Mutuality and sales tax: club supplies to members were not a sale, and writ relief remained maintainable.

A writ petition under Article 226 was held maintainable despite available appellate and revisional remedies under the sales tax law, because the challenge went to the legality of the levy itself and prior departmental challenge was not an absolute prerequisite. On taxability, a non-profit members' club supplying refreshments to its members from common club funds at fixed charges was treated as a mutual arrangement, not a sale in the course of trade or business. As the statutory elements of transfer of property and sale in a commercial transaction were absent, sales tax on such supplies was unsustainable. The club therefore succeeded on the substantive tax issue, with prospective protection against further levy while past collections were left undisturbed.

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Issues: (i) Whether a writ petition under Article 226 of the Constitution of India was maintainable despite the existence of appellate and revisional remedies under the sales tax law and the absence of prior challenge to the levy before the taxing authorities. (ii) Whether the supply of refreshments by a non-profit members' club to its members at fixed charges constituted a sale attracting sales tax.

Issue (i): Whether a writ petition under Article 226 of the Constitution of India was maintainable despite the existence of appellate and revisional remedies under the sales tax law and the absence of prior challenge to the levy before the taxing authorities.

Analysis: The availability of appeal and revision under the sales tax statute did not by itself bar writ relief where the legality of the levy itself was attacked. The Court treated the extraordinary jurisdiction under Article 226 as broad and discretionary, dependent on the nature of the illegality complained of and the appropriateness of writ relief in the circumstances. The fact that the club had not earlier mounted a formal legal challenge before the department, and had long paid the levy, was not treated as an absolute impediment. The absence of prior notice to Government was also not held fatal in the circumstances.

Conclusion: The writ remedy was held to be maintainable and appropriate in the circumstances, in favour of the assessee.

Issue (ii): Whether the supply of refreshments by a non-profit members' club to its members at fixed charges constituted a sale attracting sales tax.

Analysis: The Court held that a members' club formed for mutual benefit and not for profit is a collection of members with a joint interest in club funds and property. Supplies made through the club from common funds for consumption by members were treated as a distribution of jointly held resources, not a transfer of property by one person to another in the course of trade or business. The statutory definition of sale required both transfer of property and a transaction in the course of trade or business. On those elements, the club's supply of refreshments to members did not amount to a sale. The Explanation treating certain bodies as dealers applied only where they in fact sold goods to members.

Conclusion: The levy of sales tax on the club's supply of refreshments to its members was held illegal, in favour of the assessee.

Final Conclusion: The club succeeded on the substantive question of taxability, and the court granted prospective protection against further levy while declining to disturb past collections.

Ratio Decidendi: A members' club supplying refreshments to its members out of common club funds does not effect a sale, because there is no transfer of property in the course of trade or business; such a levy of sales tax is therefore unsustainable.

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