Title of the case: Federation of Hotel And Restaurant Associations Of India vs Union Of India And Others. on 12 December, 2017
Citation: Civil Appeal No.21791 OF 2017 (Arising out of S.L.P. (C) No. 27629/2015)
Court: The Supreme Court of India
Bench: R.F. Nariman
Appellant: FEDERATION OF HOTEL AND RESTAURANT ASSOCIATIONS OF INDIA
Respondents: UNION OF INDIA AND OTHERS
Writ petition was filed by the Federation of Hotel and Restaurant Associates of India to seek a declaration of the Controller of Weights and Measures to proceed against the hotels and restaurants of the appellant association for charging a price higher than the printed Maximum Retail Price for supply of packaged water bottle during services provided to their customers while in the hotels and restaurants. The appellants plead in the Writ Petition that the transaction consisting predominantly of a service, and not of a sale of drinking water, consisted of a composite charge which included incidental charges for food, drinks etc.
Argument of Appellant:
Appellant argued that both the original as well as the review order impact his clients in that the judgment of the learned Single Judge, which is a detailed and comprehensive judgment dealing with all the law points at hand has been brushed aside, and the result is that any de novo proceeding under the Legal Metrology Act, 2009, which has since replaced the two Acts of 1976 and 1985, would transgress the rights of the appellant’s clients as this has to be gone into de novo. According to the learned Senior Counsel, the concession that is made cannot possibly bind the appellant as not only is it a concession on a point of law but on a concession made on jurisdiction, and according to the learned Senior Counsel once it is conceded, as will become clear from a reading of the Legal Metrology Act, that the position under the two statutes, namely, the 2009 Act as well as the repealed Acts is identical, then the Single Judge’s judgment, if it is otherwise good in law, would require to be confirmed.
Bearing these arguments in mind, Parliament amended the Constitution and introduced the Constitution (forty-sixth Amendment Act), by which it introduced Article 366 (29-A). Sub-clause (f), with which we are directly concerned, reads as follows:-
“Article 366. (29A) (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.” A reading of the constitutional amendment would show that supply by way of or as part of any service of food or other article for human consumption is now deemed to be a sale of goods by the person making the transfer, delivery or supply.
Argument of Respondent:
Respondent argued that we should not go into the jurisdictional question at all in view of the statement of counsel made for the writ petitioner before the learned Division Bench. Alternatively, he argued that if for some reason we are to go into the merits of the case, despite the fact that the 2009 Act admittedly does not make any change in the earlier position so far as the definition of “sale” is concerned, yet a reading of the definition of “pre-packaged commodity” contained in Section 2(l) of the 2009 Act read with Rule 3 explanation (1) of the Rules made thereunder would show that hotels such as the appellant’s are within the reach of the statute and the rules made thereunder. He also referred to Section 57 of the 2009 Act, which repeals the 1976 Act, and submitted that transactions made under the old Act would continue as a result. The question that therefore arises in the present case is: given the fact that the Legal Metrology Act, 2009 continues with the same definition of “sale” as was contained in the 1976 Act, whether the judgment of the learned Single Judge can be said to be correct in law and applicable qua the 2009 Act as has been stated in the trilogy of judgments in M/s. Associated Hotels of India Ltd. (supra) and the two Northern India Caterers (India) Ltd. (supra), it is clear that when “sale” of food and drinks takes place in hotels and restaurants, there is really one indivisible contract of service coupled incidentally with sale of food and drinks. Since it is not possible to divide the “service element”, which is the dominant element, from the “sale element”, it is clear that such composite contracts cannot be the subject-matter of sales tax legislation, as was held in those judgments.
After discussing these judgments in detail, and considering the statement of objects and reasons of the Standards of Weights and Measures Act, the learned Single Judge finally held:
In the above analysis it was hold that charging prices for mineral water in excess of MRP printed on the packaging, during the service of customers in hotels and restaurants does not violate any of the provisions of the SWM Act as this does not constitute a sale or transfer of these commodities by the hotelier or restaurateur to its customers. The customer does not enter a hotel or a restaurant to make a simple purchase of these commodities. It may well be that a client would order nothing beyond a bottle of water or a beverage, but his direct purpose in doing so would clearly travel to enjoying the ambience available therein and incidentally to the ordering of any article for consumption. Can there by any justifiable reason for the Court or Commission to interdict the sale of bottled mineral water other than at a certain price, and ignore the relatively exorbitant charge for a cup of tea or coffee. The response to this rhetorical query cannot be in the negative. The appeals are accordingly allowed and the judgments dated of the High Court are set aside.