MOULIN ROUGE PVT. LTD. versus THE COMMERCIAL TAX OFFICER AND ORS.

Citation: [1997] SUPP. 5 S.C.R. 122 · Decided: 12-11-1997 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
MOULIN ROUGE PVT. LTD. 
v. 
THE COMMERCIAL TAX OFFICER AND ORS. 
NOVEMBER 12, 1997 
(S.P. BHARUCHA AND SUHAS C. SEN, JJ.] 
Sales Tax: 
Bengal Finance (Sales Tax) Act, 1941 : 
. Sections 2(g) (iii) and 26A-Restaurant-Food and drinks served along 
with other services-Tax not charged separately fi"om customers for food and 
drinks-No liability to pay sales tax on it-Commercial tax officer-Imposition 
of sales tax and penalty-Tribunal holding that appellant entitled to tax 
D exe,,;ptionfi"om September 7, 1978 till the amendment of the Act-On appeal, 
held legislature has made a valid classification for the purpose of granting 
exemption-Appel/ant's case falls under clause (a) of sub-section (2) of 
section 26A of the Act-Thus entitled to exemption from 7th September, 1978 
till the amendment of the Act. 
E 
Clauses (a) and (b) of sub-section (2) of section 26A-Distinction 
made between restaurants and hotels by granting different period of exemption 
on sales tax-Reliance based on two different judgments of this Court-
Validity of-Held, classification based on an intelligible and rational basis-
Thus a valid classification. 
F 
Constitution of India, 1950 : Bengal Finance (Sales Tax) Act, 1941-
Section 26A-Held, not violative of Constitution. 
The appellant-company was running a restaurant which, apart from 
food and drinks, provided to its customers various services and amenities. 
The case of the appellants was that in view of the judgment in Associated 
G Hotels ltd* decided on 4•• January, 1972 it had no liabHTty to pay or to 
collect any sales tax on the food and drinks supplied by it as these were not 
separately charged. for but were included in the bills for various services and 
amenities provided to its customers. However, the (:ommercial Tax OQicer 
passed an ex-parte, best judgment assessment imposing sales tax and penalty 
H on the appellant. On failure to pay the sales tax as demanded; a certificate 
122 
• 
MOULIN ROUGE PVT. LTD. v. C.T.O. 
123 
· case was started. 
A 
In Northern India* case decided on September 7, 1978 restaurants and 
eating houses were granted exemption from payment of sales tax on food 
served by them. Thus by the two judgments of this Court restaurants and 
hotels were exempted from payment of sales tax on the food and drinks 
served by them. To retrieve the situation arising out of the said judgments, B 
amendments were made in Article 366 of the Constitution and sub-clause 
29A was inserted in the definition of"tax on the sale or purchase of goods". 
Consequently the definition of "sale" in section 2(g)(iii) of the Bengal 
Finance (Sales Tax) Act, 1941 was amended and section 26A was inserted. 
The appellant approached the High Court alleging that it was not liable C 
to pay sales tax on the food served to its customers. The High Court passed 
an order of injunction restraining the Sales Tax Officer from proceeding 
with the aforesaid certificate cases. On transfer, the Taxation Tribunal while 
dismissing the petition held that the appellant's case falls under clause (a) 
of sub-section (2) of section 26A of the Act and it was thus entitled to tax D 
exemption from September 7, 1978 till the amendment of the Act. Being 
aggrieved by the order of Tribunal, the appellant has preferred the present 
appeal. 
The contention of the appellant was that section 26A of the Act has 
made an invidious and irrational distinction between supply of food by a E 
restaurant in clause (a) and supply of food by any other body in clause (b) 
for grant of sales tax exemption. 
Dismissing the appeal, this Court 
HELD : I.I. The legislature has made a valid classification for the F 
purpose of granting exemption to hotels and to restaurants from payment of 
sales tax for food supplied by them _on the basis of the judgments of this 
Court. [130-Al 
*State of Punjab v. Association Hotels of India ltd., 119721lSCC472 
and Northern India Caterers (India) ltd., v. Lt. Governor of Delhi, [ 19781 4 G 
sec 36, referred to. 
1.2. Sale of foodstuffs by a restaurant to its customers was dealt with 
in the case of Northern India Caterers (India) ltd. where the judgment was 
pronounced on September 7, 1978. The exemption in clause (a) of Section 
26A (2) to the restaurants or the eating houses has been given from the date H 
124 
SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R. 
A of that judgment. When Section 26A validated the levy of tax with retrospective 
effect the legislature took care to ensure that the 

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