LexSTATE OF PUNJAB versus M/S. ASSOCIATED HOTELS OF INDIA LTD.
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A ll c D E F G H 937 STATE OF PUNJAB v. M/S. ASSOCIATED HOTELS OF INDIA LTD. January 4, 1972 [S . .M. S!KRI, C.J., J. M. SHELAT, I. D. DuA, H. R. KHANNA AND G. K. MITTER, JJ.] · S11les-rt1.t-Sale and contract of H'ork and serl'ice-Distinction nnd fC'SIS, The respondent-company was running the business of a hotelier and was registered as a dealer under the Punjab General Sales Tax Act 1948. lt applied for a declaration that it was not liable to sales-tax in 'respect of meals served to the guests staying in the hotel on the grounds that : (1) the hotel receives guests primarily for the purpose of lodging;. (2) when so receil"zd the management provides him with a number of ameni- ties including· meals at fixed hours, incidental to such lodging and with a view to render his stay comfortable; (3) the transaction between the respondent and the guests is one for the latter to stay and not one of sale of food stuffs supplied; ( 4) the bill given by the respondent and paid by the guest is one and indivisible, being a fixed amount per day during his stay in the hotel and does not consist of separate items in respect of the several amenities furnished to him, and (5) the transaction does not envisage any sale of food since the guest cannot demand a rebate or deduction if he were to miss a meal or meals nor is he entitled to carry a\vay or deal with. in any n1anner, the food sen1ed on his· table if a part of it is not consumed. The dcpartmi.:nt rejected the company·s npplication but the High Court allowed its writ petition. Disn1issing the appeal to this Court, HELD : The transaction is one essentially of sorvice in the perfor- mance of which and as part of the amenities incidental to that service, the h~1teli'i!r se1ves n1eals at stated hours. The Revenue, the'refore, was not entitled to split up the transaction into two parts one of service and the other of sale of food stuffs and to split up the bill charged as consist- ing of charges for lodging and charges for food stuffs sel'\"Od with a view to bring the latter uml•" the Act.[947 F-G] The distinction between a 'Contract of sale and a contract of work and service is fine especially when the contract is a composite one iiivoTv- ing both. In considering whether a transaction is a sale falling within the purview of sales-tax 1t is necessary to determine the nature of the contract involved on the facts of each case. A coniract of sale is one whose main object is the transfer of property and delivery of possesi;ion of a chattel to the buyer: but the mere passing of property in an arti- (:}c or con1moditY during the course of .tlr- perfonnance of a tf'3nsaction does not render It a transaction of sale when there is no intention to sdl and purchase.· When the principal object of work undertaken bv the payee of the p'rk,. is not the transfer of a chattel qua chattel tlie con- tract is one of work and labour. The test is whether or not the work or labour bestowed ends in anything that can properly become the subject ,,f sak: neither the ownership of the matcriah nor the value of the skill 938 stlilltfii:E Ci'.l'UltT REPO!l TS (1972] 2 S.C.R. and labour as «;o_Jllpared with the value of materials is conclusive, although such matters may be taken into consideration. In every case the court would M\re to find out what is the primary object of the transac- tibtl and the intention of the parties while cnbzring into it. L942 D-G: 944 F-G. HJ The fransaction in the present case is one and indivisible, namely, one of receiving .a customer in. the. hotel to stay. The bill is not capable of being split up into one for residence and another for sale of meals. Jl.ll!enities ittduding m<!al&, are µart and parcel of the ser\>ice which, iri reality; is the transaction between the parties. Even if it was. to be disintegfatect the Stipplv of meals during such stav does not constitute ~ sepat'iite coiifr'_act of sale, since no intention on the part of the parties ti> sell nl!d J)utchase the foild stuffs supplied durin.g meal time can be spelt out. ~945 G-H; 946 A-CJ . Mar/ras v. Gannon Dunkerley & Co. Ltd., i 1959] S.C.R. 379, Mohan/al J'.D1iflil1 Rice & Atill Mills. v. Assdm [1953] 4 S:f.C. 129, Masanda & Co. v. IJ6tfllltf~Ofl~ of Saler-lax, f,1957] 8 S.T.C. 370, United Bleachers .Ltd. v. Milifl"~. (1960) 9 S.'I'.C. 278, Krishna & Co. Ltd. v. Andhra Pradesh. [1956] 7 S.T.C. 26, Palllaik & Co. v. Oris~a. [19651 16 S.T.C.
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