Restaurant turnover taxability turns on dominant object: service transactions escape sales tax, but sales of food may be taxed.

Restaurant turnover taxability depends on the dominant object of the transaction: if the arrangement is principally one of service, sales tax cannot be levied on the composite turnover, but if the dominant object is the sale of food, eatables, beverages or drinks, the turnover is taxable. The assessment records had not been examined on that basis, because the authority relied mainly on the constitutional amendment without determining whether the business was service-based or sale-based. Fresh examination of the accounts was therefore required, and the existing assessments were set aside for reassessment, leaving liability open to be determined again on remand.

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Issues: Whether turnover from supply of food and beverages in a restaurant was exigible to sales tax under section 12(4) of the Orissa Sales Tax Act, and whether the assessment orders required reconsideration on the basis of the dominant object of the transaction.

Analysis: The matter was governed by the principle that a restaurant transaction must be examined on its character: if the dominant object is service, sales tax cannot be levied on the composite turnover, but if the dominant object is sale of food, eatables, beverages and drinks, including sales in packets and parcels, the turnover is taxable. The assessment records had not been examined on that footing, and the assessing authority had proceeded mainly on the broad effect of the constitutional amendment without ascertaining whether the business was one of service or sale. Fresh examination of accounts was therefore necessary.

Conclusion: The assessment orders were quashed and the matters were remanded for reassessment. If the petitioners did not effect packet and parcel sales, the turnover would not be liable to sales tax; if such sales were proved and the sale turnover could be segregated, tax would be exigible.

Final Conclusion: The petitions succeeded to the extent of setting aside the existing assessments, but the tax liability was left open for fresh determination on remand.

Ratio Decidendi: In a restaurant transaction, taxability depends on whether the dominant object is service or sale; only where the dominant object is sale of food or beverages is the turnover exigible to sales tax.

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