Civil Appeal Nos
1768 1769 72
Appeals by Special Leave from the Judgment and order dated 15 7 1971 of the Delhi High Court in Sales Tax Reference No 8 of 1969
F section Nariman In CA 176872 V section Desai in CA 1769
M C Bhandare CA 176872 and Mrs section Bhandare and Miss M Poduval for the Appellants
P A Francis R N Sachthey and Miss A Subhashini for the Respondent
Y section Chitale Vinay
Bhasin A K Srivastava and Vineet Kumar for the Interveners
The Judgment of the Court was delivered by PATHAK J
This and the connected appeal are directed against the judgment of the High Court of Delhi disposing of a reference made to it under section 213 of the Bengal Finance Sales Tax Act 1941 as extended to the Union Territory of Delhi on the following question Whether the service of meals to casual visitors in the Restaurant is taxable as a sale i when charges are lumpsum per meal or ii when they are calculated per dish  The High Court has answered the question in the affirmative
The appellant runs a hotel in which lodging and meals are provided on inclusive terms to residents
Meals are served to non residents also in the restaurant located in the hotel
In the assessment proceedings for the assessment years 1957 58 and 1958 59 under the Bengal Finance Sales Tax Act 1941 the appellant contended that the service of meals to residents and non residents could not be regarded as a sale and therefore sales tax could not be levied in respect thereof
The contention was rejected by the Sales Tax authorities who treated a portion of the receipts from the residents and nonresidents as representing the price of the foodstuffs served
At the instance of the appellant the High Court called for a statement of the case on two questions
One was whether the supply of meals to residents who paid a single all inclusive charge for all services in the 559 hotel including board was exigible to sales tax
The second was the A question set forth above
The High Court answered the first question in favour of the appellant and the second against it
And now these appeals by special leave
Tax is payable by a dealer under section 4 of the Bengal Finance Sales Tax Act 1941 on sales effected by him and the expression sale  has been defined by section 2 g of the Act to mean any transfer of property in goods for cash or deferred payment or other valuable consideration including a transfer of property in goods involved in the execution of a contract 
The question is whether in the case of non residents the service of meals by the appellant in the restaurant constitutes a sale of foodstuffs
It appears to us that after the view taken by this Court in State of Punjab vs Ms Associated Hotels of India Ltd1 the approach to the question before us is clearly indicated
This is a case where the origin and historical development of an institution as profoundly influenced the nature and incidents it possesses in law
In the case of an hotelier this Court proceeded on the footing that his position in law was assimilable to that of an inn keeper
At common law an innkeeper was a person who received travellers and provided lodging and necessaries for them and their attendants and employed servants for this purpose and for the protection of travellers lodging in his inn and of their goods2
It was hospitality that he offered and the many facilities that constituted the components of that hospitality determined the legal character of the transactions flowing from them
Long ago in Crisp vs Pratt3 it was pointed out that innkeepers do not get their living by buying and selling and that although they buy provisions to be spent in their house they do not sell them but what they do is to utter them
Their gain it was added is not only by uttering of their commodities but for the attendance of their servants and for the furniture of their house rooms lodgings for their guests 
This test went to the root and we find it repeated in Parker vs Flint4 In Newton vs Trigg5 Holt CJ defined the true status of an inn keeper by reference to the services afforded by him that he was an hospitator and was not paid upon the account of the intrinsic value of his provisions but for other reasons the recompence he receives is for care and pains and for protection and security  but the end of an inn keeper in 1  2 Halsbury s Laws of England 3rd Edn
21 p 442 paras 932
3 1639 Cro Car 549
4 1699 12 Mod 254
5 3 Mod 
2 549SCI78 560 his buying is not to sell but only a part of the accommodation he is bound to prepare for his guests
 And for the purpose of the question before us is would be relevant to quote Professor Beale1 As an inn keeper does not lease his rooms so he does not sell the food he supplies to the guest
It is his duty to supply such food as the guest needs and the corresponding right of the guest is to consume the food he needs and to take no more
Having finished his meal he has no right to take food from the table even the uneaten portion of food supplied to him nor can he claim a certain portion of good as his own to be handed over to another in case he chooses not to consume it himself
The title to food never passes as a result of an ordinary transaction of supplying food to a guest Having proper regard to those particular considerations it is not surprising that the principle was extended in England to the service OF food at eating places or restaurants
The keeper of an eating house or victualler was regarded fundamentally as providing sustenance to those who ordered food to eat in the premises
That eminent and learned Judge Lord Mansfield saw no distinction in Saunderson vs Rowles2 between an innkeeper and a victualler
He observed 
The analogy between the two cases of an inn keeper and a victualler is so strong that it cannot be got over
And we are all clear that this man victualler is not within these laws upon the authority of a determined case of an inn keeper and also upon the reason of the thing
He buys only to spend in his house and when he utters it again it is attended with many circumstances additional to the mere selling price
 Like the hotelier a restaurateur provides many services in addition to the supply of food
He provides furniture and furnishings linen crockery and cutlery and in the eating places of today he may add music and a specially provided area for floor dancing and in some cases a floor show
The view taken by the English law found acceptance on American soil and after some desultory dissent initially in certain states it very soon became firmly established as the general view of the law
The first edition of American Jurisprudence sets3 forth the statement of the law in that regard but we may go to the case itself Electa B Merrill vs James W Hodson4 from which the 1 Innkeepers  Hotels para 169
2 3 Vol
46 p 207 para 13
