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PETITIONER: STATE OF PUNJAB

       Vs.

RESPONDENT: M/S.  ASSOCIATED HOTELS OF INDIA LTD.

DATE OF JUDGMENT04/01/1972

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. MITTER, G.K. SIKRI, S.M. (CJ) DUA, I.D. KHANNA, HANS RAJ

CITATION:  1972 AIR 1131            1972 SCR  (2) 937  1971 SCC  (1) 472  CITATOR INFO :  D          1974 SC2309  (110)  RF         1977 SC1642  (6)  RF         1978 SC 621  (28)  R          1978 SC1591  (3,6,7)  R          1980 SC 674  (4)  E          1984 SC 744  (18)  F          1989 SC 285  (10)

ACT: Sales tax-Sale and contract of Work and  service-Distinction and tests.

HEADNOTE: The  respondent-company  was  running  the  business  of   a hotelier  and  was registered as a dealer under  the  Punjab General  Sales Tax Act, 1948.  It applied for a  declaration that  it  was not liable to sales-tax in  respect  of  meals served  to  the guests staying in the hotel on  the  grounds that  :  (1)  the hotel receives guests  primarily  for  the purpose  of  lodging; (2) when so  received  the  management provides  him with a number of amenities including meals  at fixed hours, incidental to such lodging and with a view  to render  hi-, stay comfortable; (3) the  transaction  between the respondent and the guests is one for the latter to  stay and  not one of sale of food stuffs supplied; (4)  the  bill given  by  the respondent and paid by the guest is  one  and indivisible, being a fixed amount per day during his stay in the hotel and does not consist of separate items in  respect of  the  several  amenities furnished to him,  and  (5)  the transaction  does  not envisage any sale of food  since  the guest cannot demand a rebate or deduction if he were to miss a  meal  or meals nor is he entitled to carry away  or  deal with, in any manner, the food served on his table if a  part of it is not consumed. The  department rejected the company’s application  but  the High Court allowed its writ petition. Dismissing the appeal to this Court, HELD : The transaction is one essentially of service in  the performance of which and as part of the amenities incidental

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to that service, the hotelier serves meals at stated  hours. The  Revenue,  therefore, was not entitled to split  up  the transaction  into two parts one of service and the other  of sale  of  food stuffs and to split up the  bill  charged  as consisting  of  charges  for lodging and  charges  for  food stuffs served with a view to bring the latter under the Act. [947 F-G] The distinction between a contract of sale and a contract of work  and service is fine especially when the contract is  a composite  one  involving both.  In  considering  whether  a transaction  is a sale falling within the purview of  sales- tax it is necessary to determine the nature of the  contract involved  on the facts of each case.  A contract of sale  is one  whose  main  object is the  transfer  of  property  and delivery  of possession of a chattel to the buyer;  but  the mere  passing of property in an article or commodity  during the  course  of the performance of a  transaction  does  not render  it a transaction of sale when there is no  intention to  sell  and purchase.  When the principal object  of  work undertaken by the payee of the price is not the transfer  of a  chattel  qua  chattel the contract is  one  of  work  and labour.   The  test  is whether or not the  work  or  labour bestowed  ends  in  anything that can  properly  become  the subject of sale; neither the ownership of the materials  nor the value of the skill 938 and  labour  as  compared with the  value  of  materials  is conclusive,   although  such  matters  may  be  taken   into consideration.   In every case the court would have to  find out  what is the primary object of the transaction  and  the intention  of the parties while entering into it. [942  D-G: 944 F-G.  H] The transaction in the present case is one and  indivisible, namely,  one of receiving a customer in the hotel  to  stay. The  bill  is  not capable of being split up  into  one  for residence   and  another  for  sale  of  meals.    Amenities including  meals, are part and parcel of the service  which, in reality, is the transaction between the parties.  Even if it  was to be disintegrated the supply of meals during  such stay does not constitute a separate contract of sale,  since no intention on the part of the parties to sell and purchase the food stuffs supplied during meal time can be spelt  out. [945 G-H; 946 A-C] Madras  v. Gannon Dunkerley & Co. Ltd., [1959]  S.C.R.  379, Mohanlal Jogani Rice & Atta Mills. v. Assam [1953] 4  S.T.C. 129,  Masanda & Co. v. Commissioner of Sales-tax,  [1957]  8 S.T.C. 370, United Bleachers Ltd. v. Madras, (1960) 9 S.T.C. 278,  Krishna & Co. Ltd. v. Andhra Pradesh, [1956] 7  S.T.C. 26,  Patnaik & Co. v. Orissa, [1965] 16 S.T.C.  364,  Andhra Pradesh  v.  Guntur Tobaccos Ltd. [1965] 2  S.C.R.  167  and English Law and United States Law, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1207 of 1968. Appeal  by special leave from the judgment and  order  dated May 10, 1967 of the Punjab and Haryana High Court in Letters Patent Appeal No. 159 of 1966. V.   C. Mahajan and R. N. Sachthey, for the appellants. M.   C.  Setalvad,  M. C. Bhandare, Rameshwar  Nath,  T.  R. Bhasin and Lalit Bhasin, for the respondent. The Judgment of the Court was delivered by Shelat,  J.  The respondent-company carries on  business  as hoteliers  and conducts several hotels including the  ’Cecil

