Composite hotel board-and-lodging contracts are not food sales, but restaurant and takeaway food to non-residents is taxable.

Meals supplied to resident hotel guests under a consolidated boarding-and-lodging charge were not a sale of food because the arrangement was a single composite service, no separate price was fixed, the guest acquired no dominion over identifiable goods, and the taxing authority could not split the contract without statutory basis; that supply was therefore not taxable as a sale. Restaurant meals and packed food supplied to non-resident customers were taxable sales because the customer could order specific food, receive delivery, take it away, or have it served to another person, so property in the goods passed and the sale element predominated.

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Issues: (i) Whether meals supplied by a hotelier to resident guests under a consolidated charge for boarding and lodging amounted to a sale of food within section 2(h) of the Punjab General Sales Tax Act, 1948. (ii) Whether meals and packed food supplied by the hotelier in its restaurant business to non-resident customers amounted to taxable sales.

Issue (i): Whether meals supplied by a hotelier to resident guests under a consolidated charge for boarding and lodging amounted to a sale of food within section 2(h) of the Punjab General Sales Tax Act, 1948.

Analysis: The transaction for resident guests was treated as a single composite arrangement for residence and allied services, with food supplied only as part of the overall hotel service. No separate price was fixed or payable for food, the guest could not demand the food to be handed over, removed, or diverted to another person, and no rebate was allowed if meals were not taken. Property in the food did not pass to the guest in the manner required for a sale, and the taxing authorities could not split up the indivisible contract into artificial components in the absence of a valid statutory basis. The Court also applied the principle that the burden lies on the taxing authority to prove a taxable sale and that a mere passing of movables in the course of service does not establish sale.

Conclusion: The supply of meals to resident guests was not a sale and was not taxable as such under the Punjab Act.

Issue (ii): Whether meals and packed food supplied by the hotelier in its restaurant business to non-resident customers amounted to taxable sales.

Analysis: The restaurant transactions stood on a different footing because the customer could order specific food, receive delivery of it, take it away, or have it served to another person. In that setting, property in the food passed to the customer and the element of sale predominated over service. The reasoning that excluded resident hotel meals from the concept of sale did not apply to restaurant sales or packed food sales, where the customer obtained dominion over the goods and could deal with them as his own.

Conclusion: Restaurant sales and packed food sales to non-residents were taxable sales under the Punjab Act.

Final Conclusion: The challenge succeeded in respect of food served to resident hotel guests under a consolidated lodging-and-board arrangement, but failed in respect of restaurant and packed food sales, leaving the assessment valid only to that limited extent.

Ratio Decidendi: A composite hotel contract for lodging and board is not divisible into a taxable sale of food unless the customer is shown to have contracted for and acquired property in identifiable goods for a price; where food is merely served as part of the hotel service and no dominion, rejection, or separate transfer of property exists, no sale arises.

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