JUDGMENT
Ramaswami, J.
1. The appellants in the writ appeals are two hoteliers, one known as Sree Annapoorna and the other known as Sree Gowrisankar. All the tax cases have been filed by the department against the orders of the Sales Tax Appellate Tribunal, Coimbatore. The assessees in these tax cases are the two writ appellants above referred to. The assessment years relating to these tax cases and the writ appeals are 1973-74, 1974-75 and the period from 1st April, 1975, to 31st May, 1975, in 1975-76. The appellants in the writ appeals as also the respondents in the tax cases will hereafter be referred to as the assessees.
2. The assessees are running restaurants in Coimbatore. They were supplying food and drinks inside their restaurant premises to the customers providing seating facilities and other facilities like fan, light, music, etc. The Joint Commercial Tax Officer, Coimbatore, assessed these transactions as sales in his orders dated 21st November, 1974, 28th August, 1975, and 7th August, 1975, for the assessment years 1973-74, 1974-75 and the broken period in 1975-76. The assessees went in appeal in all these cases. The Appellate Assistant Commissioner applying the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi held by his orders dated 18th March, 1980, in all these cases that the supply of food and drinks for those customers who consume the eatables inside the premises cannot be held to be sale liable to be taxed under the provisions of the Tamil Nadu General Sales Tax Act, 1959. However, packet or parcel sales effected by the assesses are liable to be taxed. Since the bills issued to the customers did not make any difference between the packet or parcel sales and those cases where the customers consume eatables inside the premises, the Appellate Assistant Commissioner said that the packet or parcel sales can be reasonably fixed at 5 per cent. of the total turnover. The assessment orders were revised on those basis. The Appellate Assistant Commissioner also found that the assessee have collected the tax and in regard to this matter he held that it is for the department to take appropriate action for such illegal collection of tax. The assessees preferred further appeals to the Tribunal against the order of the Appellate Assistant Commissioner estimating the packet or parcel sales at 5 per cent. and contended that the entire turnover in the restaurants is exempt from tax. The department also filed applications in each appeals, before the Tribunal, for enhancement and revision of the turnover contending that the entire turnover is taxable and that the J.C.T.O.’s order shall be confirmed. In support of this contention the department relied on mainly the decision reported in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi . The assessee also disputed the opinion or direction of the Appellate Assistant Commissioner regarding the collection of tax and action to be taken on the same and contended that such an opinion or direction is not valid and it has to be quashed. The Tribunal in a common order dated 30th December, 1980, accepted the contention of the assessees that the turnover relating to the supply of food and drinks in the restaurants is not liable to tax. However, the Tribunal did not agree with the assessees in their contention that the entire turnover was exempt from tax. The Tribunal confirmed the finding of the Appellate Assistant Commissioner that the turnover relating to packet or parcel sales is liable to tax. However, on the basis of materials placed before them, they determined the parcel sales at 13 per cent. of the total turnover. The direction relating to taking of proper action for illegal collection of the tax was also set aside. In the result the appeals filed by the assessee were dismissed and the enhancement petitions filed by the department were partly allowed to the extent of increasing the turnover relating to packet or parcel sales from 5 per cent. to 13 per cent. for the purpose of tax. The department has filed the tax revision petitions in all these cases.
3. It appears that T.C. No. 929 of 1982 filed by the department in respect of the assessment year 1975-76 was dismissed. However, T.C. Nos. 103 and 106 of 1982 relating to the assessment years 1973-74 and 1974-75 were admitted. The department also have filed three separate tax cases, viz., T.C. Nos. 111, 115 and 19 of 1982, against the order of the Tribunal not enhancing the taxable turnover to the full extent prayed for. These tax cases related to Sree Annapoorna. Similar tax cases were filed relating to Sree Gowrisankar and they are T.C. Nos. 965, 101, 1060 and 116 of 1982. While these petitions were pending, Sree Annapoorna filed W.P. Nos. 9081 to 9083 of 1985 and Sree Gowrisankar filed W.P. Nos. 9084 to 9086 of 1985. In all these cases they prayed for a writ of certiorarified mandamus calling for the records in G.O. Ms. No. 1187, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, and quash para 8(i) which provided that waiver shall apply only to cases where the final assessments are kept pending and not to cases where assessments have become final as being discriminatory and quash the same as illegal and directing the Commercial Tax Officer, Coimbatore, to apply G.O. Ms. No. 1187 dated 22nd October, 1982, and grant waiver for the years 1973-74, 1974-75 and 1975-76 and pass such further or other directions as this Court may think fit. These writ petitions were dismissed at the admission stage on the ground that the waiver in the Government order was subject to the condition that the assessment proceedings were pending, that the condition was reasonable and perfectly valid and even if there was a discrimination between cases which are pending and cases which have become final, the discrimination will have to be upheld on the ground of valid classification. It is against these orders, the writ appeals have been filed. The respondents have also filed a counter-affidavit in the writ appeals.
4. It may be seen from the various orders that the facts in respect of these two assessments are not in dispute. The assessees are running restaurants. They supply food and drinks to the customers who come to the restaurants and also provide service to them. The customers are not entitled to remove or carry home any unconsumed portion of the food. There were also certain cases of sales across the counter which are referred to as parcel sales and in respect of those cases, the customers do not eat in the restaurants but the food or drinks sold are handed over to them to be carried away. In respect of these three assessment years in question the assessees also have collected sales tax.
