Holding

A State may levy tax on the supply of food and drinks only if its own sales‑tax law, after amendment of the definition of ‘sale’, expressly provides for such levy; consequently Tamil Nadu’s amendment suffices, but Maharashtra and Uttar Pradesh cannot tax retrospectively for periods before their statutes were amended.

Summary

The Supreme Court examined whether State governments could levy sales tax on the supply of food and drinks after the Constitution (Forty‑sixth Amendment) Act, 1982 inserted clause 29A in Article 366. The petitioners – restaurant owners in Tamil Nadu, residential‑hotel owners in Maharashtra and a halwai in Uttar Pradesh – argued that the States lacked authority to tax such supplies before 2 February 1983 because their sales‑tax statutes did not contain a provision for the levy. The Court held that once a State amended the definition of “sale” to include food and drink, the supply became taxable, so Tamil Nadu could levy tax after its amendment, but Maharashtra and Uttar Pradesh could not levy tax retrospectively for periods before the amendment as their statutes were silent. The Court also ruled that the price charged in a restaurant cannot be split into food and service components for tax purposes. Consequently, the Court dismissed all appeals and writ petitions and directed Maharashtra not to assess tax on residential hotels until appropriate rules are framed.

Issues considered

The constitutional validity and retrospective effect of Section 6 of the Constitution (Forty‑sixth Amendment) Act, 1982 on State sales‑tax statutes
Whether a State may levy tax on the supply of food and drinks before its own legislation was amended to include such supply
Whether the price charged by a restaurant can be divided into food and service components for tax assessment
Whether Tamil Nadu’s amendment of the definition of ‘sale’ suffices to authorise tax on food and drinks prior to the 1997 insertion of Section 3D
Whether Maharashtra and Uttar Pradesh can tax food and drink supplies prior to 2 Feb 1983

Legislation cited

Bombay Sales Tax Act, 1959s. Section 2(28)(b)(iii)
Constitution (Forty‑sixth Amendment) Act, 1982s. Clause 29A (Article 366), s. Section 6
Tamil Nadu General Sales Tax Act, 1959s. Section 2(g), s. Section 2(n), s. Section 3A, s. Section 3B, s. Section 3D
Uttar Pradesh Sales Tax Act, 1948s. Section 2(h)(vi)

Subjects

Sales taxFood and drink taxConstitutional amendmentRetrospective validationArticle 366Section 6Tamil NaduMaharashtraUttar PradeshRestaurant taxResidential hotel taxSplit of charges

Judgment

MIS. K. DAMODARASAMY NAIDU AND BROS. ETC. ETC. A
v.
THE STATE OF TAMIL NADU AND ANR. ETC. ETC.

OCTOBER 12, 1999

(S.P. BHARUCHA, B.N. KIRPAL, V.N. KHARE, D.P. B
MOHAPATRA AND N. SANTOSH,HEGDE, JJ.]

Constitution of India/Constitution (Forty-Sixth Amendment) Act, 1982:

Anicle 366 Clause (29A)-Supply of food and drinks by Hotels and C
Restaurants-Sales Tax-Levy of-Held, States entitled to Levy Tax on the
supply of food and drink-No necessity to split the food charges from service
charges for levy of tax-Tamil Nadu General Sales Tax Act, 1959---Bombay
Sales Tax Act, 1959---U.P. Sales Tax Act, 1948.

Anide 366 Clause (29A)/S.6-Supply of food and drinks-Sales D
Tax-Levy of-No enabling provision in State enactments in State of
Maharashtra and in S(ate of Uttar Pradesh prior to 2.2.1983-Effect of-Held,
Parliament while amending Article 366 cannot and does not amend the State
laws-State legislature alone could amend or modify the State laws relating
to levy of tax-Thus, the levy of Sales tax on supply of food and drinks prior
to 2.2.1983 in State of Maharashtra and in State of Uttar Pradesh is bad in E
law-Bombay Sales Tax Act, 1959--S.2(28) (b)-U.P. ·Sales Tax Act,
1948-S.2(h)(vi).