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Hotel’ at Simla.  Besides conducting hotels, it also carries on  restaurant  business.   As  part  of  its  business   as hoteliers, the company receives guests in its several hotels to whom, besides furnishing lodging, it also serves  several other amenities, such as public and private room, bath  with hot and cold running water, linen, meals during stated hours etc.   The  bill tendered to the guest is an  all  inclusive one,  that  is to say, a fixed amount for the  stay  in  the hotel  for each day and does not contain different items  of each of the aforesaid amenities.  That is, however, not  the case  in its restaurant business where a customer takes  his meal  consisting either of items of food of his choice or  a fixed menu.  The primary function of such a restaurant is to serve  meals desired by a customer, although along with  the food,  the customer gets certain other amenities also,  such as service, linen etc.  The bill which 939 the  customer  pays is for the various food items  which  he consumes  or at a definite rate for the fixed menu, as  the case may be, which presumably takes into account service and other related amenities. The   respondent-company,  as  such  hoteliers,   has   been registered  as a dealer under the Punjab General  Sales  Tax Act, XLVI of 1948 and has been filing quarterly returns  and paying sales tax under that Act. On  September 2, 1958 the company applied for a  declaration that it was not liable to pay sales tax in respect of  meals served  in the said Cecil Hotel to the guests  coming  there for  stay.  In support of its plea, the company  raised  the following contentions : (1) that the, hotel receives  guests primarily  for  the  purpose of lodging, (2)  that  when  so received,  the  management  provides him with  a  number  of amenities  incidental  to such lodging and with  a  view  to render his stay in the hotel comfortable including meals  at fixed  hours, (3) that the transaction between the  company and  such a guest is one for the latter to stay and not  one of  sale  of food stuffs supplied as one of  the  incidental amenities,  (4) that the bill given by the company and  paid by the guest is one and indivisible, that is, a fixed amount per day during his stay in the hotel and does not consist of separate items in respect of the several amenities furnished to  him  including  meals served to him, and  (5)  that  the transaction  so entered into does not envisage any  sale  of food since the guest cannot demand a rebate or deduction  if he were to miss a meal or meals, nor is he entitled to carry away  or  deal  with in any manner the food  served  at  his table,  if a part of it remains unconsumed.  It is,  on  the other hand, the management which has the right to deal  with such  unconsumed  remainder as it likes.  Such  a  position, therefore,  is  inconsistent  with a sale  under  which  the property  in the whole must pass to the purchaser,  and  who can deal with the remainder in any manner he likes. The Sales Tax Officer rejected the company’s application  on the  ground that the transaction Which takes  place  between the  management and a resident guest takes in  both  lodging and boarding and the hotel charges include consideration for both.   A revision under S. 21 of the Act by the company  to the Commissioner met the same fate.  The company then  filed a  writ petition for an order quashing the said decision  as also  the notices issued by the Sales Tax authorities  under the Act.  The grounds put forward in the writ petition  were almost  the same which the company had previously  urged  in its application for declaration. There was no dispute regarding the facts stated in the  writ petition  and particularly with regard to the fact that  the