4 561 statement has been derived
Holding that the supply of food or drink A to customers did not partake of the character of a sale of goods the Court commented The essence of it is not an agreement for the transfer of the general property of the food or drink placed at the com command of the customer for the satisfaction of his desires or actually appropriated by him in the process of appeasing his appetite or thirst
The customer does not become the owner of the food set before him or of that portion which is carved for his use or of that which finds a place upon his plate or in side dishes set about it
No designated portion becomes his
He is privileged to eat and that is all
The uneaten food is not his
He cannot do what he pleases with it
That which is set before him or placed at his command is provided tc enable him to satisfy his immediate wants and for no other purpose
He may satisfy those wants but there he must stop
He may not turn over unconsumed portions to others at his pleasure or carry away such portions
The true essence of the transaction is service in the satisfaction of a human need or desire ministry to a bodily want
A necessary incident of this service or ministry is the consumption of the food required
This consumption involves destruction and nothing remains of what is consumed to which the right of property can be said to attach
Before consumption title does not pass after consumption there remains nothing to become the subject of title
What the customer pays for is a right to satisfy his appetite by the process of destruction
What he thus pays for includes more than the price of the food as such
It includes all that enters into the conception of service and with it no small factor of direct personal service
It does not contemplate the transfer of the general property in the food supplied as a factor in the service rendered
 Subsequent cases drew on these observations notably Mary Nisky vs Childs Company
1 The position was radically altered in the United States by the enactment of the Uniform Commercial Code which provides in effect that the serving for value of food or drink to be consumed either on the premises or elsewhere constitutes a sale
Nonetheless it is affirmed in the second edition of American Jurisprudence2 that where the Code does not operate in general the pre Code distinction between a contract for sale and one for the giving of services should continue
 l 2 Vol
67 p 142 para 33
562 It has already been noticed that in regard to hotels this Court has in Ms Associated Hotels of India Limited supra adopted the concept of the English law that there is no sale when food and drink are supplied to guests residing in the hotel
The Court pointed out that the supply of meals was essentially in the nature of a service provided to them and could not be identified as a transaction of sale
The Court declined to accept the proposition that the Revenue was entitled to split up the transaction into two parts one of service and the other of sale of foodstuffs
If that be true in respect of hotels a similar approach seems to be called for on principle in the case of restaurants
No reason has been shown to us for preferring any other
The classical legal view being that a number of services are 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 has been said in Electa B Merrill supra appears to be as much applicable to restaurants in India as it does elsewhere
It has not been proved that any different view should be taken either at common law in usage or under statute
It was urged for the respondent that in Associated Hotels of India Ltd supra this Court drew a distinction between the case of meals supplied to a resident in a hotel and those served to a customer in a restaurant
We are unable to find any proposition of law laid down by the court there which could lead to that inference
We may point 13 out that in the view which appeals to us we find ourselves unable to agree with the observations to the contrary made by the Punjab High Court in Ms Associated Hotels of India Ltd Simla vs Excise and Taxation officer Simla1 and by the Delhi High Court in Municipal Corporation of Delhi vs Laxmi Narain Tandon and another
2 In the result we hold that the service of meals to visitors in the restaurant of the appellant is not taxable under the Bengal Finance Sales Tax Act 1941 as extended to the Union Territory of Delhi and this is so whether a charge is imposed for the meal as a whole or according to the dishes separately ordered
In the circumstances of the case we make no order as to costs
NVK Appeals allowed 1 A I R 1966 Punjab 449
2 A I R 1970 Delhi 244


Summary:
The appellant runs a hotel in which meals are served to non residents also in the restaurant located in the hotel
The sales tax authorities treated a portion of the receipts as representing the price of foodstuffs served and levied tax
The High Court affirmed the view of the sales tax authorities
On the question whether the transaction constituted sale of foodstuffs
Allowing the appeals  HELD 1
Service of meals to non residents in the restaurant of the appellant is not taxable under the Bengal Finance Sales Ta Act 1941 as extended to the Union Territory of Delhi
This is so whether a charge is imposed for the meal as a whole or according to the dishes separately ordered
562 F 2
In State of Punjab vs Ms Associated Hotels of India  this Court held that there was no sale when food and drink were supplied to guests residing in the hotel
The Court pointed out that the supply of meals was essentially in the nature of a service provided to the guests and could not be identified as a transaction of sale
This Court declined to accept the position that the Revenue was entitled to split up the transaction into two parts one of service and the other of sale of foodstuffs
If that be true in respect of hotels a similar approach seems to be called for on principle in the case of restaurants
Like the hotelier a restaurateur provides many services in addition to the supply of food
He provides furniture and furnishings linen crockery and cutlery and he may add music an area for floor dancing and in some cases a floor show
The classical legal view being that a number of services are 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
No reason has been shown for preferring any other view
562 B 560 F G 562 C State of Punjab vs Ms Associated Hotels of India Ltd  applied
Ms Associated Hotels of India Ltd Simla vs Excise and Taxation Officer Simla not approved
Municipal Corporation of Delhi vs Laxmi Narain Tandon and Another not approved
Crisp vs Pratt 1639 Cro
Car 549 Parker vs Flint 1699 12 Mod
254 Newton v 
Trigg 3 Mod
327 Saunderson vs Rowles Electa B 558 Merrill vs James W Hodson  and Mary Nisky vs Child Company SO ALR 227 referred