lump sum per meal or (b) when they were
calculated per dish. It was held that Revenue was not
entitled to split up the transaction into two parts, one of
service and the other of sale of foodstuffs. An approach
similar to the case of the hotels was adopted. It was
explained that the classical legal view was that when a
number of services were concomitantly provided by way of
hospitality, the supply of meals must be regarded as
ministering to a bodily want or to the satisfaction of a
human need. What the customer paid of included more than the
price of the food as such. It included all that entered into
the conception of service. It did not contemplate the
transfer of the general property in the of supplied as a
factor to the service rendered. It was ultimately held that
the service of meals to visitors in the restaurant of the
appellant was not sale of food and was not taxable under the
Bengal Fiance (Sales Tax) Act, 1941. The position would be
the same whether a charge was imposed fr the meal as a whole
or according to the dishes separately ordered.
As a result of these two judgments, food served by a
hotelier to its boarder or by a restaurant to its customer
could not be subjected to sales tax. The Legislature tried
to retrieve the situation for the State by passing the
constitution (Forty-sixth Amendment) Act, 1982 by which sub-
clause 29A was inserted in the definition of "tax on the
sale or purchase of goods" by amending Article 366 of the
Constitution. as a result of this amendment, tax on sale or
purchase of goods was given an expanded meaning to include a
tax on the supply by way of or as part of any service or in
any other manner whatsoever, of goods, being food or any
other articles for human consumption or any drink.
Following the insertion of clause 29A in Article 366,
of the constitution, the Bengal Fiance (Sales Tax) Act, 1941
was amended. The definition of "sale" in Section 2(g) (iii)
was amended to include, inter alia, any supply, by way of or
as part of any service or in any other manner whatsoever, of
goods being food or any other article for human consumption
or any drink (whether or not intoxicating), where such
supply or service was for cash, deferred payment or other
valuable consideration, and such delivery, transfer or
supply of any goods was deemed to be a sale of those goods
by the person making the delivery, transfer or supply and a
purchase of those goods by the person to whom such delivery,
transfer or supply was made. Section 26A was also inserted
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into the Act.
"26A validation and exemption - (1)
For the purposes of this Act, every
transaction by way of supply of the
nature referred to i sub-clause
(ii) of clause (g) of section 2
shall be deemed to be, and shall be
deemed always to have been, a
transaction by way of sale. with
respect to which the person making
such supply is the seller and the
person to whom such supply is made,
is the purchaser; and
notwithstanding any judgment,
decree or order of any court,
tribunal or authority, no
imposition of tax on any sch
transaction before the coming into
force of section 3 of the West
Bengal Taxation Laws (Second
Amendment) Act, 1983, shall be
deemed to be invalid or ever to
have been invalid, and accordingly
-
(i) all the aforesaid taxes levied
or collected or purporting to have
been levied or collected under this
Act shall be deemed always to have
been validly levied or collected in
accordance with this Act;
(ii) no suit or other proceeding
shall be maintained or continued in
any court or before any tribunal or
authority for the refund of, and no
enforcement shall be made by any
court, tribunal or authority of any
decree or order directing the
refund of, any sch tax which has
been collected;
(iii) recoveries shall be made in
accordance with the provisions of
this Act of all amounts which would
have been collected thereunder as
tax as aforesaid if this section
had been in force all the material
times.
(2) Notwithstanding anything
contained in sub-section (1), any
supply of the nature referred to
therein shall be exempted from the
aforesaid tax -
(a) where such supply has been
made, by any restaurant or eating
house (by whatever name called),
at any time on or after the 7th day
of September, 1978 and before the
commencement of section 3 of the
West Bengal Taxation Laws (Second
Amendment) Act, 1983 and the
aforesaid tax has not been
collected on such supply on the
ground that no such tax could have
been levied or collected at that
time; or
(b) where such supply, not being
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any such supply by any restaurant
or eating house (by whatever name
called), has been made at any time
on or after the 4th day of January,
1972 and before the commencement of
section 3 of the West Bengal
Taxation Laws (Second Amendment)
Act, 1983 and the aforesaid tax has
not been collected on such supply
on the ground that no such tax
could have been levied or collected
at that time :
Provided that the burden of proving
that the aforesaid tax was not
collected on any supply of the
nature referred to in clause (a)
or, as the case may be clause (b)
shall lie on the person claiming
the exemption under this sub-
section."
On 24.8.81, the appellant moved a writ petition under
Articles 226 of the Constitution alleging that is was not
liable to pay a sales tax in view of the aforesaid judgment
of the Supreme Court in Norther India Caterers (India) Ltd.