5. The learned counsel for the assessees contended that the supply of food and drinks in the restaurants is not a sale and merely on the ground that sales tax has been collected by the assessees, the turnover cannot be treated as relating to sales liable to sales tax. He also contended that the distinction made in G.O. Ms. No. 1187, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, between cases where the final assessments are kept pending including those remanded on appeal or revision for fresh assessment and cases where the assessments have become final, for the purpose of waiver of sales tax and surcharge has no rational basis, and is discriminatory and illegal. The learned counsel also contended that the earlier Government Order in G.O. Ms. Nos. 436 and 437 dated 27th April, 1981, waiving tax and surcharges could not have been modified or varied by G.O. Ms. No. 1187 dated 22nd October, 1982, to the detriment of the assessees. The learned Additional Government Pleader on the other hand contended that in view of the Constitution (Forty-sixth Amendment) Act, 1982, and the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1984, even the turnover relating to supply of food and drinks inside the restaurants is a sale and liable to sales tax and that, since the assessees have collected tax, they could not also claim the benefits of the said Government Order. He also supported the distinction based on pendency or finality of the assessment proceedings.
6. Before the considering these respective contentions, it is necessary to trace the development of the law and the legislative changes made, In State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. , the Supreme Court has held that the expression “sale of goods” as used in the entries in List II of Schedule VII has the same meaning as in the Sale of Goods Act, 1930, and the widened definition of “sale” in the Madras General Sales Tax Act (Act 9 of 1939) including in it a transfer of property in goods involved in the execution of a works contract was ultra vires. By a series of subsequent decisions on the ratio of the decision in the said case, the Supreme Court and the various High Courts held various other transactions which resembled this to be not liable to sales tax. In State of Punjab v. Associated Hotels of India Ltd. , the Supreme Court held that the transaction between a hotelier and the visitor to the hotel is one essentially of service in the performance of which and as part of the amenities incidental to the service, the hotelier serves meals and that such supply of meals by the hotel to the residents was not a sale of food. This decision was rendered on 4th January, 1972. In Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi , the Supreme Court held that there is no distinction between a case on meals supplied to a resident in a hotel and those served to customers in restaurants and that service of meals whether in a hotel or a restaurant does not constitute a sale of food for the purpose of levy of sales tax, but must be regarded as rendering of a service in the satisfaction of a human need or ministering to a bodily want. The Supreme Court further observed that it would not make any difference whether the visitor to the restaurant is charged for the mean as a whole or according to each dish separately. This decision was rendered by the Supreme Court on 7th September, 1978. A review petition filed to review the judgment in the above case was also dismissed on 21st December, 1979, in which the learned Judges also pointed out that apart from the fact that the supply of meals must be regarded as ministering the bodily want of human beings there was no right and also factually to the customers to take away any eatable served and that also is relevant in determining that it was not a sale. This decision is reported in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi .
7. The Constitution (Forty-sixth Amendment) Act, 1982, received the assent of the President on 2nd February, 1983, and came into force accordingly as and from that date. By section 4 of that Act, in article 366 of the Constitution, after clause (29), the following clause was inserted :
“(29A) ‘tax on the sale or purchase of goods’ includes –
(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(c) a tax on the delivery of goods on hie-purchase or any system of payment by instalments;
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(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.”
8. Section 6 dealt with validation and exemption and it reads as follows :
“6. Validation and exemption. – (1) For the purposes of every provision 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, –
(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 consumption or any drinks (whether or not intoxicating) for cash, 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 shall be deemed to be and shall be deemed always to have been, a transaction by way of sale, with respect to which the person making such supply is the seller and the person to whom such 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 imposition of, or purported to impose or authorise the imposition of, the 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 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 proceeding shall be maintained or continued 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 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 exempted from the 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 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; or
(b) where such supply, not being any such supply by any restaurant or eating house (by whatever name called), has been 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 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 the exemption under this sub-section.
(3) For the removal of doubts, it is hereby declared that, –
(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, 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
(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.”
