Full Judgment Text
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CASE NO.:
Appeal (civil) 5086 of 1989
PETITIONER:
EAST INDIA HOTELS LTD. AND ANR.
RESPONDENT:
UNION OF INDIA AND ANR.
DATE OF JUDGMENT: 15/11/2000
BENCH:
B.N. KIRPAL & N. SANTOSH HEGDE & DORA1SWAMY RAJU
JUDGMENT:
JUDGMENT
2000 Supp(4) SCR 658
The Judgment of the Court was delivered by
KIRPAL, J. This appeal by way of special leave arises from assessment order
in respect of the year 1982-83 passed by the Sales Tax Officer, Delhi,
subjecting to tax sales made by the appellants in the restaurants owned by
them which are situated in the appellants’ hotels.
In the appeal which was filed, the two grounds which were taken were
firstly challenge to the 46th Amendment to the Constitution whereby
definition of expression ’sale of goods’ was amended and the Second ground
taken was that on a correct interpretation of the Delhi Sales Tax Act,
1975, the sales made in the restaurants could not be taxed.
Mr. Gopal Subramaniam, learned senior counsel for the appellants, has not
argued or urged the first contention with relation to the challenge to the
46th Amendment. His contention is that on a correct interpretation of the
provisions of the Delhi Sales Tax Act, 1975 and Sections 2(1) in
particular, there is no sale in a restaurant in a hotel and, therefore, no
sales tax could be levied. He submits that after the 46th Amendment it was
open to the legislature to amend the law and bring it in line with the said
Amendment to the Constitution which permitted such transactions being
subjected to sales tax where food is supplied in a restaurant. Relying upon
the decision of this court in Northern India Caterers (India) Ltd. v. Lt.
Governor of Delhi, [1978] 4 SCC 36, he contends that meals which are served
by a hotel in a restaurant to non-residents does not constitute sale of
foodstuffs and, therefore, no sales tax could be levied.
The Sheet-anchor of Mr. Subramanium’s submission is this decision of
Northern India Caterer’s case. That was a case where this court was
concerned with the assessment proceedings in respect of the assessment
years 1957-58 and 1958-59. It was contended by the appellant therein that
this court in an earlier decision in The State of Punjab v. M/s. Associated
Hotels of India Ltd., [1972] 1 SCC 472, had held that no Sales Tax was
leviable in respect of the food which was supplied by a hotel to its
residents. Applying the same principle, this Court in Northern India
Caterers ’ case referred to the definition of the word ’sale’ in Section
2(g) of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, and
observed that when a hotel serves food to a non-resident it does not amount
to sale.
Mr. Subramanium submits that what was held in Northern India Caterers’ case
was reiterated by the Court in the review judgment reported as Northern
India Caterers (India) Ltd. v. Lt. Governor of Delhi, [1980] 2 SCC 167.
In the present case, we are not concerned with the provisions of the Bengal
Finance (Sales Tax) Act, 1941. as extended to Delhi. What is applicable in
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the present case are the provisions of the Delhi Sales Tax Act, 1975 (for
short "the 1975 Act"). Keeping in mind the provisions of Article 246(4) of
the Constitution which enabled the Parliament to enact laws with regard to
Delhi even on matters relating to subjects enumerated in List II as well as
List I and which entitled an artificial definition being given to the word
’sale’ or which enabled a service of works contract to be split up so as to
entitle the imposition of sales tax on the transfer of the materials or
goods in the execution thereof, we find that on a correct interpretation of
the 1975 Act the ratio of the decision of this Court in Northern India
Caterers’ case would not be applicable.