(Supra). the High Court issued a rule nisi on the writ
petition and passed an order of injunction restraining the
Sales Tax officer from proceeding with the aforesaid
certificate cases. The writ petition was ultimately
transferred to the West Bengal Taxation Tribunal. The
Tribunal following its decision in the case of Nimai Chandra
Guin vs. Commercial Tax Officer, Manicktola & Ors. 75 STC
322 dismissed the writ petition in view of the amended
definition of ""sale" give in section 2(g) of the Bengal
Fiance (Sales Tax) Act with retrospective effect. It was,
however, pointed out by the Tribunal that the petitioner’s
case cam in clause (a) of sub-section (2) of Section 26A of
the Act. Therefore, the petitioner was entitled to tax
exemption from September 7, 1978 till the coming into force
of Section 3 of the West Bengal Taxation Laws (Second
Amendment) Act 1983. However, in order to take advantage of
this provision, the petitioner must provide that it did not
collect sales tax during the period in question.
Mr. Sanyal, on behalf of the appellant, has contended
that Section 36A of the Bengal Act has made an artificial
distinction between supply of food by a restaurant in clause
(a) supply of food by any other body by whatever name
called in clause (b). I clause (a) a restaurant or an eating
house has been exempted from tax fro food supplied on or
after the 7th September, 1978 and before the commencement of
Section 3 of the West Bengal Taxation Laws (Second
Amendment) Act, 1983 provided no tax had been collected by
the restaurant or that eating house from its customers.
Clause (b) grants a similar exemption to food supplied by a
body other than restaurant or an eating house for a longer
period of time i.e. on or after the 4th January, 1972 to the
commencement of Section 3 of the West Bengal Taxation Laws
(Second Amendment) Act, 1983. Mr. Sanyal contends that an
invidious distinction has been made in the period of
exemption for restaurant under clause (a) and a hotel under
clause (b) of Section 26A(2). According to Mr. Sanyal, there
is no rational basis for this distinction as the underlying
principle behind these two decisions was the same.
This contention of Mr. Sanyal must fail for two reason.
the question of constitutional validity of Section 26A was
not raised before the tribunal and cannot be agitated in
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appeal against the order of the tribunal. In any event that
allegation that an invidious and irrational distinction has
been made between a hotel and a restaurant is without any
merit. The judgment in the case of M/s. Associated Hotels of
India Ltd. (supra) was delivered on 4th January, 1972. After
this Judgment, sales tax could not be levied by the Revenue
nor collected by the hotel on sale of foodstuff when such
sale constituted part of the services rendered by it its
residents. Therefore, even though the levy was validated
retrospectively by sub-section (1) of Section 26A, exemption
from payment of tax on such sales was given by clause (b) of
sub-section (2) of Section 26A from the date of that
judgment to the date of the passing of the Amendment Act.
Sale of foodstuffs by a restaurant to its customers was
dealt with in the case of Norther India Caterers (India)
ltd. (supra) where the judgment was pronounced on September
7, 1978. The exemption in clause (a) of Section 26A (2) to
the restaurants or the eating houses has been given from the
date of that judgment. When Section 26A validated the levy
of tax with retrospective effect the legislature took care
to ensure that the persons who had not collected tax on the
basis of the aforesaid two decisions of this Court will not
be burdened with tax with retrospective effect. Since the
two judgments were delivered on two different dates, two
different periods of time were fixed for granting exemption
to two different classes of sellers. Restaurant and eating
houses were granted exemption fro the date of the judgment
in Norther India Caterers (India) Ltd. case i.e. September
7, 1978. Others were granted exemption on and from 4th
January, 1972 i.e. the date of the judgment in the case of
M/s Associated Hotels of India Ltd.. The classification has
been based on an intelligible basis. There is no
irrationality about it. The same principles may have been
followed both the judgment bu the two judgments
dealt with two different classes of assessees.
Mr. Sanyal, however, contended that his client had
stopped paying and collecting sales tax on foodstuff
supplied to its customers on and from 4th January, 1972
relying upon the principle laid down in the case of M/s.
Associated Hotels of India Ltd.. That may be so. But the
Associated Hotel’s case did not deal with sales may by a
restaurant. The retrospective operation of the Act is bound
to affect many tax payers prejudicially in many different
ways. But that will not make the provision unconstitutional.
The legislature has decided to grant relief to two classes
of tax payers from the burden of this retrospective levy of
tax. For this purposes, it has drawn a justifiable
distinction between hotels and restaurants and has decided
to grant exemption to them from two separate dates based on
two separate judgments of this Court.
In our opinion, the legislature has made a valid
classification for the purpose of granting exemption to
hotels and to restaurants on the basis of the two dates of
the aforesaid two judgments.
The case of the appellants is without any merit and is
dismissed. The appellant must pay costs of this appeal
assessed at Rs. 1,700/-