9. The learned Additional Government Pleader relying on clause (1) of section 6 contended that the Tamil Nadu General Sales Tax Act, 1959, in the definition of “sale” shall be deemed always to have included a tax on supply of food and drinks in a hotel and that notwithstanding the decision of the Supreme Court in State of Punjab v. Associated Hotels of India Ltd. and Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi , the State is entitled to tax on the sale of food and drinks in a hotel or a restaurant. In this connection he laid emphasis on the words “shall be deemed to include, and shall be deemed always to have included” in sub-clause (a) of clause (1) of section 6. We are unable to agree with this contention of the learned Additional Government Pleader. As may be seen from the latter part of clause (1) that section 6 only validated the law which was passed or made before the commencement of the Constitution (Forty-sixth Amendment) Act which imposed or authorised the imposition or purported to impose or authorise the imposition of a tax on food and drinks supplied in a hotel or restaurant and that if the law thus made, though would have been ultra vires on the ground of legislative competence, the defect or want of competence was removed by the validation provision. But if the law which was in force at the relevant date did not expressly impose or authorise the imposition of a tax on supply of food and drinks in a hotel or restaurant, the Constitution (Forty-sixth Amendment) Act did not amend that law including in it a tax on sale of food and drinks in a hotel pr restaurant. The amendment only expanded the legislative entry and conferred legislative competence in respect of a matter when the State Legislature was found not competent. This is also clear from the Statement of Objects and Reasons appended to the Constitution (Forty-sixth Amendment) Bill, 1981. The Objects and Reasons referred to the case in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. wherein the Supreme Court held that the expression “sale of goods” as used in the entries in the Seventh Schedule to the Constitution has the same meaning as in the Sale of Goods Act, 1930, and the subsequent decisions holding various other transactions resemble, in substance, transactions by way of sales to be not liable to sales tax and as the result of those decisions. Similarly, the Objects and Reasons referred to decisions relating to hire-purchase agreements in respect of which it was held that there is sale only when the purchaser exercises the option to purchase at a much later date and therefore only the depreciated value of the goods involved in such transaction, at the time the option to purchase is exercised, becomes assessable to sales tax. Similarly it referred to the distinction made in the decision that while sale by a registered club or other association of persons (the club or association of persons having corporate status) to its members is taxable, sales by an unincorporated club or association of persons to its members is not taxable as such club or association, in law, has no separate existence from that of the members. Difference of opinion relating to taxability of transfer of controlled commodities in pursuance of a direction under the Control Orders and the desirability of putting the matter beyond doubt in regard to sale was one of the other reasons given. The problem encountered by the taxing authorities due to device by way of lease of films resulting in avoidance of sales tax and large scale avoidance of Central sales tax leviable on inter-State sales of goods through the device of consignment of goods from one State to another and above all the immediate problem raised by reason of the decision in Northern India caterers (India) Ltd. v. Lt. Governor of Delhi were also cited as the reasons for the amendment sought to be made. After nothing that though the Parliament could levy a tax on those transactions, as tax on sales has all along been treated as an item pertaining to the State, in regard to those transactions which resemble sales also, it is considered that the same policy should be adopted, the Objects and Reasons proceed to state that accordingly it was proposed to suitably amend the Constitution to include in article 366 a definition of “tax on the sale or purchase of goods” by inserting a new clause (29A). Regarding clause 6, the Objects and Reasons stated as follows :
“The proposed amendments would help in the augmentation of the State revenues to a considerable extent. Clause 6 of the Bill seeks to validate laws levying tax on the supply of food or drink for consideration and also the collection or recoveries made by way of tax under any such law. However, no sales tax will be payable on food or drinks supplied by a hotelier to a person lodged in the hotel during the period from the date of the judgment in the Associated Hotels of India case and the commencement of the present Amendment Act if the conditions mentioned in sub-clause (2) of clause 6 of the Bill are satisfied. In the case of food or drink supplied by restaurants this relief will be available only in the respect of the period after the date of judgment in the Northern India Caterers (India) Limited case and the commencement of the present Amendment Act.”
10. It may be seen from the definition newly inserted in clause (29A) of article 366 and the objects as set out in the Statement of Objects and Reasons appended to the Bill, the Act intended to validate only the laws levying tax on supply of food and drinks and it does not have the effect of altering a definition of “sale” in the various State legislations. The Supreme Court decisions are that “sale” will not comprehend within it supply of food and drinks in a hotel or restaurant and that if any definition of “sale” in a State law included those transactions it would be ultra vires on the ground of want of legislative competence. Therefore if any State sales tax law had included any transaction of works contract, hire-purchase, supply of food and drinks in a hotel or transfer for consideration of controlled commodities in the definition of “sale”, then such a provision, though lacked legislative competence at the time when it was enacted, shall stand validated by the Constitution (Forty-sixth Amendment) Act so that the levy and collection of tax under those provisions would become legally valid.
11. The definition of “sale’ in the Tamil Nadu General Sales Tax Act, 1959, as it stood prior to the amendment of the same by Madras Act 19 of 1960 read as follows :
“‘sale’ with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of business for cash or for deferred payment or other valuable consideration and includes a transfer of property in goods involved in the execution of a works contract but does not include a mortgage, hypothecation, charge or pledge.”
12. In Gannon Dunkerley’s case , the inclusion of “transfer of property in goods involved in the execution of works contract” was held to be ultra vires of the State Legislature. The words “and includes the transfer of property in goods involved in the execution of works contract” were omitted by Act 19 of 1960. Explanation (1) to the definition of “sale” stated thus :
“The transfer of property involved in the supply or distribution of goods by a society (including a co-operative society), club, firm or any association to its members, for cash or for deferred payment, or other valuable consideration, whether or not in the course of business. shall be deemed to be a sale for the purpose of this Act.”