Sales Tax:

Tamil Nadu General Sales Tax Act, 1959--Ss.2(g) 2(n), JD, 3B and F
3A-Restaurants-Supply of food and drinks-Sales Tax-Levy of-Held,
·exigible to tax once the definition of "Sale" was amended to include supply of
food and drinks--lt cannot be infe"ed that there was no intention to tax until
S.3D was introduced in 1977.
G
Bombay Sales Tax Act, 1959 :

Supply of Food and Drinks-Sales Tax-Levy of-Residential Hotels
providing lodging and boarding for a composite sum-No mies setting out
formulae for determining the component exigible to tax framed---Effect
of-Held, it would amount to arbitrariness in assessment by Sales Tax H
597
-
598 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A officials-Directions issued to the State Govemment not to make assessment
till necessary mies were framed.

Article 366 of the Constitution was amended by Constitution (Forty
Sixth Amendment) Act, 1982 by inserting clause (29A) and States were
permitted to levy tax on supply of food and drinks. Consequently, the
B definition of 'sale' in Sales Tax Act of different States were amended to
include the sale of food and drinks and tax was levied thereon. Hence the
present appeals and writ petitions.

On behalf of restaurant owners in the State of Tamil Nadu it was
c contended that the State Legislature had evinced r.o intention to tax the
supply of food and drink until Section 30 was introduced in the Tamil
Nadu State Sales Tax Act, 1959 in 1997 and mere amendment of the
-
definition section in the Act was not enough to entitle the State to levy the
tax prior to 1997; that in the eye of the law, the tax on food served in
D restaurant could not be levied on the sum total of the price charged to the
customer and the bill that the customer paid in the restaurant had,
'•
therefore, to be split up between what was charged for such service and
what was charged for the food.

E
On behalf of residential hotel owners in the State of Maharashtra it
was contended that residential hotels provided only lodging or lodging and
boarding and the composite charge that the hotel owner levied for lodging
--
and such boarding had to be split up and only the element thereof that
related to the supply of meals could be subjected to tax. Thus, tax could
not be levied on the composite charge for boarding and lodging unless the
F State made Rules which set down formulae for determining that com-
ponent of the composite charge which was exigible to the tax on food and
drinks; that the definition of 'sale' in Bombay Sales Tax Act, 1959 was
amended by introducing Clause (b) (iii) which entitled levy of tax on supply
of food and drinks made or given on or after 2.2.1983 and therefore no tax
G could be levied on supply of food and drinks prior to 2.2.1983.

On behalf of 'halwai' in State of Uttar Pradesh, it was contended that
the definition of 'sale' in U.P. Sales Tax Act 1948 was amended on 2.2.1983 .L'
and therefore tax on the supply of food and drinks C{Juld not be levied for
H the period prior to 2.2.1983.
K. DAMODARASAMY NAIDU v. STATE 599

On behalf of State of Maharashtra and Uttar Pradesh it was con- A
_ tended that S.6 of the Constitution (Forty-Sixth Amendment) Act, 1982
validated the Sales Tax Laws of the States with retrospective effect and
that, therefore, the States were entitled to levy the tax on the supply of
food and drink regardless of the fact that there was no provision in the
State Acts for such levy prior to 2.2.1983.
B
Dismissing the appeals and the petitions, the Court

HELD l.l. The State of Tamil Nadu is entitled to levy tax on supply
of food and drinks in the State after amendment of definition of 'sale' in
... the Tamil Nadu Sales Tax Act, 1959. [604-H; 605-A] C

1.2. Once the definition of "Sale" in the Act was amended to include
the supply of food and drinks, the supply of food and drinks fell within
the purview of the charging section thereof and became exigihle to tax
thereunder. That the State legislature had earlier chosen specifically to D
incorporate Section 3A and 3-B to tax the transfer of the right to use
goods and the transfer of goods involved in work contracts respectively
does not lead to the conclusion that, therefore, it had not intended to tax
the supply of food and drinks until Section 30 was inserted in 1997. The
incorporation of Section 3A and 38 can only be said to be measures of
abundant caution. [605-B; CJ E

2. The provisions of Article 366 clause (29A) (I) inserted by Con-
stitution (Forty Sixth Amendment) Act, 1982 permits the States to impose
a tax on the supply of food and drinks. The supply can be by way of a
service or as part of a service or it can be in any other manner whatsoever. F
The supply or service can be for cash or deferred payment or other
valuable consideration. The words of sub-clause(!) have found place in
the Sales Tax Acts of most States and, they have been used in the Tamil
Nadu Sales Ta~Act. The tax, therefore, is on the supply of food or drinks
......
, and it is not of relevance that the supply is by way of a service or as part
of a service. Therefore, the price that the customer pays for the supply G
of food in a restaurant cannot be split up. The supply of food by the
restaurant owner to the customer, though it may be a part of the service
that he renders by providing good furniture, furnishing and fixtures,
linen, crockery and cutlery, music, a dance floor and a floor show, is what
is the subject of the levy. [605-F; G; H; 606-A] H
600 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A State of Punjab v. M/s. Associated Hotels of India Ltd., [1972J 2 SCR
937; Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, [1978]
4 SCC 36 and Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi,
[1980] 2 sec 167, referred to.