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transac- 940 tion  which  a  visiting  resident  enters  into  with   the management is one and indivisible, that the bill charged  on him  is likewise one and indivisible, that the  charges  are for  each day of stay, and that that being so, the bill  was incapable  of being split up into separate charges for  each of the amenities furnished and availed of by such a visiting resident.   The  dispute  was  as  to  the  nature  of   the transaction  and whether such transaction included  sale  of food  stuff  supplied at various meals supplied  to  such  a customer. The  High Court, on a consideration of the  arguments  urged before it and relying mainly upon the decision of this Court in  Madras  v. Gannon Dunkerley and Co.  Ltd.(,’),  to  the effect  that where a transaction is one and  indivisible  it cannot  be split up so as to attract the Sales Tax Act to  a part  of  it , allowed the writ petition.  It  held  that  a transaction between a hotelier and his resident visitor  did not involve a sale of food when the former supplied meals to the latter as one of the amenities during his residence, and that  if there was one inclusive bill, it was  incapable  of being  split  up in the absence of any rates for  the  meals agreed  to  between the parties as part of  the  transaction between  the  two.   The  High  Court  also  held  that  the transaction  was primarily one for lodging, that  the  board supplied by the management amounted to an amenity considered essential  in these days in all properly  conducted  hotels, and  that  when  so  supplied,  it  could  not  be  said  to constitute  a  sale every time a meal was served to  such  a resident  visitor.  This appeal, by special leave, is  filed against this view of the High Court. The question in this appeal, it would appear, arises in  the present  form for the first time.  There are, therefore,  no previous  decisions to guide its determination.   It  would, however,  be helpful to consider certain decisions  both  of this  Court as also of the High Courts, in which  different types  of  transactions  which  came  up  before  them   for consideration  in sales tax cases have been dealt  with  and which might throw some light upon the problem before us. In a case arising under the Assam Sales Tax Act, 1947 though there was no express sale in respect of gunny bags in  which rice,  an  exempted commodity, was supplied  to  Government, they  were  held to form assessable  turnover.   There  was, however,  in  that  case evidence  that  the  assessees  had charged the Government for those bags (Mohanlal Jogani  Rice & Atta Mills V.     Assam) (2). In  D. Masanda and Co. v. Commissioner of Sales Tax(3),  the question was whether photographic materials imported and (1)  [1959] S.CR. 379. (3)  [1957] 8 S.T.C. 370. (2) [1953] 4 S.T.C. 129. 941 used  in  the process of  manufacturing  photographic  work, copies of which were supplied by the assessee to a customer, was  a transaction involving sale of those  materials.   The High Court held that such a transaction did not cease to  be a  sale merely because the materials were not sold  directly in  their  original form but in another form,  forming  the, components  of the finished product, namely, the  copies  of the photograph, and that the transaction was not merely  the performance  of skilled services but the supply of  finished goods.   This  was,  however,  a  border  line  case.    The transaction  might  well be considered as  one  of  service, during   performance  of  which,  a  transfer   of   certain