13. In the decisions reported in Joint Commercial Tax Officer v. Young Men’s Indian Association , State of Tamil Nadu v. Madras Advocates’ Co-operative Society Limited [1976] 38 STC 297 (Mad), National Chamber of Commerce, Madras v. State of Madras [1970] 25 STC 185 (Mad.) and State of Tamil Nadu v. Madras Motor Parts Dealers’ Association [1978] 42 STC 243 (Mad.) such transactions were held to be not sales. Explanation (1-A) to the definition of “sale” in section 2(n) which was inserted by Tamil Nadu Act 5 of 1962 provided that every transfer of property in goods by the Central Government or any State Government for cash or for deferred payment or other valuable consideration, whether or not in the course of business, shall be deemed to be a sale for the purposes of this Act. Similarly explanation (2) stated that a transfer of goods on the hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be a sale. Explanation (3) related to contract of sale. Explanation (4) dealt with sales by the principals to agents and from buying agent to his principal. Thus if hire purchase transactions, works contract transactions, supply of food and drinks in hotels or transfer of controlled commodities were included in the definition of “sale”, though such inclusion would not have been valid by reason of lack of legislative competence, section 6 of the Constitution (Forty-sixth Amendment) Act validated those provisions by conferring legislative competency in respect of those matters. In the instant cases during the relevant assessment years 1973-74, 1974-75 and 1975-76 the definition of “sale” did not specifically include food and drinks supplied to customers in hotels and restaurants. The State wanted these transactions to be taxed only relying on the word “sale” as including normally those transactions as well, but in view of the decision of the Supreme Court, supply of food and drinks in a hotel or restaurant is not a sale. The main part of the definition of “sale” could not be said to have included those transactions and therefore the turnover relating to the sale was not liable to sales tax.
14. A Division Bench of the Andhra Pradesh High Court in the case reported in Hotel Dwaraka, Hyderabad v. Union of India [1958] 58 STC 241 took a similar view in respect of the argument that section 6 of the Constitution (Forty-sixth Amendment) Act authorised the taxing authorities to levy and collect tax on supply of food and drinks served in the restaurant and the learned Judges held thus :
“A reading of the Statement of Objects and Reasons appended to the Amendment Act and the marginal note to section 6 leaves no doubt that the object of section 6 is only to remove the defect in the law, to validate levying of tax on the supply of goods, being food or any other article for human consumption or any drink and also collection or recoveries made by way of tax under any such defective law. The marginal note of section 6 is ‘Validation and exemption’. Clause (b) clearly says that every transaction by way of supply made before such commencement shall be deemed to be and shall always be deemed to have been a transaction by way of sale. A careful reading of clause (1) of section 6 shows that it does not clearly and unambiguously allow or authorise the levy or imposition of 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. Clause (2) deals with only exemption in respect of transaction covered by sub-section (1).”
15. Again at page 261 the learned Judges observed :
“The Amendment Act by the expansion of the legislative entry has merely conferred legislative competence in respect of a matter the State Legislature was found not competent to legislate. Now the Amendment Act enables the State Legislature to enact the law imposing tax on foodstuffs supplied or served to customers. Without an amendment to section 2(1)(n) and (s) of the Sales Tax Act relating to the definition of ‘sale’ and ‘turnover’ respectively, there will be no law providing for levy and collection of tax.”
16. In fact, the Government also proceeded on this understanding of the provision and the Tamil Nadu General Sales Tax (Fourth Amendment) Act (Act 28 of 1984) specifically amended prospectively the definition of “sale” in clause 2(n) by section 2(c)(i) by including within the definition of “sale” :
“(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a word contract;
(iii) a delivery of goods on hire-purchase or any system of payment by instalments;
(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(vi) 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 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.”
17. We have therefore no doubt that if the food and drinks supplied to a customer were not specifically included in the definition of “sale”, it could not have been taxed during the relevant assessment years.
18. We have already noticed that the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi was rendered on 7th September, 1978, and that in State of Punjab v. Associated Hotels of India Ltd. on 4th January, 1972. In the light of those judgments in certain cases, the assessees had not collected tax on the supply of food and drinks in either a hotel or a restaurant respectively on the ground that no such tax could have been levied or collected though under the State law such transactions are taxable. Clause (2) provided for exemption in respect of such cases from levy of tax though validation has retrospective authorised such levy. However, the section provided that the burden of proving that the aforesaid tax was not collected on any such supply shall be on the person claiming the exemption under that sub-section. The resultant position is that food and drinks supplied to a customer in a hotel or restaurant were not sales and could not have been taxed as sales during the relevant assessment years 1973-74, 1974-75 and 1975-76 either under the provisions then in force or by reason of the Constitution (Forty-sixth Amendment) Act.
19. Immediately after the review petition was dismissed on 21st December, 1979, the Government issued a notification under section 17 of the Act in G.O.P. No. 1001, Commercial Taxes and Religious Endowments Department, dated 6th October, 1980, making an exemption with effect on and from the 6th of October, 1980, “in respect of the tax payable by any dealer under the said Act on the sale of food and drinks in any hotel or restaurant, other than those specified in item 150 in the First Schedule to the said Act”. It appears that the President of the Tamil Nadu Hotels Association has represented that the hotel industry has not collected sales tax on account of the judgment of the Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi and had requested that the tax due for the period prior to 6th October, 1980 may be waived. On that the Commissioner of Commercial Taxes also has made his report and requested for the orders of the Government. The Government examined the question and held that the tax due for the period should be waived. Accordingly in G.O. Ms. 436, Commercial Taxes and Religious Endowments Department, dated 27th April, 1981, the Government ordered thus :
“….. in respect of supply of food and drinks in hotels and restaurants during the period from 7th September, 1978, to 20th December, 1979 :-
1. Past cases of assessments, if any, finalised levying no tax, need not be reopened.
2. Where final assessments are kept pending no proceedings need be initiated nor orders passed levying.
3. The tax due for the period, in cases where the dealer has not collected any amount by way of tax or purporting to be tax or deposit or contingent liability or had not made any provision in the balance sheet to meet tax liability, be waived.”