3. Parliament, when exercising the powers to amend the Constitu-
B tion under Article 366, cannot and does not amend State Acts. The State
Legislatures alone could amend or modify a State law levying tax under
Entry 54 of List II. Section 6 of the Constitution (Forty Sixth Amendment)
Act only validates retrospectively State Sales Tax Acts that had made
provision for the levy of sales tax on the supply of food and drinks. Neither
C the State of Maharashtra nor the State of Uttar Pradesh had provisions
in their Sale Tax Acts prior to the introduction of clause (29A) in Article
366 which enabled them to tax the supply of food and drinks. Thus, the
levy of sales tax on the supply of food and drinks prior to 2.2.1983 in the
State of Maharashtra and in the State of Uttar Pradesh is bad in law.
[611-B; C; D; E; F]
D
4. There are several hundred residential hotels in the State of
Maharashtra. They provide lodging and boarding to several thousands of
...
customers in every assessment year. It is in practical terms impossible. for

-
the sales tax authorities to make assessments upon the basis of the facts
E relevant to each individual customer in each individual hotel. Generalisa-
tions are, therefore, inevitable and there is every likelihood that the basis
of the generalisation made by one Sales Tax Officer would differ from the
basis of the generalisation made by another, leading to unacceptable
arbitrariness. Rules that indicate to Sales Tax Officers how to treat
F composite charges for lodging and boarding would eliminate substantial
differences in their approach and, thus, arbitrariness. The State of
Maharashtra is, therefore, directed not to make assessment of the tax on
the supply of food and drink on hotel owners who provide lodging and
boarding for a composite sum until it frames Rules that set out formulae

G
for such assessment. [606-G; H; 607·A; BJ

5. The language of s.6 of Constitution (Forty-Sixth Amendment) Act,
·-
'

1982 shows that it applies to all laws passed or made before the said Act.
Thus, High Court was not justified in holding that s.6 of the Act could have ·
no application to the U.P. Sales Tax Act because it was a sbtute that was
H enacted prior to the Constitution. [611-G-HJ
K. DAMODARASAMY NAIDU v. STATE [BHARUCHA, J.] 601

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1416 of A
1990 Etc. Etc.

From the Judgment and Order dated 8.2.90 of the Madras High
Court in W.P. Nos. 8516 and 5311 of 1989.

C.S. Vaidyanathan, Additional Solicitor General, R.B. Mehrotra B
K. Parasaran, Harish N. Salve, R.F. Nariman, S.K. Dholakia, B. Sen,
(A.K. Goel, Additional Advoca\e General for U.P.), V. Balachandran,
S. Aravindh, Senthil Jagadeesan, P.P. Tripathi, Ms. Swati Singh, Ms.
Neelima Tripathi, Kavin Gulati, R.B. Misra, C. Sidharath, R.C. Verma,
S. Srinivasan, Ms. Nina Gupta, Ms. Arpita Roy Choudhary, Ms. Tania C
Bery, Sanjay Katya!, Sanjay Chaudhary, Vineet Kumar, Yashank Adhyaru,
P.K. Jain, Mrs. Urmila Sirur, D.P. Mukherjee, Mrs. Kamini Jaiswal,
V. Krishnamurthy, A. Mariarputham, T. Harish Kumar, V. Rama Sub-
ramaniam, G.B. Sathe, S.P. Singh Chauhan, K.K. Mohalik, Debasis Mohan-.
ty, (D. Goburdhan) (NP), M. Veerappa, K.H. Nobin Singh, Neeraj Kr.
Jain, Ms. Arnita Gupta, A.S. Bhasme, K. Ram Kumar, Ms. Santinarayan, D
Y. Subba Rao, B. Sridhar, S.N. Terdol, (P. Parmeswaran) {NP), Ms. B.
Sunita Rao, (C.V.S. Rao) (NP), Mrs. Shureshta Bagga and K.R. Nambiar,
for the appearing parties ..

