M/S. K. DAMODARASAMY NAIDU AND BROS. vs THE STATE OF TAMIL NADU

The Supreme Court held that the States are empowered to levy taxes on the sale of goods under Entry 54 of List-II of the Seventh Schedule of the Constitution, but the nature of transactions involving hotels and restaurants must be considered. The Court reaffirmed the principle from State of Punjab v. M/s. Associated Hotels of India Ltd. that the transaction between a hotelier and a guest is primarily one of service, with meals served as part of that service, thus not constituting a separate sale of goods. Consequently, the Revenue cannot impose sales tax on meals served to guests as they are integral to the hospitality service provided.