Composite hotel food charges form full sale price where amenities are not separately contracted for, court says.

A single composite price charged by a hotel for food and drinks supplied in its eating rooms was treated as the full sale price for sales tax purposes. The court held that sale price means the entire consideration paid by the customer, and the seller cannot split that amount internally into taxable and non-taxable components based on ambience, luxury, or business policy. It also found no separate implied contract for amenities or environment; the only identifiable bargain was for the supply of food and drinks. The entire receipts were therefore part of turnover and fully taxable under the Bombay Sales Tax Act, 1959.

---

---

Issues: (i) Whether the whole amount charged to customers for food and drinks served in the hotel eating rooms constituted sale price liable to tax under the Bombay Sales Tax Act, 1959, or only 50 per cent of the receipts was taxable. (ii) Whether there were two implied contracts, one for amenities and environment and the other for food, so that only the price attributable to food was liable to tax.

Issue (i): Whether the whole amount charged to customers for food and drinks served in the hotel eating rooms constituted sale price liable to tax under the Bombay Sales Tax Act, 1959, or only 50 per cent of the receipts was taxable.

Analysis: The Act taxes the turnover of sales, and sale price means the total valuable consideration payable for the sale. The relevant test is the amount paid by the purchaser as consideration for the goods, not the manner in which the seller internally apportions that amount among different business elements. The price charged in the menu card was the price payable for the food and drinks supplied, and the customer had no option to separate payment for food from payment for surroundings or luxury. The nature of the establishment, its ambience, or the higher pricing policy could not convert part of the price into a non-taxable amount. The full amount received was therefore part of the sale price.

Conclusion: The entire receipts for food and drinks were liable to tax, and the contention for a 50 per cent deduction was rejected in favour of the Revenue.

Issue (ii): Whether there were two implied contracts, one for amenities and environment and the other for food, so that only the price attributable to food was liable to tax.

Analysis: The factual position disclosed only one contract between the hotel and its customers, namely the contract for supply of food and drinks. There was no separate and identifiable bargain for environment or amenities as a distinct contractual consideration. The charges were inseparably embedded in the single price for the food and drinks supplied, and no part of the consideration could be split off as payment for something other than the sale.

Conclusion: There was no second implied contract, and the whole consideration formed sale price in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee on the surviving questions, and the sale proceeds from the hotel's supply of food and drinks were held fully taxable as part of turnover.

Ratio Decidendi: Where a purchaser pays a single composite price for goods, the entire amount constitutes sale price if the additional elements are inseparably included in the consideration for the sale and are not separately contracted for or separately charged.

---