Taxable sale of railway canteen food upheld where the substance of the transaction was commercial sale, not merely service.

Sale of food, snacks, tea and other eatables in railway canteens was treated as a taxable sale because the substance of the transaction was the commercial sale of goods, with any service element only incidental. The Court distinguished cases where canteen facilities were statutorily required to be run on a non-profit basis, and also distinguished the restaurant situation in Northern India Caterers, where the transaction was characterised as a service. As no statutory obligation for non-profit supply was shown and the assessee was actually selling food and drink, the activity was held exigible to sales tax.

---

---

Issues: Whether the assessee's sale of food-stuffs, snacks, tea and other eatables in railway canteens amounted to a taxable sale, or whether it was merely a supply of services falling outside sales tax.

Analysis: The decisive factor was the true character of the transaction. The Court distinguished cases where canteen facilities were mandated by statute and the supply was required to be on a non-profit basis, and also distinguished the restaurant situation considered in Northern India Caterers where the substance of the transaction was treated as service. Here, there was no statutory obligation shown requiring the Railways to provide the facilities on a no-profit basis, and the assessee was actually selling food and drink. On the facts, the transaction was not a mere package of services but a commercial sale of eatables.

Conclusion: The assessee's activity amounted to sale and was liable to sales tax.

Ratio Decidendi: Where the substance of the transaction shows a sale of food and the rendering of services is only incidental, the transaction is exigible to sales tax.

---