Taxability of hotel and restaurant food supplies turns on whether the transaction is sale or incidental service, requiring factual determination first.

Taxability of food and drinks supplied by hotels and restaurants depends on the real character of the transaction. If the dominant object is sale, with any service element merely incidental, the supply may be treated as a taxable sale; if the supply is only incidental to a service relationship, it may not amount to a sale. The nature of each transaction is therefore a factual question for the assessing authority under the relevant sales tax law. Where only show-cause notices have been issued and no factual determination has been made, writ intervention is ordinarily premature.

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Issues: Whether the writ petitions challenging notices for assessment to sales tax on supply of food and drinks by hotels and restaurants should be entertained at the stage of show-cause notice, and whether the nature of the transactions must first be determined by the assessing authority on facts.

Analysis: The governing principle was that liability to sales tax depends on the real character of the transaction. Where the dominant object is sale of food or drinks, and any service rendered is merely incidental, the transaction may be taxable as a sale. Where supply of food is part of a service relationship and is incidental to that service, it may not amount to a sale. The nature of each transaction in hotels and restaurants was therefore held to be a factual inquiry for the assessing authority under the relevant sales tax law. Since only notices to show cause had been issued and no factual determination had yet been made, writ intervention at that stage was held to be inappropriate.

Conclusion: The petitions were not maintainable at that stage and the assessment authorities were left to decide, on evidence, whether the transactions amounted to sales liable to tax.

Final Conclusion: Judicial interference was declined because the dispute required factual examination by the assessing authority, and the challenge was premature.

Ratio Decidendi: Taxability of food supplied by hotels and restaurants turns on whether the dominant object of the transaction is sale or service, and where facts are yet to be ascertained, the matter must first be decided by the assessing authority rather than in writ proceedings.

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