Hotel exemption does not extend to ordinary restaurant sales unless a distinct lodging-based transaction is proved.

Hotel accommodation with meals served as an incidental amenity was treated as legally distinct from restaurant sales of cooked food, sweets, tea, coffee, dahi and lassi. The Court noted that the hotel exemption principle applies where lodging is the dominant service and meals are ancillary, whereas in a restaurant the primary transaction is the sale of food for a price. It further stressed that a petitioner seeking exemption must clearly prove a genuine hotel component separate from restaurant business; vague pleadings are insufficient in writ proceedings. The commentary therefore indicates that special sales tax notifications cannot be avoided for ordinary restaurant sales unless distinct hotel transactions are established on the facts.

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Issues: (i) Whether the impugned special sales tax notifications could be avoided on the footing that the supply of cooked food, sweets, tea, coffee, dahi and lassi by the petitioners formed part of an indivisible hotel service and not a taxable sale; (ii) Whether the writ petitions could succeed on the available facts where the petitioners failed to establish with clarity that any part of their business was genuinely hotel business distinct from restaurant sales.

Issue (i): Whether the impugned special sales tax notifications could be avoided on the footing that the supply of cooked food, sweets, tea, coffee, dahi and lassi by the petitioners formed part of an indivisible hotel service and not a taxable sale.

Analysis: The petitions were founded on the proposition that the rule in respect of hotel accommodation, where meals are served as an incidental amenity to lodging and the bill is one and indivisible, should also exempt restaurant supplies. The Court distinguished hotel transactions from restaurant transactions. In a hotel, the dominant element is service connected with lodging, and meals are incidental to that service. In a restaurant, by contrast, the primary object is supply of food to the customer, and the property in the food passes on payment of price. The Court held that the Supreme Court decision relied on by the petitioners could not be stretched to cover restaurant business, because the factual and legal basis of that decision was confined to hotel accommodation and did not decide restaurant sales.

Conclusion: The special sales tax notifications were not shown to be inapplicable to the petitioners' restaurant business, and no exemption was established on this ground.

Issue (ii): Whether the writ petitions could succeed on the available facts where the petitioners failed to establish with clarity that any part of their business was genuinely hotel business distinct from restaurant sales.

Analysis: The pleadings were found to be vague and insufficient to show which petitioners, and to what extent, were running a true hotel business involving lodging with incidental meals. On the record, the Court was unable to hold in writ jurisdiction that any petitioner had proved a distinct hotel component deserving exemption. The Court indicated that if a petitioner could establish before the taxing authorities that part of the business was genuinely hotel business, exemption could be claimed for that part in appropriate proceedings, but such factual proof was not available in the present cases.

Conclusion: The petitioners were not entitled to writ relief on the facts presented.

Final Conclusion: The challenge failed because the hotel exemption principle was held inapplicable to ordinary restaurant sales on the facts pleaded, and the writ petitions were dismissed.

Ratio Decidendi: A composite supply exemption applicable to hotel accommodation with incidental meals cannot be extended to ordinary restaurant sales unless the petitioner proves a distinct hotel transaction involving lodging and incidental service.

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