Canteen sales exemption denied, while turnover taxability was remitted for fresh factual examination of the transaction nature.

Canteen sales exemption was denied because the assessee served not only its own employees but also employees of other group companies, including entities not under a statutory obligation to run a canteen; the exemption principle applicable to statutory canteen facilities therefore did not assist it. Taxability of the canteen turnover was remitted for fresh consideration because the revisional authority had not objectively examined the factual position or recorded findings on whether the activity was a sale of goods or a service-oriented arrangement. The assessing authority was directed to reconsider the issue in accordance with law after giving the assessee an opportunity to establish the relevant facts.

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Issues: (i) whether the assessee was entitled to the benefit of the Government Order granting exemption in respect of canteen sales; (ii) whether the question of taxability of the canteen turnover required fresh consideration in the light of the Supreme Court decision on the nature of canteen transactions.

Issue (i): Whether the assessee was entitled to the benefit of the Government Order granting exemption in respect of canteen sales.

Analysis: The assessee catered not only to its own employees but also to employees of other amalgamated group companies, some of which were not under a statutory obligation to run a canteen. In that factual setting, the earlier decision governing exemption for canteen facilities run to satisfy a statutory obligation applied against the assessee's claim.

Conclusion: The assessee was not entitled to the exemption.

Issue (ii): Whether the question of taxability of the canteen turnover required fresh consideration in the light of the Supreme Court decision on the nature of canteen transactions.

Analysis: The revisional authority rejected the assessee's reliance on the Supreme Court ruling without an objective examination of the factual position and without recording findings on whether the canteen activity was predominantly a sale of goods or involved rendering of services. Since the applicability of the Supreme Court principle depended on the actual facts, the proper course was to have the assessing authority examine the matter afresh after giving the assessee an opportunity to establish the relevant facts.

Conclusion: The matter relating to taxability of the canteen turnover was remitted for fresh consideration.

Final Conclusion: The assessee failed on the exemption issue, but succeeded in obtaining a remand for reconsideration of the taxability of canteen sales, with the assessing authority directed to decide the question in accordance with law after due opportunity.

Ratio Decidendi: Where the taxability of canteen sales depends on whether the transaction is truly a sale of goods or a service-oriented activity, the authority must record factual findings on the actual nature of the transaction before applying the governing legal principle.

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