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materials,  in  respect of which there was no  contract  for sale,  either express or implied, may be said to have  taken place.   An illustration of such a kind is furnished by  the case  of United Bleachers Ltd. v. Madras(1).  In  that  case the  assessee  bleached and dyed,  calendered,  pressed  and folded unbleached yarn and cloth manufactured by his  custo- mer  textile  mills.   The  bills  issued  by  the  assessee contained,  (a)  bleaching  charges,  and  (b)  charges  for stitching,  folding,  stamping,  baling etc.,  but  did  not contain separately charges for the materials used for those’ purposes.  The Revenue contended that there was transfer  of those materials and separately assessed the charges of those materials   holding  that  though  the  assessee   did   not specifically  deal  in  those materials, a  portion  of  the profit  earned in the business of bleaching and  calendering could  legitimately be attributed to the  packing  materials and   the   transaction  involved  a  sale   of   them   for consideration.  On a reference, the High Court held that the case was one of contract of service as distinguished from  a sale  of a principal commodity, such as rice in  Assam  case (supra)  and  salt in Varasuki and Co. v. Madras(1)  On  the other hand, where a contract is to supply such commodity  in a  packed  condition,  it  could  be  inferred,  though  the contract  might  not be express that the  intention  of  the parties  was to give and accept delivery of the goods  in  a packed  condition  and not to take the  principal  commodity alone  so that in the contract of sale of such  a  commodity there  was  implicit the sale of packing material  as  well. Even  in  a  contract  of  service  such  as  bleaching  and calendering  where  the  goods  after  such  processing  are delivered  packed a sale of packing, materials is  possible, quite  apart from the contract of service.  The question  in such cases would be one of evidence, whether there is such a contract beside the one of service.  Where however there are no  such  distinct  contracts and the contract  is  one  and indivisible, the essential part of which is one of  service, packing  would be part of or incidental to the service,  and unless an intention to charge for the materials used in  the packing can be spelt out, the Revenue would not be (1) [1960] 9 S.T.C. 278. (2) [1950] 2 S.T.C. 1. 942 entitled  to split up the contract,  estimate  approximately the charges for such materials and treat them as  chargeable on the mere ground that the transaction involved transfer of packing  materials,  whose value must have been  taken  into consideration while fixing charges for the service.  Such an implied contract of supply of packing materials was inferred in  a  contract of service, namely, drying  raw  tobacco  in Krishna  and Co. Ltd. v. Andhra Pradesh But the decision  in that case did not rest on there being a transfer of  packing materials  in  favour of the customer.  There  was  evidence that such a transfer was for consideration, inasmuch as  the amounts  charged as remuneration for service also  contained charges  for the packing materials though such charges  were not separately shown in the assessee’s accounts.  In such  a state  of  evidence it would be possible for  the  Court  to infer  a  separate  implied  contract  of  sale  of  packing materials  and  not  as part of the service  of  drying  raw tobacco and delivering it in packed condition. The  difficulty which the Courts have often to meet with  in construing  a contract of work and labour, on the one  hand, and  a contract for sale, on the other, arises  because  the distinction between the two is very often a fine one.   This is  particularly  so when the contract is  a  composite  one