The Judgment of the Court was delivered by
E
BHARUCHA, J. The issues in these appeals and writ petitions relate
to the entitlement of the States to levy tax on the sale of food and drink.
Entry 54 of List-II of the Seventh Schedule to the Constitution empowers
the States to levy "taxes on the sale or purchase. of goods other than
newspapers subject to the provisions of entry 92A of List-I." (Entry 92A of F
List-I deals with taxes on the sale or purchase of goods in the course of
interstate trade or commerce and does not concern us here).

In the decision in State of Punjab v. Mis. Associated Hotels of India
Ltd., [1972] 2 SCR 937, this Court considered the plea of Associated Hotels
of India Ltd., which ran the Cecil Hotel in Shimla, that it was not liable to G
pay sales tax in respect of meals served to guests who came there to stay.
Posing the questions, what was the nature of the transaction and the
intention of the parties when a hotelier received a guest in his hotel and
was there in that transaction and intention to sell him the food contained
in the meals served to him during his stay, this Court held that the H
602 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.

A transaction was essentially one and indivisible, namely, 'o receive cus- "
tomers in the hotel to stay. Even if the transaction was to be disintegrated,
there was no question of the supply of meals during such stay constituting
a separate contract of sale since no intention on the part of the parties to
sell and purchase food-stuff supplied during meal times could realistically
B be spelt out. The transaction, essentially, was one of service by the hotelier,
in the performance of which meals were served as part of and incidental
to that service, such amenities being regarded as essential in well con-
ducted modern hotels. Such amenities, including meals, were part and
parcel of service, which was in reality the transaction between the parties.
The Revenue, therefore, was not entitled to split the transaction into two
C parts, one of service and the other of sale of food-stuffs, and to split up
also the bill charged by the hotelier as consisting of charges for lodging
and charges for food-stuff served.

The case of Northern India Caterers (India) Ltd. v. Lt. Governor of
D Delhi, (1978] 4 sec 36, dealt specifically with the levy of sales tax upon the
service of meals to casual visitors in a restaurant. The question was whether
the service of meals to non resident customers in the appellant's restaurant
constituted a sale of food stuff. This Court said that the view taken in the
case of Associated Hotels of India Ltd., indicated the approach to the
E question. This Court considered the origin and historical development of
the institution of a restaurant and found it akin to what, historically, was
an inn. An innkeeper or hotelier "does not lease his rooms, so he does not
sell the food he supplies to the guest. It is his duty to supply such food as
the guest needs, and the corresponding right of the guest is to consume the
food he needs, and to take no more. Having finished his meal, he has no
F right to take food from the table, even the uneaten portion of food supplied
to him, nor can he claim a certain portion of food as his own to be handed
over to another in case he chooses not to consume it himself. The title to
food never passes as a result of an ordinary transaction of supplying food
to a guest." This principle, put in the words of professor Beale, had been
G extended in England to the service of food at restaurants. The restaurateur
was regarded fundamentally as providing sustenance to those who ordered
food to eat in the premises. Like the hotelier, the restaurateur provided
many services in addition to the supply of food. He provided furniture and
furnishing, linen, crockery and cutlery and, perhaps, music, a dance floor
H and a floor show. The Court held, accordingly, that the service of meals to
K. DAMODARASAMY NAIDU v. STATE [BHARUCHA, J.] 603

visitors in the appellant's restaurant was not liable to sales tax and this was A
so whether the charges were imposed for the meals as a whole or according
to the dishes separately ordered.

A review petition was filed in respect of the judgment in No1them
India Caterers, [1980] 2 SCC 167 and all three Judges found that it should
be dismissed. The order of the majority noted that it appeared from the B
submissions that were made in the review petition that the States were
apprehensive that the judgment in Nmthem India Caterers would be
invoked by restaurant owners in those cases also where there was sale of
food and title passed to the customers. It seemed to the two learned Judges
who constituted the majority, having regard to the facts on which that C
judgment rested, undisputed as they had remained throughout the different
stages of the litigation, and the considerations which they attracted, that no
such apprehension could reasonably be entertained. Where food was
supplied in a restaurant and it was established upon the facts that the
substance of the transaction, evidenced by its dominant object, was the sale D
of food and the rendering of service was merely incidental, ihe transaction
would undoubtedly be exigible to sales tax. In every case it would be for
the trucing authority to ascertain the facts when making an assessment under
the relevant sales tax law and to determine upon those facts whether a sale
, of the food supplied was intended. Krishna Iyer, J., concurring with the E
majority, said that the judgment under review squarely applied to the cases
of high-style restaurants or residential hotels which rendered a bundle of
special services for a consolidated sum.