20. There is no dispute that a similar order was issued in G.O. Ms. No. 437, Commercial Taxes and Religious Endowments Department, dated 27th April, 1981, covering the period from 21st December, 1979, to 5th October, 1980. On the same reasoning, the Government also issued G.O. Ms. No. 1186, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, exempting tax due on sale incidental or ancillary to the sale of food and drinks and purchase tax payable under section 7-A.
21. It appears that the Commissioner of Commercial Taxes brought to the notice of the Government that there are assessments pending at various stages relating not only to the period 7th September, 1978, to 6th October, 1980, but also the period prior to 7th September, 1978, and such pending assessments included :
1. Cases where no returns have been filed and no tax paid.
2. Cases where returns were filed but no tax was paid.
3. Cases where returns were filed and tax was paid for part of the period.
4. Cases where returns were filed and taxes were paid for period prior to the Supreme Court’s decision.
22. Apart from the pending assessments, even among the assessments which had been finalised before the Supreme Court’s decision, arrears of tax remained to be collected in some cases and in others appeals or revision at various stages were pending and in some cases even revision of assessment already finalised or proposed or contemplated as a result of detection of suppression or other omissions. Accordingly the Commissioner had suggested that a general waiver order may be issued so as to cover all such cases. The Commissioner also seems to have suggested that the assessments already finalised on the basis of the position obtaining prior to the judgment need not be reopened and that arrears, if any, in such cases are legally enforceable. The Commissioner of Commercial Taxes has also suggested some conditions for waiver in other cases. Accepting those suggestions and conditions, in G.O. Ms. No. 1187, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, the Government waived the tax and the relevant portion of the Government Order reads as follows :
“8. The Commissioner of Commercial Taxes has suggested that the waiver orders may be subject to the following revised conditions :
(i) The waiver shall apply only to cases where the final assessments are kept pending, including those remanded on appeal or revision for fresh assessments and where the fresh assessments have not been made. The waiver shall not apply to cases where the assessments have become final;
(ii) The waiver shall not apply to cases where the dealer has collected tax which is equal to or in excess of the amount of tax due. In cases where the tax collected is less than the amount of tax due, the amount to be waived shall be restricted to the difference between the amount of tax due and the amount of tax collected by the dealers;
(iii) The tax, if any, paid by a dealer in all cases where he is eligible for waiver as per conditions (i) and (ii) shall be refunded to him to the extent to which he is eligible for waiver after deducting the tax, if any, collected by him; and
(iv) past assessments, if any, finalised levying no tax need not be reopened.
9. In supersession of the orders issued in G.Os. fifth and sixth read above, the Government direct that the tax due from hotels and restaurants on the sales of food and drinks, the tax due under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, the tax due on sundry sales incidental or ancillary to the sale of food and drinks and the additional sales tax and surcharge due, for the period up to 5th October, 1980, be waived subject to the conditions mentioned in para 8 above.”
23. The Government Orders referred to in para 9 are G.O. Ms. Nos. 436 and 437 dated 27th April, 1981.
24. The learned counsel for the appellants contended that the conditions imposed for the waiver are discriminatory, illegal and unenforceable and they are also not liable under the law to pay sales tax in respect of the turnover relating to supply of food and drinks in the restaurants in respect of all the three assessment years. The validity of the first condition, namely, that the waiver shall not apply to cases where the assessments have become final is questioned on the ground that it is arbitrary and discriminatory. In fact the first condition seems to say that even pendency in appeal or revision is not enough to get the benefit of waiver. It is open to argument that only if as a result of the order in appeal or revision the matter is remanded to the assessing officer and the assessing officer had not passed the final assessment order, the assessment proceedings can be said to be pending. For the purpose of testing the validity of this condition, we shall go to the basis of the waiver. The Supreme Court has already held by the decision rendered on 4th January, 1972, in State of Punjab v. Associated Hotels of India Ltd. that supply of meals by hotels to residents in a hotel was not a sale of food and in the decision in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi rendered on 7th September, 1978, it was held that there was no distinction between a case of meals supplied to a resident in a hotel and those served to customers in restaurants. Therefore, during the relevant assessment years, these transactions were not chargeable to tax. The decision of the Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi though was rendered on 7th September, 1978, would, as the G.O. itself stated, apply not only to assessments relating to the period from 7th September, 1978, but also to all assessments relating to the period even prior to 7th September, 1978. On this aspect, therefore, there is no distinction between pending assessment proceedings and cases where the assessment proceedings were completed. Thus, the basis for the waiver was that the transactions in question were not sales and could not have been taxed but wrongly sought to be taxed. If that were the reason, there could be no distinction between pending and finalised assessments. In fact, waiver is a misnomer. We have already held that unless the sales tax law of the State comprehended within the taxing net transactions of supply of food and drinks in a restaurant, the validating provision in section 6 does not enlarge that power so as to include transactions which are not included in the word “sale” and that it confers retrospectively legislative competence, if there was a provision which lacked such competence. The definition of “sale” in the Tamil Nadu Sales Tax Act did not include food and drinks supplied in a restaurant. Waiver of tax also can only arise when there is a legally imposed tax. The suggestion of conditions for waiver by the Commissioner and the acceptance of the Commissioner’s reasons by the Government proceeds thus on a wrong assumption that the levy was legal and the assessment orders are valid. That, in our opinion, makes the conditions not applicable if not illegal and unsustainable. The learned single Judge who dismissed the writ petitions held that a provision extending a waiver to cases other than those already concluded and which have become final must be held as valid classification and that otherwise it will lead to reopening of all concluded matters and the result would be catastrophic. Normally