Restaurant food supply and counter sales: taxability depends on whether the transaction is service or an ordinary sale.

Restaurant supply of food is not automatically a taxable sale under the Andhra Pradesh General Sales Tax Act; taxability depends on the facts, especially whether the customer has a right to carry away the food and whether the dominant character of the transaction is service or sale. Where the transaction is seated restaurant service satisfying a bodily want, it is treated as service rather than sale, but counter sales of food and drinks are direct transfers of goods for consideration and remain taxable. The dealer bears the initial burden of showing that customers had no right to take away the food, as that fact lies specially within the dealer's knowledge.

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Issues: (i) Whether supply of foodstuffs, drinks and meals by restaurants to customers constituted a sale exigible to tax under the Andhra Pradesh General Sales Tax Act when the food was consumed in the restaurant itself; (ii) whether sales across the counter of foodstuffs and drinks amounted to taxable sales; (iii) who bore the burden of proving whether the customer had no right to carry away the food.

Issue (i): Whether supply of foodstuffs, drinks and meals by restaurants to customers constituted a sale exigible to tax under the Andhra Pradesh General Sales Tax Act when the food was consumed in the restaurant itself.

Analysis: The definition of sale in the State Act was materially similar to the definition considered by the Supreme Court in the restaurant and hotel cases. The controlling principle drawn from those decisions was that where the customer had no right to carry away the food and the substance of the transaction was service in satisfaction of a bodily want, the transaction was not a sale. The later observations in the review decision were read as applying only where the customer had a right to take away the food and the dominant object was sale rather than service. On that construction, the question whether a particular restaurant transaction was taxable depended on the facts of each case and could not be answered as a blanket proposition against the assessee.

Conclusion: The supply of food in every restaurant case was not automatically a taxable sale; the matter had to be examined on the facts, and the assessments already made were therefore set aside for fresh consideration.

Issue (ii): Whether sales across the counter of foodstuffs and drinks amounted to taxable sales.

Analysis: A counter sale was treated differently from seated restaurant service because the transfer of goods for consideration was direct and any accompanying packing or incidental assistance was insignificant. Such transactions were treated as ordinary sales, and the arguments advanced on behalf of the petitioners did not dislodge that position.

Conclusion: Sales across the counter were liable to sales tax.

Issue (iii): Who bore the burden of proving whether the customer had no right to carry away the food.

Analysis: Although the normal rule placed the burden on the revenue to prove taxability, the existence of a contractual term, custom or practice denying a right to carry away the food was a matter especially within the dealer's knowledge. In that situation, the initial burden rested on the dealer to establish the absence of such a right, after which the character of the transaction had to be assessed accordingly.

Conclusion: The initial burden lay on the dealer to show that the customer had no right to carry away the food.

Final Conclusion: The writ petitions succeeded in part, with the assessments quashed and remitted for reconsideration on the restaurant-service transactions, while counter sales were upheld as taxable.

Ratio Decidendi: A restaurant transaction is not automatically a sale merely because food is supplied for consideration; taxability depends on whether the customer has a right to take away the food and whether the dominant character of the transaction is sale or service, with counter sales remaining taxable as ordinary sales.

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