The Constitution Forty-sixth Amendment Act, 1982 amended Article
366 of the Constitution thereafter by inserting clause (29A) therein. So far F
it is relevant for our purposes, it read :

"Tax on the sale or purchase of goods includes :

(a) xxXx
G
(b) xxxx

(c) xxxx

(d) xxxx H
604 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A (e) xxxx

(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
B 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 ·
c whom such transfer, delivery of supply is made."

By reason of this amendment the States became entitled to levy a tax on
the supply of food and drink.

In Tamil Nadu, the Tamil Nadu General Sales Tax Act was amended
D by the Tamil Nadu General (Sales Tax) Fourth Amendment Act, 1984. The
definition of "sale" now included a 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
E consideration. The definition of "dealer" was similarly expanded. Section
3A was introduced providing for the levy of tax on the transfer of the right
to use goods and, in 1986, Section 3B was inserted to provide for the levy
of tax on the transfer of goods involved in work contracts. (Article 366,
clause (29A), sub clauses (d) and (b) respectively provided for the levy of
tax on the transfer of the right to use goods and on the transfer of goods
F involved in work contracts. By successive notifications issued under the said (
Tamil Nadu Act, exemptions were granted in respect of the tax payable on
the sale of food and drink by hotels, restaurants, sweet stalls and other
eating houses. Then, in 1997, Section 3D was introduced with effect from
1st April, 1997 and the exemption in respect of the tax payable on the sale
G of food and drinks by hotels, restaurants, sweet stalls and eating houses
was increased so that those whose total turnover was not more than Rupees
25 lacs were exempt.
•..
Learned counsel for such restaurant owners from Tamil Nadu (ap-
pellants in C.A. Nos. 1415 and 1416 of 1990), contended that the Tamil
H Nadu State legislature had evinced no intention of taxing the supply of food
"
K. DAMOOARASAMYNAIDUv. STATE [BHARUCHA,J.] 605

·and drink until Section 3D was introduced in 1997, while it had evinced A
' · the intention to tax the transfer of the right to use goods and the transfer
of goods involved in work contracts by the introduction of Sections 3A and
3B in the said Tamil Nadu Act. In his submission, the mere amendment of
the definition section as aforestated was not enough to entitle the State to
levy the tax prior to 1997. We find it difficult to accept the contention. Once
the definition of "sale" in the said Tamil Nadu Act was amended to include
B
the supply of food and drink, the supply of food and drink fell within the
purview of the charging section thereof and became exigible to tax there-
under. That the State legislature had earlier chosen specifically to incor-
porate Sections 3A and 3B to tax the transfer of the right to use goods and
the transfer of goods involved in work contracts respectively does not lead c
to the conclusion that, therefore, it had not intended to tax the supply of
food and drink until Section 30 was inserted in 1997. The incorporation
of Sections 3A and 3B can only be said to be measures of abundant caution.

Learned counsel next contended, relying upon the judgments
aforementioned, that, in the eye of the law, the tax on food served in
D/
~estaurants could not be levied on the sum total of the price charged to
the customer. In his submission, restaurants provided services in addition
to food, and these had to be accounted for. Thus, restaurants provided an
elegant decor, uniformed waiters, good linen, crockery and cutlery. It could
even be that they provided music, recorded or live, a dance floor and a
cabaret. The bill that the customer paid in the restaurant had, therefore,
to be spilt up between what was charged for such service and what was
charged for the food.