we would have taken a similar view but for the fact in the case of supply of food and drinks in hotels and restaurants it was the subject-matter of dispute between the hoteliers and the Government right from 1970 and in fact, the hoteliers first succeeded before the Supreme Court in State of Punjab v. Associated Hotels of India Ltd. and still when the Government sought to tax such transactions restricting the decision of the Supreme Court only to supply of meals to residents, they were fighting that issue again and in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi they were able to persuade the Supreme Court to point out that there was no distinction in case meals supplied to residents in a hotel and those served to customers in restaurants. Even the review petition filed by the Government was dismissed on 21st December, 1979. Thus the dispute had not reached the finality and the assessees could not be said to have conceded to any position. Merely because some of the assessees allowed their assessments to become final as law-abiding citizens during the pendency of those disputes in the Supreme Court and other courts, we cannot deprive them of the benefit given to the other assessees in respect of the same assessment years merely on the ground that in their cases the assessment proceedings were not pending. It is also not unusual for an assessee to pay the tax as per the original assessment though he may be questioning the order in appeal, further appeal and revision, but on that ground, it is not possible to say that he will also not be entitled to refund when the decisions ultimately end in his favour. It is also not uncommon that when the Supreme Court holds that any levy was illegal or unconstitutional, validating Acts are made whenever the States want to retain the collections already made.
25. The Supreme Court in considering the validity of such retrospective legislations has very often upheld the validity on the ground that they were disputed questions pending for a long time in court and ultimately when the decision of the Supreme Court was adverse, they amend the law retrospectively and such retrospective legislations are reasonable and could not be questioned if the legislature has the power to tax.
26. This principle was recognised in Rai Ramkrishna v. State of Bihar . In that case, though the retrospective levy of the tax on goods and passengers was as long as for 10 years, the validating Act which gave such retrospective effect was held as not unreasonable due to the fact that the litigation regarding the constitutionality of the taxing statute, which has to be validated, was going on for an inordinate length of time and the retrospective operation only covered that period. It is also pertinent to note that the retrospective levy will affect even assessments which had become final as has been held by the Supreme Court in Venkatachalam v. Bombay Dyeing .
27. The present is a converse case where, though there was no authority to levy the sales tax, the assessee has been subjected to a levy and merely on the ground that the assessment had not been questioned by way of appeal or revision, they cannot be denied the benefit of the decision of the Supreme Court. If the legislature had not intended to give benefit of the Supreme Court judgment to these assessees they shall have amended the Sales Tax Act retrospectively.
28. The learned Additional Government Pleader then submitted that when a waiver or exemption is subject to certain conditions, the assessees could not claim the benefit without complying with the conditions. The waiver being conditional on the filfilment of those conditions, if the conditions are to be treated as not enforceable, the waiver itself could not be given effect to. We do not see how this argument is open. If the transactions are taxable, then only the question of waiver arises and such waiver can also be subject to conditions. If they are not taxable, the conditions have no place, as the waiver gives effects only to what the assessee is entitled to under the law or what the law provides for him. Equally, the condition requiring the pendency of the proceedings has no meaning. If the assessment proceedings are pending, there was no need for the assessee to invoke the Government Order relating to waiver, as he would even otherwise be entitled in law to such waiver since the transaction is not taxable. The waiver, therefore, can only arise in respect of cases where the assessments have become final.
29. There is also the other line of cases which dealt with refund of taxes illegally levied. In fact, in a number of cases decided by the Supreme Court and the various High Courts including this Court, it has been held that section 72 of the Contract Act includes payments made under a mistake of law and that payment of tax which is ultra vires or unconstitutional comes under its scope. It has also been held that when the tax is subsequently declared by court to be ultra vires or unconstitutional, the party is entitled to have a refund of it from the Government, whether he had paid it under protest or not unless any question of limitation arises. The refund cannot also be refused on the ground that the assessment was not challenged by way of an appeal, representation or revision or that an assessment has become final under the terms of the taxing statutes. We may now notice some of the decisions which have taken this view.
30. In Sales Tax Officer v. Kanhaiya Lal , the Supreme Court held that “the term ‘mistake’ (section 72) has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as a mistake of fact”. That was a case in which for the assessment years 1948-49, 1949-50 and 1950-51 the respondent in that case was assessed on his forward transactions and the assessment orders passed on 31st May, 1949, 30th October, 1950, and 22nd August, 1951, have become final. The levy of sales tax on such forward transactions was held to be ultra vires by the High Court of Allahabad in its judgment delivered on 27th February, 1952, in the case of another assessee and that decision was reported in Budh Prakash Jai Prakash v. Sales Tax Officer, Kanpur . Thereafter the assessee in the Supreme Court case asked for a refund of the amount of sales tax paid by him. The authorities refused to refund the same. The assessee filed a writ petition in the Allahabad High Court for a writ of mandamus directing the authorities to refund the tax collected from him. The learned single Judge allowed the writ petition and directed refund. A special appeal filed by the department to a Division Bench of the same High Court was also dismissed. On a further appeal to the Supreme Court, the Supreme Court held :
“We are of opinion that this interpretation put by their Lordships of the Privy Council on section 72 is correct. There is no warrant for ascribing any limited meaning to the word ‘mistake’ as has been used therein and it is wide enough to cover not only a mistake of fact but also a mistake of law. There is no conflict between the provisions of section 72 on the one hand and sections 21 and 22 of the Indian Contract Act on the other and the true principle enunciated is that if one party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitled the party paying the money to recover it back the party receiving the same.”