Section 2(e) defines "dealer’, Section 2(g) ’goods’ and Section 2(1)
’sale’. The said provisions are as follows:
"2(e) "dealer means any person who carries on business of selling goods in
Delhi and includes -
(i) the Central Government or a State Government carrying on such business;
(ii) as incorporated society (including a co-operative society), club or
association which sells or supplies goods, whether or not in the course of
business, to its members for cash or for deferred payment or for
commission, remuneration or other valuable consideration;
(iii) a manager, factor, broker, commission agent, delcredere agent or any
mercantile agent, by whatever name called, and whether of the same
description as hereinbefore mentioned or not, who sells goods belonging to
any principal whether disclosed or not; and
(iv) an auctioneer who sell or auctions goods belonging to any principal,
whether disclosed or not and whether the offer of the intending purchaser
is accepted by him or by the principal or a nominee of the principal;"
"2(g) "goods" includes all materials, articles, commodities and all other
kinds of movable property, but does not include newspapers, actionable
claims, stocks, shares, securities or money;"
"2(1) "sale", with its grammatical variations and cognate expressions,
means any transfer of property in goods by one person to another for cash
or for deferred payment or for any other valuable consideration, and
includes -
(i) a transfer of goods on hire-purchase or other system of payment by
instalments, but does not include a mortgage or hypothecation of or a
charge or pledge on, goods;
(ii) supply of goods by a society (including a co-operative society), club,
firm or any association to its members for cash or for deferred payment, or
for commission, remuneration or other valuable consideration, whether or
not in the course of business; and
(iii) transfer of goods by an auctioneer referred to in sub-clause (iv) of
clause (e);"
Section 3 is the charging Section according to which every dealer whose
turnover during the year immediately preceding the commencement of the year
exceeds taxable turnover becomes liable to pay sales tax. Section 4
stipulates the rate of tax and the same reads as under :
"4. Rate of tax.- (1) The tax payable by a dealer under this Act shall be
levied -
(a) in the case of taxable turnover in respect of the goods specified in
the First Schedule, at the rate of twelve paise in the rupee;
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(b) in the case of taxable turnover in respect of the goods specified in
the Second Schedule, at such rate not exceeding four paise in the rupee as
the Lieutenant Governor may, from time to time, by notification in the
Official Gazette, determine;
(c) in the case of taxable turnover in respect of any food or drink served
for consumption in a hotel or restaurant or part thereof, with which a
cabaret, floor show or similar entertainment is provided therein,. at the
rate of forty paise in the rupee;
(cc) in the case of taxable turnover in respect of goods specified in
Fourth Schedule, at the rate of twenty paise in the rupee;
(ccc) in case of taxable turnover in respect of Liquor (Foreign Liquor and
India Made Foreign Liquor) and Narcotics (Bhaang), at the rate of twenty
paise in the rupee;
(d) in the case of taxable turnover in respect of any other goods, at the
rate of eight paise in the rupee:
Provided that the Lieutenant Governor may, by notification in the Official
Gazette, add to or omit from, or otherwise amend, the First Schedule, the
Second Schedule or the Fourth Schedule either retrospectively or
prospectively, and thereupon the First Schedule or the Second Schedule or,
as the case may be, the Fourth Schedule shall be deemed to be amended
accordingly:
Provided further that no such amendment shall be made retrospectively if it
would have the effect of prejudicially affecting the interests of any
dealer:
Provided also that in respect of any goods or class of goods if the
Lieutenant Governor is of the opinion that it is expedient in the interest
of the general public so to do, he may by notification in the Official
Gazette, direct that the tax in respect of the taxable turnover of such
goods or class of goods shall, subject to such conditions as may be
specified, be levied at such modified rate not exceeding the rate
applicable under this section, as may be specified in the notification.
(2) For the purposes of this Act, "taxable turnover" means that part of a
dealer’s turnover during the prescribed period in any year which remains
after deducting therefrom -
(a) his turnover during that period on -
(i) sale of goods, the point of sale at which such goods shall be taxable
is specified by the Lieutenant Governor under Section 5 and in respect of
which due tax is shown to the satisfaction of the Commissioner to have been
paid; (ii) sale of goods declared tax-free under section 7; (iii) sale of
goods not liable to tax under section 8;
(iv) sale of goods which are proved to the satisfaction of the Commissioner
to have been purchased within a period of twelve months prior to the date
of registration of the dealer and subjected to tax under the Bengal Finance
(Sales Tax) Act. 1941 (7 of 1941), as it was then in force, or under this
Act;
(v) sale to a registered dealer -
(A) of goods of the class or classes specified in the certificate of
registration of such dealer, as being intended for use by him as raw
materials in the manufacture in Delhi of any goods, other than goods
specified in the Third Schedule or newspapers -
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(1) for sale by him inside Delhi; or
(2) for sale by him in the course of inter-State trade or commerce, being
a sale occasioning, or effected by transfer of documents of title to such
goods during the movement of such goods for Delhi; or
(3) for sale by him in the course of export outside India being a sale
occasioning the movement of such goods from Delhi, or a sale effected by
transfer of documents of title to such goods effected during the movement
of such goods from Delhi, to place outside India and after the goods have
crossed the customs frontiers of India; or
(B) of goods of the class or classes specified in the certificate of
registration of such dealer as being intended for resale by him in Delhi,
or for sale by him in the course of inter-State trade or commerce or in the
course of export outside India in the manner specified in the sub-item (2)
or sub-item (3) of item (A), as the case may be; and
(c) of containers or other materials, used for the packing of goods, of the
class or classes specified in the certificate of registration of such
dealer, other than goods specified in the third Schedule, intended for sale
or resale;
(vi) such other sales as are exempt from payment of tax under section 66 or
as may be prescribed: Provided that no deduction in respect of any sale
referred to in sub-clause (iv) shall be allowed unless the goods, in
respect of which deduction is claimed, are proved to have been sold by the
dealer within a period of twelve months from the date of his registration
and the claim for such deduction is included in the return required to be
furnished by the dealer in respect of the said sale:
Provided further that no deduction in respect of any sale referred to in
sub-clause (v) shall be allowed unless a true declaration duly filled and
signed by the registered dealer to whom the goods are sold and containing
the prescribed particulars in the prescribed form obtainable from the
prescribed authority is furnished in the prescribed manner and within the
prescribed time, by the dealer who sells the goods :
Provided also that where any goods are purchased by a registered dealer for
any of the purposes mentioned in sub-clause (v) but are not so utilised by
him, the price of the goods so purchased shall be allowed to be deducted
from the turnover of the selling dealer but shall be included in the
taxable turnover of the purchasing dealer; and
(b) the tax collected by the dealer under this Act as such and shown
separately in cash memoranda or bills, as the case may be."