The provisions of sub-clause (f) of clause (29A) of Article 366 need F
to be analysed. Sub-clause (f). permits the States to impose a tax on the
supply of food and drink. The supply can be by way of a service or as part
of a service or it can be in any other manner whatsoever. The supply or
service can be for cash or deferred payment or other valuable considera-
tion. The words of sub-clause (f) have found place in the Sales Tax. Acts
of most States and, as we have seen, they have been used in the said Tamil G
Nadu Act. The tax, therefore, is on the supply of food or drink and it is
not of relevance that the supply is by way of a service or as part of a service.
In our view, therefore, the price that the customer pays for the supply of
food in a restaurant cannot be split. up as suggested by learned counsel.
The supply of food by the restaurant owner to the customer, though it may H
606 "'
SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.
A be a part of the service that he renders by providing good furniture,
furnishing and. fixtures, linen, crockery and cutlery, music, a dance floor
and a floor show, is what is the subject of the levy. The patron of a fancy
,,restaurant who orders a plate of cheese sandwiches whose price is shown
to be Rs. 50 on the bill of fare knows very well that the innate cost of the
B bread, butter, mustard and cheese in the plate is very much less, but he
orders it all the same. He pays Rs. 50 for its supply and it is on Rs. 50 that
the restaurant owner must be taxed.

The contentions of learned counsel for owners of restaurants in West
Bengal (Writ petition Nos. 15227 and 17245 of 1984) are similar, and must ·
C be similarly rejected.

Learned counsel for the owners of residential hotels in the State of
Maharashtra (Writ Petition No. 9901 of 1983) raised much the same
contention, but in the context of residential hotels. He pointed out that
residential hotel provided only lodging or lodging and boarding. The
D boarding could comprise full board, i.e., breakfast, lunch and dinner or
.breakfast and one meal or breakfast alone. In Mr. Salve's submission, the
composite charge that the hotel owner levied for lodging and such boarding
. ),

had to be split up and only the element thereof that related to the supply
of meals could be subjected to the tax. The tax could not be levied on the
E composite charge for boarding and lodging unless the State made Rules
which set down formulae for determining that component of the composite
charge which was exigible to the tax on food and drink.

It was not disputed by learned counsel for the State of Maharashtra
that the tax on food and drink could be imposed only upon that component
F of the composite charge for lodging and boarding at a residential hotel as
related to the supply of food and drink. But, in his submission, no Rules
in this behalf were necessary; the Sales Tax Officers would make assess-·
ments depending upon the facts of each individual case.

There are several hundred residential hotels in the State of
G Maharashtra. They provide lodging and boarding to several thousands of
customers in every assessment year. It is in practical terms impossible for
the sales tax authorities to make assessments upon the basis of the facts
relevant to each individual customer in each individual hotel. Generalisa,
tions are, therefore, inevitable and there is every likelihood that the basis
H of the generalisation made by one Sales Tax Officer would differ from the
K. DAMODARASAMY NAIDU v. STATE [BHARUCHA, J.] 607

basis of the generalisation made by another, leading to unacceptable A
arbitrariness. Rules that indicate to Sales Tax Officers how to treat com-
posite charges for lodging and boarding would eliminate substantial dif-
ferences in their approach and, thus, arbitrariness.

We, therefore, direct that the State of Maharashtra shall henceforth
not make assessments of the tax on the supply of food and drink on hotel B
owners who provide lodging. and boarding for a composite sum until it
frames Rules that set out formulae for such assessmen~ which take account
of the fact that residential hotels may provide lodging and full or part board_
as set out above. If the Rules are framed by 1st June, 2000 the assessments
that are not completed only by reason of this order may be proceeded with. c
If the Rules are not framed by the said date, these assessments shall lapse.
No proceedings for assessments shall be commenced hereafter until the
' Rules have been framed. At the same time, completed assessments as of
today shall not be affected by this order, and the assessees would .be
entitled to adopt proceedings thereagainst, subject to the law.
D
Learned counsel for the owners of residential hotels in the State of
Maharashtra then referred to the provisions of the Bombay Sales Tax Act,
1959. Section 2, sub-section (28) dealing with "sale" was amended with
effect from 16th August, 1985. and clause (b) was introduced therein.
Sub-clause (iii) thereof read: E
"(iii) 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 made or given on or after the 2nd
day of February, 1983, for cash, deferred payment or other valuable F
consideration."

(Emphasis supplied)

In learned counsel's submission no tax on food or drink could ,
therefore, be levied by the State of Maharashtra. for any supply thereof G
prior to 2nd February, 1983, but the State was purporting to levy such tax
for periods before that date.