31. It may be pertinent to point out that in this decision also on behalf of the State it was urged that (1) in so far as the payments were in discharge of a liability under the U.P. Sales Tax Act and were voluntary payments without protest, and (2) inasmuch as the monies which had been received by the State of U.P. had not been retained but had been spent away by it, the assessee was disentitled to the said amounts. Both these contentions were repelled by the Supreme Court and held that the assessee was entitled to a refund whether he had paid the money under protest or not and that “no question of estoppel can ever arise where both the parties, as in the present case, are labouring under the mistake of law and one party is not more blame than the other”.
32. The Supreme Court further observed :
“Estoppel arises only when the plaintiff by his acts or conduct makes a representation to the defendant of a certain state of facts which is acted upon by the defendant to his detriment; it is only then that the plaintiff is estopped from setting up a different state of facts. Even if this position can be availed of where the representation is in regard to a position in law, no such occasion arises when the mistake of law is common to both the parties. The other circumstances would be such as would entitle a court of equity to refuse the relief claimed by the plaintiff because on the facts and circumstances of the case it would be inequitable for the court to award the relief to the plaintiff. These are, however, equitable considerations and could scarcely be imported when there is a clear and unambiguous provision of law which entitled the plaintiff to the relief claimed by him.”
33. The Supreme Court further held :
“Merely because the State of U.P. had not retained the monies paid by the respondent but had spent them away in the ordinary course of the business of the State would not make any difference to the position and under the plain terms of section 72 of the Indian Contract Act the respondent would be entitled to recover back the monies paid by it to the State of U.P. under mistake of law.”
34. In Rayalseema Constructions v. Deputy Commercial Tax Officer , a similar question was considered by a Division Bench of this Court. In that case there were two writ petitioners, one a firm of construction engineers and the other a firm of tanners. The construction engineers were assessed under the Madras General Sales Tax Act, 1930, on their works contract for the years 1951-52 and 1952-53. The tanners were assessed to tax on their gross turnover of purchase including the sales to them from persons other than licensed dealers. After the decisions in Gannon Dunkerley v. State of Madras [1954] 5 STC 216 (Mad.); ILR (1955) Mad. 832 and Abdul Shukoor and Company v. State of Madras [1955] 6 STC 352 (Mad.) [FB]; ILR (1956) Mad. 1 (FB) both these assessees contended that the levy made on them was unlawful and that they were not liable to pay the amount. One of the contentions raised by the Government was that the assessments in their cases have become final, they have not preferred any appeal, reference or revision and that, therefore, the collection of the tax due under those assessments cannot be stayed or said to be prohibited from collecting the tax. Repelling this contention this Court observed that “if the officers employed to administer the law make mistakes in the exercise of their powers, the persons affected must ordinarily use the remedies of appeal, reference or revision as the case may be but where there is an absence of jurisdiction or where the assessing officer stayed beyond the limits of jurisdiction his acts would, to that extent, be null and void and no one would have any power to call upon a citizen to make payment of a tax so imposed, and to say that an assessment has become final is not equivalent to saying that assessment is lawful can an assessment made without jurisdiction or in pursuance of a provision which was found to be ultra vires continues to be unlawful and nothing less than a validating provision properly enacted would alter that fact”.
35. There could also be no doubt that when the proceedings are pending in appeal or revision before the appellate or revisional authorities or pending in revision in this Court or for that matter when a writ petition is admitted and rule nisi is issued, it cannot be said that the assessments have become final. An instructive case in this regard is the decision reported in Satyanarayana v. Venkataratnamma . That was a case in which a tenant had filed a petition under article 226 for the issue of a writ of certiorari to quash the orders of the Subordinate Judge and the Rent Controller directed him to be evicted under the Madras Buildings (Lease and Rent Control) Act. The ground on which eviction was ordered was default in payment of rent within the prescribed time. When the writ petition was pending disposal, the Rent Control Act was amended and a proviso was added to section 7(2) of the Act which empowered the Rent Controller if satisfied that the default of the tenant to pay was not wilful, to give the tenant a reasonable time not exceeding 15 days to pay or tender rent to the landlord up to the date of such payment or tender. The amending Act provided that “any application made, appeals preferred or other proceedings instituted under the said Act and pending at the commencement of this Act shall be disposed of as if this Act had been in force at the time when such application, appeal or proceeding was made, preferred or instituted”. The question, therefore, for consideration was whether in view of the filing of the writ petition and the issue of the rule nisi, it could be said that eviction proceedings were pending in order to enable the tenant to invoke the provisions of the proviso to section 7(2) added by the amending Act. It was contended on behalf of the respondent-landlord that the amending Act had no application because both the original application for eviction as well as the appeal preferred against the order of the Rent Controller were disposed of long before the amending Act came into force and the application for a writ of certiorari is not a proceeding instituted under the Rent Control Act. It may be mentioned that the Madras Building (Lease and Rent Control) Act only provided for an appeal against the order of the Rent Controller and it did not provide for any further proceeding by way of revision or by way of a writ of certiorari to the High Court, Rejecting this contention, the learned Chief Justice, Rajamannar, held thus :
“…. the appeal preferred to the Subordinate Judge must be deemed to be pending so long as the application to quash the order is pending in this Court. In Halsbury’s Laws of England, Volume 9, page 838 (section 142(1), the nature of a writ of certiorari is thus set out :
‘The writ of certiorari issues out of a superior court and is directed to the Judge, or other officer of an inferior court of record. It requires that the record of the proceedings in some cause or matter pending before such inferior court shall be transmitted into the superior court to be there dealt with, in order to insure that the applicant for the writ may have the more sure and speedy justice.’
