Restaurant turnover taxability upheld where sale of food was dominant and service was merely incidental.

Restaurant turnover for periods before 7 September 1978 remained taxable where the dominant object of the transaction was the sale of food and drinks and the service element was only incidental. The constitutional amendment and the validating State amendment were treated as removing earlier doubt and as preserving levy and collection under the Karnataka Sales Tax Act, subject to statutory exemptions. The assessees had reported the turnover as sales and paid tax, and produced no material showing that the supplies were outside taxability or that the tax had not been collected so as to attract exemption. The assessments were therefore upheld and the challenge to taxability failed.

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Issues: Whether the assessments on turnover relating to supply of food and drinks by restaurant owners for periods prior to 7 September 1978 were valid in law, and whether the constitutional amendment and consequential State amendment left no authority to levy tax on such transactions.

Analysis: The transactions were brought to tax under the charging provisions of the Karnataka Sales Tax Act, 1957. The constitutional amendment and the validating provision were understood as removing doubts created by earlier decisions and as preserving levy and collection of tax on food and drink supplied in hotels and restaurants, subject to the statutory exemptions. The Court noted that the Supreme Court had clarified that where the substance of the transaction is a sale of food and the rendering of service is merely incidental, sales tax is exigible. The assessees had themselves returned the turnover as sales, paid tax, and produced no material to show that the supply was not taxable or that the tax had not been collected so as to attract the exemption.

Conclusion: The assessments were held to be valid and the challenge to taxability of the restaurant turnover prior to 7 September 1978 was rejected, in favour of the Revenue.

Ratio Decidendi: Where the dominant object of a restaurant transaction is the sale of food and the service element is only incidental, the turnover is exigible to sales tax, and a validating constitutional amendment does not by itself negate a levy already supported by the State charging provision.

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