It is relevant to the argument to mention that the Schedule to the
Bombay Sales Tax Act listed "cooked food" as an item liable to sales tax. H
608 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A There was no amendment of the U.P. Sales Tax Act, 1948, to make
the supply of food and drink taxable after Clause (29A) was introduced
into Article 366 until 1985 when the definition of "sale" was amended
appropriately with effect from 2nd February, 1983. The Schedule to the
U.P. Sales Tax Act contained an entry whereby "sweetmeats, namkin,
B cooked food, confectionery, revari, gajak, biscuits, bread, cakes, pastries,
buns, jams, jallies, murabbas, gulkand, churan, chatani and achar when sold
loose or unpacked" were taxable. •

A "halwai" in Uttar pradesh challenged the levy of the tax on the
supply of food and drink by him for periods prior to 2nd February, 1983,
C and the High Court upheld his case. It noted that the Tribunal had found
that he provided the service of bearers, radio, fans, etc., and had made'
seating arrangements in his shop. Reliance was placed on behalf of the
State on Section 6 of the Constitution Forty-sixth Amendment Act, but the
argument was turned down. The judgment and order of the High Court. of
Uttar Pradesh in under appeal (C.A. No. 354 of 1985).
D
Learned counsel for the States of Maharashtra and Uttar Pradesh
relied upon Section 6 of the Constitution Forty-sixth Amendment Act. The
said Section 6 reads thus :

"6. Validation and exemption. · For the purposes of every provision
E
.of the Constitution in which the expression "tax on the sale or
purchase of goods" occurs, and for the purposes of any law passed
or made, or purporting to have been passed or made, before the
commencement of this Act,in pursuance of any such provision, ·

F (a) the said expression shall be deemed to include, and shall be
deemed always to have included, a tax (hereafter in this
section referred to as the aforesaid 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 consump-
tion or any drink (whether or not intoxicating) for cash,
G
deferred payment or other valuable consideration : and

(b) every transaction by way of supply of the nature referred to
in clause (a) made before such commencement shdll be
deemed to be, and shall be deemed always to have been, a
H transaction by way of sale, with respect to which the person
K. DAMODARASAMYNAIDU v. STATE [BHARUCHA, J.] 609

making such supply is the seller and the person to whom such A
supply is made, is the purchaser,

and notwithstanding any judgment, decree or order of any court,
tribunal or authority, no law which was passed or made before
such commencement and which imposed or authorised the imposi-·
tion of, or purported to impose or authorise the imposition of, the B
aforesaid tax shall be deemed to be invalid or ever to have been
invalid on the ground merely that the Legislature or other
authority, passing or making such law did not have competence to
pass or make such law, and accordingly -

(i) all the aforesaid taxes levied or collected or purporting to
c
have been levied or collected under any such law before the
commencement of this Act shall be deemed always to have
been validly levied or collected in accordance with law;

(ii) no suit or other proceedings shall be maintained or continued D
in any court or before any tribunal or authority for the refund
of, and no enforcement shall be made by any court, tribunal
or authority of any decree or order directing the refund of,
any such aforesaid tax which has been collected;

(iii) recoveries shall be made in accordance with the. provisions E
of such law of all amounts which would have been collected
thereunder as such aforesaid tax if this section had been in
force at all material times.

(2) Notwithstanding anything contained in sub-section (1) any
supply of the nature referred to therein shall be exempt from the F
aforesaid tax -

(a) where such supply has been made, by any restaurant or eating
house (by whatever name called), at any time on or after the
7th day of September, 1978 and before the commencement G
of this Act and for the aforesaid tax has not been collected
on such supply on the ground that no such tax could have
been levied or co.~ected at that time; or

(b) where such supply, not being any such supply by any res-
taurant or eating house (by whatever name called), has been H
'-
610 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.
A made at any time on or after the 4th day of January, 1972 and
before the ,commencement of this Act and the aforesaid tax
has not been collected on such supply on the ground that no
such tax could have been levied or collected at that time :

Provided that the burden of proving that the aforesaid tax was
B not collected on any supply of the nature referred to in clause (a)
or, as the case may be, clause (b ), shall be on the person claiming .c
the exemption under this sub- section.

(3) For the removal of doubts, it is hereby declared that, -
c (a) nothing in sub-section (1) shall be construed as preventing
any person -

(i) from questioning in accordance with the provisions of
any law referred to in that sub-section, the assessment, '
D reassessment, levy or collection of the aforesaid tax, or

(ii) from claiming refund of the aforesaid tax paid by him
in excess of the amount due from him under any such
law; and

E (b) no act or omission on the part of any person, before the
commencement of this Act, shall be punishable as an offence
which would not have been so punishable if this Act had not
come into force."

