Member supplies by a corporate society were taxable sales where the goods belonged to the society and consideration was paid.

An Explanation enlarging the definition of "dealer" under the Madras General Sales Tax Act was held valid because it only identified a taxable entity and did not itself create a sale or tax a non-sale transaction. A corporate society's supply of its own refreshments to members for price was treated as a taxable sale, as the goods belonged to the society, were transferred for consideration, and the arrangement was not shown to be a mere agency or trust. The legal form of the transaction was respected. The society's challenge failed and the assessment was upheld.

---

---

Issues: (i) Whether the Explanation to section 2(g) of the Madras General Sales Tax Act, 1959, was ultra vires the State Legislature; (ii) Whether the society's supply of refreshments to its members for price constituted taxable sales under the Act.

Issue (i): Whether the Explanation to section 2(g) of the Madras General Sales Tax Act, 1959, was ultra vires the State Legislature.

Analysis: The Explanation to section 2(g) only enlarged the definition of "dealer" by treating a society, club, firm or association as a dealer even where dealings with members were not in the course of business. It did not itself create a sale or impose tax on a non-sale transaction. The State Legislature was competent under Entry 54 of List II to define the taxable entity, and the provision did not transgress the constitutional limits on sales tax legislation.

Conclusion: The Explanation to section 2(g) was not ultra vires and was valid.

Issue (ii): Whether the society's supply of refreshments to its members for price constituted taxable sales under the Act.

Analysis: A taxable sale requires transfer of property in goods for price. The society was a body corporate capable of holding property and contracting in its own name. On the facts, the refreshments belonged to the society and were transferred to members for a price or promised price. The transaction was not shown to be a mere agency or trust arrangement, and the court declined to ignore the legal form of the transaction in a taxing statute. The supply therefore fell within the substantive definition of "sale".

Conclusion: The transactions were sales and were taxable under the Act.

Final Conclusion: The appeals succeeded, the High Court's view was set aside, and the society's challenge to assessment failed.

Ratio Decidendi: For sales tax purposes, where a corporate society supplies its own goods to members for consideration and the legal ingredients of sale are present, the transaction is taxable, and a statutory provision enlarging the class of "dealers" does not become unconstitutional merely because it covers member dealings.

---