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NORTHERN INDIA CATERERS (INDIA) LTD. V. LT. GOVERNOR OF DELHI (1978) 4 SCC 36 & (1980) 2 SCR 650

NORTHERN INDIA CATERERS (INDIA) LTD. V. LT. GOVERNOR OF DELHI (1978) 4 SCC 36 & (1980) 2 SCR 650

 

FACTS

  • The case involves a hotelier who provides lodging and meals on inclusive terms to residents, as well as serving meals to non-residents in the hotel's restaurant.
  • The appellant contended that the service of meals to both residents and non-residents should not be considered a sale, thus exempt from sales tax.
  • Sales tax authorities disagreed and treated a portion of the receipts from residents and non-residents as representing the price of the food served.
  • The High Court was approached to clarify whether the service of meals in the restaurant constitutes a sale, particularly when charges are lump sum per meal or calculated per dish.

ISSUE

  • The central issue is whether the service of meals to visitors in the appellant's restaurant qualifies as a taxable sale under the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union territory of Delhi.

JUDGEMENT

  • The Supreme Court held that the service of meals to visitors in the restaurant is not taxable under the Bengal Finance (Sales Tax) Act, 1941, regardless of whether charges are imposed for the meal as a whole or according to the dishes separately ordered.

LEGAL ANALYSIS

  • The Court reasoned that hoteliers, including restaurant owners, provide a range of services beyond simply supplying food, akin to the services of innkeepers.
  • Historically, the legal character of transactions involving hoteliers and restaurateurs has been influenced by the hospitality they offer and the various facilities provided.
  • The Court cited English and American legal precedents, which established that the essence of transactions in restaurants is service rather than the sale of goods.
  • Referring to previous judgments, the Court emphasised that the supply of meals is essentially a service and cannot be split into separate transactions of service and sale of foodstuffs.
  • The Court found no reason to distinguish between meals supplied to residents in a hotel and those served to customers in a restaurant, affirming that both should be considered as ministering to a bodily want or the satisfaction of a human need, and thus not taxable under the sales tax law.

COMMENTARIES RATIO

  • Where food is supplied in an eating house, or restaurant and the substance of the transaction, evidenced by its dominant object, is a sale of food and rendering of service is merely incidental, the transaction would amount to sale.