Hotel food supply as service, not sale, where consumption in premises is the real substance of the transaction.

Supply of food and drinks in a hotel to visitors was treated as a service transaction rather than a sale where the substance of the arrangement was consumption in the premises. The governing principle applied was that food supplied in a hotel or restaurant is not exigible to sales tax when service is the real character of the transaction. Later review observations were read as clarifying that sales tax applies only where the dominant object is sale of food and service is merely incidental. On the facts stated, the hotel supply fell within the service category.

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Issues: Whether the supply of food and drinks by the assessee in a hotel to visitors was a sale exigible to sales tax or a service transaction outside the charging provision.

Analysis: The Tribunal had applied the principle that supply of food in a hotel or restaurant, where the substance of the transaction is service and the food is served for consumption in the premises, is not sale. The later review observations did not displace that principle; they only clarified that where the dominant object is sale of food and rendering of service is merely incidental, sales tax would apply. On the facts found, the assessee was serving food and drinks to visitors in the hotel, bringing the case within the earlier governing rule.

Conclusion: The supply of food and drinks was held to be in the nature of service and not sale, and the assessee succeeded.

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