Restaurant supplies consumed on premises are treated as service, not sale, when no transfer of property in goods is intended.

A restaurant supply of fruit juice, cold drinks and ice-cream is taxable as a sale only if the transaction involves transfer of property in goods for consideration under section 2(o) of the Rajasthan Sales Tax Act, 1954. The article applies the restaurant-transaction test that the substance of the arrangement must be examined: where items are consumed on the premises and the customer has no right to carry them away, the dominant character is service rather than sale. The analysis also treats the absence of a right of appropriation as material in determining taxability.

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Issues: Whether the turnover from supply of fruit juice, cold drinks, ice-cream and similar items in a restaurant was liable to sales tax as a sale, or whether the transaction was a supply of service not amounting to a sale.

Analysis: The statutory definition of "sale" under section 2(o) of the Rajasthan Sales Tax Act, 1954 requires a transfer of property in goods for consideration. Applying the principles governing restaurant transactions, the decisive enquiry is whether the substance of the transaction is a sale of food or merely the rendering of service. Where the customer consumes the items in the restaurant and has no right to carry them away, the transaction is treated as a service and not as a sale. The conclusion was supported by the tests that the dominant object of the transaction and the absence of a right of appropriation are material in deciding taxability.

Conclusion: The supply of fruit juice, cold drinks and ice-cream in the restaurant was not a sale exigible to tax, and the assessee was not entitled to relief.

Ratio Decidendi: In a restaurant transaction, food or drinks consumed on the premises are not taxable as a sale where the dominant character of the transaction is service and no transfer of property in the goods to the customer is intended.

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