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involving both a contract of work and labour and a  contract of  sale.   Nevertheless, the distinction  between  the  two rests on a clear principle.  A contract of sale is one whose main object is the transfer of property in, and the delivery of  the possession of, a chattel as a chattel to the  buyer. Where  the principal object of work undertaken by the  payee of  the price is not the transfer of a chattel qua  chattel, the contract is one of work and labour.  The test is whether or not the work and labour bestowed end in anything that can properly  become the subject of sale; neither the  ownership of  materials,  nor the value of the skill  and  labour as compared  with  the value of the materials,  is  conclusive, although  such  matters may be taken into  consideration  in determining,  in  the circumstances of  a  particular  case, whether the contract is in substance one for work and labour or one for the sale of a chattel(1). In  Patnaik and Co. v. Orissa (3), a difference  of  opinion arose because of the fine distinction between the two  types of  contract.  The contract there was for  constructing  and fixing  bus  bodies on the chassis supplied  by  the  Orissa Government.   The  contract, infer alia,  provide  that  the appellants  were  to construct the bus bodies  in  the  most substantial and workmanlike manner (1)  [1956] 7 S.T.C. 26. (2) Halsbury’s Laws of England, 3rd Ed.  Vol. 34, 6-7. (3)  [1965] 16 S.T.C. 364. 943 both as regards materials and otherwise in every respect  in strict compliance with the specifications and should deliver them  to  the  Governor on or  before  the  dates  specified therein.  The majority rejected the contention that that was a contract of work and labour and held that the  transaction was  one  of  sale.   The  question  primarily  was  one  of construction  of  the contract, and the majority  held  that both  the  agreement  and the sale related to  one  kind  of property,  namely,  the  bus bodies.   The  reason  for  so. holding was stated to be that it was clear from the contract that  the property in the bus bodies did not pass  on  their being constructed on the chassis, but only when the vehicles including  the bus bodies were delivered.  Such  a  contract was  unlike a building contract or a contract under which  a movable is to be fixed on to another chattel or on the land, where the intention plainly is not to sell that article  but to   improve  the  land  or  the  other,  chattel  and   the consideration is not for the transfer of the chattel but for the  work and labour done and the materials furnished.   The contract  in question was to manufacture a bus body and  fix it  on  the chassis supplied and transfer the  bus  body  so constructed for consideration. In  Madras  v.  Gannon Dunkerley and Co.  Ltd.(1)  the  main question  was  as regards the vires of  the  Madras  General Sales.  Tax Act, 1939, as amended by Madras Act XXV of  1947 which  widened the definition of ’sale’ by including,  inter alia, in it a transfer of property in the goods involved  in the  execution of a works contract.  Under this  definition, the Sales Tax authority brought into chargeable turnover the materials used in the constructiOn works carried out by  the company.   This Court held that a power to enact a law  with respect to tax on sale of goods under entry 48 of List 11 in the  1935 Constitution Act must, to be intra vires,  be  one relating  in fact to a sale of goods and that  a  Provincial Legislature  could  not, in the purported  exercise  of  its power,  tax transactions which were not sales,  by  enacting that  they  should be deemed to sales, that  to  construe  a transaction as sale there should be an agreement relating to

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goods  to be supplied by passing title in those  goods,  and that it was of the essence of such a concept that both  the, agreement  and  the sale should relate to one and  the  same subject  matter.   The conclusion arrived at was that  in  a building  contract,  even if it were  to  be  disintegrated, there  was no passing of title in the materials as  movables in favour of the other party of the contract.  The  contract was one and indivisible, there was no sale of materials, and consequently,  there  was  no  question  of  title  to   the materials used by the builders passing to the other party to the  contract.   Even  where  the  thing  produced  under  a contract is movable property, the materials in- (1) [1959] S.C.R. 379. 944 corporated into it might pass as a movable.  But there would be  no  taxable sale if there was no agreement to  sell  the materials  as  such.  In arriving at  this  conclusion,  the Court  relied upon Appleby v. Myres(1) and the  observations of  Blackburn,  J., at 659-660 of the report  to  show  that thread  stitched into a coat which is under  repair  becomes part  of the coat, but in a contract for repairing the  coat the  parties surely did not enter into an agreement of  sale of  that  thread.   In Andhra  Pradesh  v.  Guntur  Tobaccos Ltd.(2),   the    transaction  was  for   redrying   tobacco entrusted  to the respondent-company by its customers.   The process  involved  the keeping of the  moisture  content  of tobacco leaf at a particular level and for that purpose  the leaf  had  to  be packed in bales,  in  water-proof  packing material, as it emerged from the reconditioning plant.   The tobacco  was then returned to the customer packed in  costly packing  material.  In the, company’s charges  for  redrying there  was no separate charge for the value of such  packing material.   It was held that the redrying process could  not be  completed without the use of the packing material,  that packing  formed an integral part of that process,  and  that although the redried tobacco was returned together with  the packing  materials there was no sale of those  materials  as there  was no intention on the part of the parties to  enter into  any  transaction of sale as regards  those  materials. The  mere  fact that in such a contract of work  or  service property  in  goods which belonged to the  party  performing service  or  executing the work stands  transferred  to  the other  party is not enough.  To constitute a  taxable  sale, the Revenue has to establish that there was a sale, distinct from  the  contract of work or service, of the  property  so passing to the other party. Thus,  in  consider whether a transaction falls  within  the purview  of sales tax it becomes necessary at the  threshold to  determine the nature of the contract involved in such  a transaction  for  the  purpose of  ascertaining  whether  it constitutes  a  contract of sale or a contract  of  work  or service.  If it is of the latter kind it obviously would not attract  the  tax.   From the  decisions  earlier  cited  it clearly emerges that such determination depends in each case upon its facts and circumstances.  Mere passing of  property in  an  article  or  commodity  during  the  course  of  the performance  of the transaction in question does not  render it a transaction of sale.  For, even in a contract purely of work or service, it is possible that articles may have to be used  by the person executing the work and property in  such articles  or  materials may pass to the other  party.   That would not necessarily ,convert the contract into one of sale of  these materials. in ,every case the Court would have  to find out what was the primary (1) [1867] L.R.2C.P.651.

