Deemed sale of food and drinks upheld for sales tax, with service element included and turnover-based classification sustained.

After the Forty-sixth Constitutional Amendment, supply of food and drinks in hotels, restaurants and eating-houses was treated as a deemed sale for sales tax purposes, so section 3 of the Tamil Nadu General Sales Tax Act, read with the amended definitions, was sufficient to authorise the levy. Clause (29A)(f) of article 366 was held to remove the earlier bar based on the Sale of Goods Act concept of sale and entry 54 of List II, and the service element was not required to be excluded. A turnover-based classification under the impugned Government Order was upheld as a rational fiscal distinction and not a violation of article 14.

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Issues: (i) Whether section 3 of the Tamil Nadu General Sales Tax Act, 1959, as amended definitions stood, authorised levy of sales tax on supply of food and drinks in hotels, restaurants and eating-houses; (ii) whether clause (29A)(f) of article 366 and the Tamil Nadu amendments removed the alleged bar arising from entry 54 of List II and the Sale of Goods Act concept of sale, including the contention that the service portion had to be excluded; (iii) whether the impugned Government Order was invalid under article 14 on the ground of classification based on total turnover of rupees ten lakhs and above.

Issue (i): Whether section 3 of the Tamil Nadu General Sales Tax Act, 1959, as amended definitions stood, authorised levy of sales tax on supply of food and drinks in hotels, restaurants and eating-houses.

Analysis: After the Forty-sixth Constitutional Amendment, the statutory definitions of dealer, sale, taxable turnover, total turnover and turnover in the State Act were amended to bring the supply of food and drinks within the taxing net. Section 3, read with those definitions, was sufficient to attract tax on such supplies. Once the amended definitions expressly included the relevant transactions, the charging section could operate on them without the need for a separate charging provision in the form suggested by the petitioners.

Conclusion: The levy was held to be authorised under section 3 and the challenge on absence of a charging provision failed, against the petitioners.

Issue (ii): Whether clause (29A)(f) of article 366 and the Tamil Nadu amendments removed the alleged bar arising from entry 54 of List II and the Sale of Goods Act concept of sale, including the contention that the service portion had to be excluded.

Analysis: Clause (29A)(f) created an inclusive and deeming constitutional definition covering supply of food and drinks by way of or as part of any service, or in any other manner whatsoever, for consideration. That constitutional enlargement was intended to overcome the earlier line of cases treating such supplies as a composite service transaction and to validate State laws taxing them. In that setting, the contention that the tax power remained confined by the earlier sale concept or that the service element had to be carved out was rejected.

Conclusion: The constitutional amendment was held to authorise levy on the supply of food and drinks without excluding the service component, against the petitioners.

Issue (iii): Whether the impugned Government Order was invalid under article 14 on the ground of classification based on total turnover of rupees ten lakhs and above.

Analysis: The turnover-based classification was treated as a permissible fiscal classification. A larger dealer was viewed as forming a distinct class with greater capacity to pay, and the State could legitimately adopt a graded or threshold-based exemption or levy structure so long as the classification had a rational nexus with the taxing object. The impugned differentiation was therefore not considered arbitrary or hostile discrimination.

Conclusion: The article 14 challenge failed and the classification was upheld, against the petitioners.

Final Conclusion: The constitutional and statutory objections to the levy of sales tax on supplies of food and drinks in hotels, restaurants and eating-houses were rejected, and the writ petitions were dismissed.

Ratio Decidendi: After the Forty-sixth Amendment, supply of food and drinks for consideration, even when rendered as part of a service, is constitutionally deemed a sale for sales tax purposes, and a turnover-based fiscal classification is valid if it bears a rational nexus to the object of taxation.

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