Canteen supplies are taxable only when sale of food is the dominant object and service is merely incidental.

Sales of food, drinks, snacks, tea and coffee in a workers' canteen are includible in gross and taxable turnover only if, on the facts, the dominant object of the transaction is sale of food and any service element is merely incidental. The governing test is the true nature of the transaction, not its label as a welfare service. In the absence of a factual finding on dominant object and incidental service, tax liability cannot be conclusively determined. The reference was answered conditionally, and the matter was to be disposed of afresh under that test.

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Issues: Whether sales in the workers' canteen were liable to be included in the assessee's gross and taxable turnovers for assessment year 1968-69.

Analysis: The question turned on whether the supply of food, drinks, snacks, tea and coffee in the workers' canteen was merely part of a welfare service or whether, on the facts, the substance of the transaction as evidenced by its dominant object was a sale of food. The governing principle drawn from the Supreme Court decisions was that the taxing authority must first ascertain the true nature of the transaction and determine whether the service element is merely incidental to a sale. In the absence of such a factual finding, liability could not be conclusively determined.

Conclusion: The sales in the workers' canteen would be includible in the gross and taxable turnovers only if it is established on the facts that the dominant object of the transaction was sale of food and the rendering of services was merely incidental.

Final Conclusion: The reference was answered conditionally, and the matter was left to be disposed of afresh in accordance with the stated legal test.

Ratio Decidendi: For canteen supplies, taxability depends on a factual determination whether the dominant object of the transaction is sale of food, with any service element being merely incidental.

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