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(2) [1965] 2 S.C.R. 167. 945 object  of the transaction and the intention of the  parties while  entering into it.  It may in some cases be that  even while  entering  into a contract of work  or  even  service, parties  might enter into separate agreements, one  of  work and service and the other of sale and purchase of  materials to be used in the course of executing the work or performing the service.  But, then in such cases the transaction  would not be one and indivisible, but would fall into two separate agreements, one of work or service and the other of sale. What precisely then is the nature of the transaction and the intention  of the parties when- a hotelier receives a  guest in his hotel ? Is there in that transaction an intention  to sell  him food contained in the meals served to  him  during his  stay  in the hotel ?  It stands to reason  that  during such  stay  a well equipped hotel Would have  to  furnish  a number   of   amenities  to  render  the   customer’s   stay comfortable.   In  the  supply  of  such  amenities  do  the hotelier and his customer enter into several contracts every time an amenity is furnished ? When a traveler, by plane  or by steam-ship, purchases his passage-ticket, the transaction is  one for his passage from one place to another.   If,  in the course of carrying out that transaction, the traveler is supplied  with drinks or meals or cigarettes, no  one  would think that the transaction involves separate sales each time any  of  those  things  is  supplied.   The  transaction  is essentially one of carrying the passenger to his destination and if in performance of the contract of carriage  something is  supplied to him, such supply is only incidental to  that services,  not changing either the pattern or the nature  of the contract.  Similarly, when clothes are given for washing to  a  laundry,  there is a  transaction  which  essentially involves work or service, and if the laundery man stitches a button  to a garment which has fallen off, there is no  sale of  the  button  or  the thread.  A  number  of  such  cases involving incidental uses of materials can be cited. none of which  can  be said to involve a sale as part  of  the  main transaction. The   transaction  in  question  is  essentially   one   and indivisible.  namely,  one of receiving a  customer  in  the hotel   to  stay.   Even  if  the  transaction  is   to   be disintegrated,  there is 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  can  be realistically spelt out.  No doubt, the customer, during his stay, consumes a number of food stuffs.  It may be  possible to  say that the property in those food stuffs  passes  from the  hotelier to the customer at least to the extent of  the food  stuffs  consumed  by him.  Even if that  be  so,  mere transfer  of property, as aforesaid, is not  conclusive  and does not render the event of such supply and con- 946 sumption  a  sale, since there is no intention to  sell  and purchase.  The transaction essentially is one of service  by the hotelier in the performance of which meals are served as part of and incidental to that service, such amenities being regarded  as essential in all well conducted  modem  hotels. The  bill prepared by the hotelier is one  and  indivisible, not  being capable by approximation of being split  up  into one for residence and the other for meals.  No doubt, such a bill  would be prepared after consideration of the costs  of meals,  but  that would be so for all  the  other  amenities given to the customer.  For example, when the customer  uses

