Restaurant food taxability turns on service versus sale, with in-house consumption treated differently from takeaway supplies.

Restaurant supplies consumed by customers inside the premises were treated as part of the service of running the restaurant, so they were not liable to sales tax for the relevant pre-amendment period. Supplies of eatables meant for consumption outside the restaurant had the character of a sale and were liable to sales tax. Because the assessment orders did not separate these two categories, fresh assessment was required after segregation of in-house consumption from outside sales.

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Issues: Whether the supply of food and eatables by a restaurant to customers consuming them in the premises constituted a taxable sale or was merely service; and whether supplies made for consumption outside the restaurant were exigible to sales tax.

Analysis: The restaurant transactions had to be examined on their dominant character. Supplies consumed by customers in the restaurant itself were treated as part of the service rendered in the course of running the restaurant, while the constitutional and statutory amendments expanding the concept of sale were considered prospective for the relevant period. On the other hand, where eatables were sold for consumption outside the restaurant, the transaction had the character of a sale and was not protected by the earlier judicial position or the saving clause relied upon by the assessee. Since the assessment orders did not segregate the two categories of transactions, reassessment was necessary.

Conclusion: The assessee was not liable to sales tax on supplies consumed in the restaurant premises, but was liable in respect of supplies meant for consumption outside the restaurant. The matter was therefore remitted for fresh assessment after segregation of the transactions.

Final Conclusion: The writ petitions succeeded only to a limited extent, with the impugned assessments set aside and the case sent back for reassessment in accordance with the stated distinction between in-house consumption and outside sales.

Ratio Decidendi: In a restaurant context, taxability depends on whether the transaction is in substance a sale or merely service, and supplies for consumption outside the premises may be taxed as sales while in-house consumption may retain the character of service for the relevant pre-amendment period.

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