From a reading of Section 2(e), it is clear that, though it is an inclusive
definition and not an exhaustive one, even in case of the supplies made by
a club or an association to its members, whether or not in the course of
business, the club or association is regarded as a dealer. According to
Section 2(g), all movable properties, materials, articles or commodities
are goods. Therefore, food in a restaurant has necessarily to be regarded
as goods. According to Section 2(1), transfer of property in goods by one
person to another would amount to sale. With cooked food or food which is
supplied in a restaurant falling within the definition of the word ’goods’
in Section 2(g), transfer of property in the same would amount to sale as
provided by Section 2(1). These definitions have to be read along with
Sections 3 and 4. Section 4(l)(c) clearly shows that in respect of food or
drink served for consumption in a hotel or restaurant or a part thereof,
the same would be regarded as a sale and taxable turnover in respect
thereto would be taxed.
It was contended by Mr. Subramanium that Section 4(1 )(c) is only relatable
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to hotels or restaurants where there is cabaret or floor show or similar
entertainment and this cannot lead one to the conclusion that in the case
of restaurants other than those which fall under this category when the
customer takes food the same can be regarded as sale to him. We are unable
to agree with this submission. If the contention of Mr. Subramanium is
correct, namely, that in a restaurant no sale at all takes place to a
customer, by relying upon Northern India Caterers’ case, then the question
of any tax being levied in respect of food or drink supplied in a hotel or
restaurant in which there is a cabaret would not arise. In other words,
Section 4(1 )(c) would become otiose. This obviously cannot be so. An Act
has to be read as a whole, the different provisions have to be harmonised
and the effect has to be given to all of them. Reading the said provisions
together, it is clear that food and drink would fall within the definition
of ’goods’ under Section 2(g). There would be a transfer of property in the
same by a hotelier in favour of the customer and in this respect it will be
useful to refer to an observation by this Court in The State of Punjab v.
M/s. Associated Hotels of India Ltd., [1972] 1 SCC 472 when at page 478 it
was observed as follows:
".........No doubt, the customer, during his stay, consumes a number of
food-stuffs. It may be possible to say that the property in those food-
stuffs passes from the hotelier to the customer at least to the extent of
the food-stuffs consumed by him. Even if that be so, mere transfer of
property, as aforesaid, is not conclusive and does not render the event of
such supply and consumption a sale, since there is no intention to sell and
purchase."
In Associated Hotels’ case, this Court was dealing with a situation where
the hotel was receiving guests and providing them with all the amenities
along with food and the bill which was tendered to the guests was all
inclusive. In other words, whether the customer staying at the hotel
consumed the food supplied to it or not, made no difference and the
composite price or amount had to be paid by him. The Court made it clear
that it was not dealing with a case where food was being supplied by a
restaurant to a customer against payment of various items of food which he
consumed but the Court was concerned with a situation where a composite
amount was being charged by the hotel supplying all the facilities
including food in a restaurant. The observations of the Constitution Bench
in Associated Hotels’ case referred to hereinabove clearly show that
property in foodstuff passes from the hotelier to the customer at least to
the extent of foodstuff consumed Section 2(1) clearly provides that sale
would mean any transfer of property in goods by one person to another. In
the present case, when a customer goes,to a restaurant and orders food and
in respect of which he pays the price indicated therein and the said food
items are supplied to him, it would clearly be a case of transfer of
property in goods to the customer. Whether the customer eats the entire or
part of the dish or chooses not to eat at all would make no difference if
he pays for the dishes supplied. The moment the dish is supplied and sale
price paid, it would amount to a sale.
In Northern India Caterers’ case, this Court did not have occasion to
consider either the definition of ’dealer’ or a provision similar to
Section 4 which exists in the 1975 Act. The observations of this Court in
Northern India Caterers’ case can, therefore, be of no assistance to the
appellants. It is clear that in a case like this if the food or drink is
supplied in a hotel or restaurant where there is a cabaret, floor show or
similar entertainment, the rate of tax would be under Section 4( 1 )(c) and
where there is no such cabaret, floor show or similar entertainment the the
of tax would be the one stipulated in Section 4(1 )(d).
For the aforesaid reasons, we see no merit in this appeal. The same is,
accordingly, dismissed with costs.
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