Restaurant food sales tax and waiver restrictions failed where the State law did not then cover such supplies.

Restaurant supplies of food and drinks were not taxable as sales for the relevant assessment years because the Tamil Nadu General Sales Tax Act, as then in force, did not specifically include such transactions within the charging definition. Article 366(29A) of the Constitution expanded legislative competence, but it did not by itself amend the State Act or retrospectively validate a levy not then authorised. The restrictive waiver conditions in G.O. Ms. No. 1187 were also unsustainable, because they treated pending and finalised assessments differently on an assumption that the levy was valid, and the classification was held discriminatory.

---

---

Issues: (i) Whether supply of food and drinks in restaurants during the relevant assessment years constituted sales liable to tax under the Tamil Nadu General Sales Tax Act, 1959; (ii) Whether the conditions in G.O. Ms. No. 1187 dated 22 October 1982, restricting waiver to pending assessments and excluding cases where tax had been collected, were valid and enforceable.

Issue (i): Whether supply of food and drinks in restaurants during the relevant assessment years constituted sales liable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The earlier Supreme Court decisions holding that service of meals in hotels and restaurants was not a sale governed the relevant years. Article 366(29A) of the Constitution of India, inserted by the Forty-sixth Amendment, expanded legislative competence and validated laws that already imposed or authorised such levy, but it did not by itself amend the State Act or automatically bring within the definition of sale transactions that the Act did not then cover. The Tamil Nadu Act was amended prospectively only later, and during the years in question the statutory definition of sale did not specifically include such restaurant supplies.

Conclusion: The supply of food and drinks in the restaurants was not taxable as sale for the assessment years in question.

Issue (ii): Whether the conditions in G.O. Ms. No. 1187 dated 22 October 1982, restricting waiver to pending assessments and excluding cases where tax had been collected, were valid and enforceable.

Analysis: The Government order proceeded on the footing that the levy was legally sustainable and that waiver was a discretionary bounty, whereas the real basis was that the transactions were not taxable at all. On that footing, there was no rational distinction between pending and finalised assessments, and no valid basis for denying relief because tax had been collected or for restricting the benefit by conditions that assumed a lawful levy. The classification was therefore held to be unsustainable and discriminatory.

Conclusion: The restrictive conditions in the Government order were invalid and could not defeat the assessee's entitlement to waiver.

Final Conclusion: The tax revisions failed and the writ appeals succeeded, with the assessee obtaining relief on the central taxability issue and on the challenge to the waiver conditions.

Ratio Decidendi: Constitutional validation of a taxing entry does not by itself amend a State sales tax statute; unless the State law, as it stood in the relevant period, specifically included restaurant food and drink supplies within the charging definition, such transactions were not taxable, and a waiver scheme built on the contrary assumption cannot validly discriminate between pending and final assessments.

---