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a  fan in the room allotted to him, there is surely no  sale of  electricity,  nor a hire of the  fan.   Such  amenities, including  that  of meals, are part and  parcel  of  service which is in reality the transaction between the parties. Even in the case of restaurants and other such places  where customers go to be served with food and drink for  immediate consumption at the premises, two conflicting views appear to prevail  in the American courts.  According to one view,  an implied  warranty  of wholesomeness and  fitness  for  human consumption  arises in the case of food served by  a  public eating place.  The transaction, in this view, constitutes  a sale  within the rules giving rise to such a warranty.   The nature  of the contract in the sale of food by a  restaurant to  customers implies a reliance, it is said, on  the  skill and  judgment of the restaurant-keeper to furnish  food  fit for  human  consumption.   The other view is  that  such  an implied warranty does not arise in such transactions.   This view  is based on the theory that the transaction  does  not constitute  a sale inasmuch as the proprietor of  an  eating place does not sell but "utters" provisions, and that it  is the service that is predominant, the passing of title  being merely incidental(’,’).  The two conflicting views present a choice between liability arising from a contract of  implied warranty and for negligence in tort, a choice indicative  of a  conflict,  in  the words of Dean  Pound,  between  social interest  in the safety of an individual and the  individual interest of the supplier of food.  The principle accepted in cases where warranty has been spelt out was that even though the  transaction  is not a sale, the basis  for  an  implied warranty  is  the justifiable reliance on  the  judgment  or skill  of  the warrant or and that a sale is  not  the  only transaction  in which such a warranty can be  implied.   The relationship  between  the  dispenser of food  and  one  who consumes   it  on  the  premises  is  one   of   contractual relationship,  a  relationship  of such  a  nature  that  an implied  warranty of wholesomeness reflects the  reality  of the   transaction   involved  and  an   express   obligation understood  by  the parties in the sense that  the  customer does, in fact, rely upon such dispenser (1)  Corputs Juris Section, Vol  77,1215-1216. 947 of  food for more than the use of due care. (see Cushing  v- Rodman(1).   A representative case propounding the  opposite view is the case of F. W. Woolworth Co. v. Wilson(2), citing Nisky  v. Childs Co.(3), wherein the principle accepted  was that such cases involved no sales but only service and  that the dispenser of food, such as a restaurant or a drug  store keeper serving food for consumption at the premises did  not sell  and  warrant food but uttered and served  it  and  was liable  in negligence, the rule in such cases  being  caveat emptor. In England, a hotel under the Hotel Proprietors Act, 1956 is an  establishment  held out by the  proprietor  as  offering food,  drink,  and if so required,  sleeping  accommodation, without  special  contract,  to  any  traveller   presenting himself and who appears able and willing to pay a reasonable sum   for  the  services  and  facilities  provided.    This definition,  which is also the definition, of an inn,  still excludes,  as formerly, boarding houses, lodging houses  and public  houses  which are merely alehouses and  in  none  of which  there  is  the obligation to  receive  and  entertain guests.  An innkeeper, that is to say, in the present days a hotel proprietor, in his capacity as an in keeper is, on the other  hand,  bound by the common law or the custom  of  the realm  to  receive and lodge in his inn all comers  who  are

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travellers  and  to  entertain  them  at  reasonable  prices without any special or previous contract unless he has  some reasonable   ground  of  refusal  (4)  .  The   rights   and obligations  of  hotel proprietors are governed  by  statute which  has  more or less incorporated the common  law.   The contract  between  such a hotel proprietor and  a  traveller presenting  himself  to  him for lodging  is  one  which  is essentially a contract of service and facilities provided at reasonable price. The  transaction  between a hotelier and a  visitor  to  his hotel is thus one essentially of service in the  performance of  which  and as part of the amenities incidental  to  that service,  the  hotelier serves meals at stated  hours.   The Revenue,  therefore,  was  not  entitled  to  split  up  the transaction into two parts, one of service and the other  of sale of food stuffs and to split up also the bill charged by the  hotelier  as  consisting of  charges  for  lodging  and charges  for food stuffs served to him with a view to  bring the latter under the Act. The  conclusion  arrived at by the High Court  is  one  with which  we  agree.   Consequently, the appeal  fails  and  is dismissed with costs. V.P.S.                               Appeal dismissed. (1)  104 American L.R. 1023; 82 T.R. 2nd Srs. 864, 868. (2) 74 F.R. 2nd Srs. 439. (3)  103 N.J. Law 464. (4)  Halsbury’s Laws of England, 3rd Ed., Vol. 21, 445-446. 948