Learned counsel for the States of Maharashtra and Uttar Pradesh ·
F argued, to start with, that the said Section 6 validated the sales tax laws of
the States with retrospective effect and that, therefore, the States were
entitled to levy the tax on the supply of food and drink regardless of the
fact that there was no provision in the State Acts for such levy prior to 2nd
February, 1983. The argument was not pressed after the learned Additional .....
G Solicitor General, appearing for the Union oflndia, submitted that the said
Section 6 validated a State law only, prior to 2nd February, 1983, if the
State law had contained a provision entitling the State to levy a tax on the
supply of food and drink. If sucl:i State law had existed, it was rendered
yalid by reason of the amendment of the definition of "sale" in Article 366
H (29A) made by Section 4 of Constitution Forty-sixth Amendment Act on
K. QAMODARASAMY NAIDU v. STATE [BHARUCHA, J.] 611

that date and the retrospectivity given theret0 by the said Section 6. The A
contention then urged on behalf of the States of Maharashtra and Uttar
Pradesh was that the said Section 6 validated the levy of sales tax on food
and drink ,by equating it to the levy on the supply of food and drink.

Parliament, when exercising the powers to amend the Constitution
under Article 366, cannot and does not amend State Acts. There is no
B
other provision in the Constitution which so permits and there is no
judgment of this Court that so holds. The power to make laws for the States
in respect of matter listed in List II in the Seventh Schedule is exclusively
that of the State Legislatures. The State Legislatures alone could have
amended or modified a State law levying tax under Entry 54 of List II. The c
said Section 6 would, therefore, be bad in law if it were construed to be
an essay by Parliament, exercising constituent powers, to amend the sales
tax laws of the States. The said Section 6 must be read as only giving
retrospective operation to the expansion of the expression "tax on the sale
or purchase of goods" in Entry 54 of List II to include a tax on the supply D
of food or drink and thus validating retrospectively State Sales Tax Acts
that had therefore made provision for the levy of sales tax on the supply
of food and drink. There is, accordingly, no warrant even for the
submission that the said Section 6 equates a provision for sales tax on food
and drink in States Sales Tax ,Acts with a provision for sales tax on the E
supply of food and drink. Neither the State of Maharashtra nor the State
of Uttar Pradesh had provisions in their Sales Tax Act prior to the
introduction of clause (29A) in Article 366 which enabled them to tax the
supply of food and drink. The said section 6, therefore, can be of no
assistance to them. The levy of sales tax on the supply of food and drink
prior to 2nd February, 1983 in the State of Maharashtra and in the State
F
of Uttar Pradesh is bad in law.

Learned counsel for the State of Uttar Pradesh submitted that there
were some observations in the judgment of the High Court of Uttar
Pradesh under appeal which suggested that the said Section 6 could have G
no application to the U.P. Sales Tax Act because it was a statute that was
enacted prior to the Constitution. We agree with learned counsel that the
observations in this behalf are not justified. The language of the said
Section 6 would show that it applies to all laws passed or made before the
Constitution Forty-sixth Amendment Act, 1982. H

. .--.../\
612 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A Writ Petition No. 9901 of 1983 is made absolute to this extent:

The State of Maharashtra is directed henceforth not to make assess-
ments of the tax on the supply of food and drink on hotel owners who
provide lodging and boarding for a composite sum until it frames Rules
that set out formulae for such assessment which take account of the fact
B that residential hotels may provide lodging and full or part board. If the
Rules are framed by 1st June, 2000 the assessments that are not completed
only by reason of this order may be proceeded with. If the Rules are not
framed by the said date, these assessments shall lapse. No proceedings for
assessments shall be commenced hereafter until the Rules have been
C framed. At the same time completed assessments as of today shall not be
affected by this order, and the assessees would be entitled to adopt
proceedings thereagainst, subject io the law.

It is further declared that th~ levy of sales tax on the supply of food
and drink prior to 2nd February, 1983 in the State of Maharashtra is bad
D in law.

Civil Appeal No. 354 of 1985 is dismissed.

Civil Appeals 1415 and 1416 of 1990 and Writ Petition Nos. 15227 ·
and 17245 of 1984 are dismissed.
E The Writ Petitions against the State of Karnataka (Writ Petition Nos.
3522 of 1983, 9022-47 of 1985 and Writ Petition No. 11812 of 1985) were
not argued; they are dismissed.

No order as to costs.

S.V.K. Appeals and Petitions dismissed.