See also Short and Mellor’s Crown Practice (Second Edition) page 14. The rule nisi is this case in terms calls upon the Subordinate Judge of Tenali to send for the use of this Court all the records with all things touching the same as fully and perfectly as they have been made by the learned Judge. It is obvious that the decision in the appeal is again set at large, as it lost its finality the moment this Court issued the rule nisi. This Court can on this application for certiorari set aside by quashing the order in the appeal. Surely, in such circumstances, it must be said that the appeal is pending. In In re Clagett’s Estate : Fordham v. Clagett (1882) 20 Ch. D 637, Jessel, M.R., when discussing the question when an insolvency can be treated as pending observed thus :
‘What is the meaning of the word “pending” ? In my opinion, it includes every insolvency in which any proceeding can by any possibility be taken. That I think is the meaning of this word “pending”. A cause is said to be pending in a court of justice where any proceeding can be taken in it. That is the test. If you can take any proceeding it is pending. “Pending” does not mean that it has not been tried. It may have been tried years ago.’
In our opinion, therefore, section 20 of Madras Act 8 of 1951 applies to this case.”
36. In these circumstances we are of the view that the distinction made between the assessments which have become final or pending in appeal or revision and those which are pending including remanded cases where fresh assessments have not been made, is discriminatory and unsustainable.
37. The assessment proceeding are thus pending in respect of the assessment years 1973-74 and 1974-75 in the case of Sree Annapoorna and the point only arises in 1975-76 from the fact that T.C. No. 929 of 1982 filed by the Government against the order of the Tribunal in respect of the assessment year 1975-76 was dismissed at the admission stage on 29th August, 1983, though in respect of the other two years the tax cases were admitted. Even in regard to that year by reason of the tax case filed against dismissal of the enhancement petition in T.C. No. 109 of 1982, that case also an be said to have not reached finality. Notice issued in a tax case sets at large the case and the matter cannot be said to have reached finality. Further the decision of the Tribunal in respect of 1975-76 was in favour of the assessee. Again when the writ appeals were admitted and notices had been issued, the finality attached to the orders of assessments is also set at large and the matter can be said to be only pending. In view of the rule nisi issued in writ proceedings and the pendency of the tax cases it cannot be said that the assessments had become final.
38. The next condition related to cases where the dealer had collected tax which is equal to or in excess of the tax. This condition again, in our view, cannot be sustained. If the non-liability to pay tax was on the ground that the turnover relating to the supply of food and drinks was not sale, there could be not question of the State collecting any tax in respect of that turnover. Again if the assessment proceedings were pending either before the assessing officer of revisional authority or in this Court, for giving relief, the collection of tax would not be of any relevance. In fact, though the notification used the word “waiver”, it is only in the nature of giving effect to the provisions of the Act and the decision of the Supreme Court, and it does not amount to any bounty or exemption of a transaction which is liable to tax. Basically we are concerned with a case where the transaction is not liable to tax and the State could not have taxed and by reason of the mistaken assessment the relief is sought to be given by the Government also. If the real basis is such mistake committed by the assessing officer in assessing a transaction which was not a sale, then there could be no basis or distinction between a dealer who has collected tax and a dealer who has not collected tax. It is not also uncommon that even in a case where the dealer had collected a tax, courts have held that the transaction is not liable for payment of tax if it was not a sale. Therefore we are of the view that the second condition imposed in the Government Order is also unenforceable. For the same reason, condition No. 3 relating to deduction of tax already collected by him would also be not sustainable. The assessees need not have worried about the 4th condition in the Government Order, for, if the past assessments levied no tax there was no need for reopening them and making them nil assessments since the same had no effect on the assessees. We are, therefore, of the view that the conditions 1, 2 and 3 could not be enforced in order to claim the eligibility for the benefit, if any, under the Government Order.
39. In the result we hold that in each of these tax cases the transactions relating to supply of food and drinks in the respective restaurants during the respective assessment years are not sales and that they are not liable to pay sales tax under the Tamil Nadu General Sales Tax Act. There are also no grounds for enhancing the percentage in respect of parcel sales. We accordingly dismiss the tax cases. In the writ appeals we also hold that the respective assessees are entitled to the benefits of waiver under G.O. Ms. No. 1187, Commercial Taxes and Religious Endowments Department, dated 22nd October, 1982, and accordingly we allow the writ appeals, setting aside the order of the learned single Judge. There will, however, be no order regarding costs.
40. Writ appeals allowed.