Sales tax treatment of canteens and dining halls turns on whether the activity is business or merely incidental service.

A factory canteen maintained under a statutory obligation and run without profit may still fall within the expanded concept of business for sales tax purposes, because the absence of profit does not prevent the canteen transactions from being treated as sales; the employer was therefore treated as a dealer and the canteen sales were taxable. By contrast, a university dining-hall serving resident students on a fee basis was held to be incidental to the institution's educational function, with the charges treated as a fee rather than a true sale price, so the university was not a dealer and the dining-hall charges were not liable to sales tax.

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Issues: (i) whether a factory canteen run under a statutory obligation and on a no-profit basis amounts to carrying on the business of buying or selling goods so as to render the employer a dealer liable to sales tax; (ii) whether a university dining-hall serving resident students on a fee basis amounts to a sale in the course of business and makes the university a dealer liable to sales tax.

Issue (i): whether a factory canteen run under a statutory obligation and on a no-profit basis amounts to carrying on the business of buying or selling goods so as to render the employer a dealer liable to sales tax.

Analysis: The statutory definition of dealer turned on carrying on the business of buying or selling goods, and the amendment inserting clause (aa) expanded that concept by providing that such business includes activity carried on without the motive of making profit. A canteen maintained in compliance with factory law remained part of the employer's organized commercial activity, and the absence of profit in the canteen itself did not alter the character of the transactions as sales.

Conclusion: The employer was a dealer, and the canteen sales were liable to sales tax.

Issue (ii): whether a university dining-hall serving resident students on a fee basis amounts to a sale in the course of business and makes the university a dealer liable to sales tax.

Analysis: The dining-hall charges were not a true price for food but a fee or distributive levy designed to meet the cost of providing a residential academic service. The dining-hall activity was incidental to the University's educational function and did not convert the University into a person carrying on the business of buying or selling goods. Since the essential elements of a taxable sale and of business were absent, the levy could not be treated as turnover exigible to sales tax.

Conclusion: The University was not a dealer, and the dining-hall charges were not liable to sales tax.

Final Conclusion: The writ petitions relating to the factory canteen were rejected, while the petition relating to the University dining-hall succeeded and the impugned assessment and further proceedings against the University were set aside.

Ratio Decidendi: For sales tax purposes, a statutory or welfare-related canteen may still constitute business and sales when the activity is an organized part of the dealer's commercial operations, but an educational institution's residential dining service does not become business where the charge is only a fee ancillary to the institution's main educational function.

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