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Issues: (i) Whether the railway canteen activity amounted to 'business' so as to make the petitioner a 'dealer' liable to sales tax under the Punjab General Sales Tax Act, 1948. (ii) Whether sales tax could be levied on the petitioner's sales in view of article 285(1) of the Constitution of India.
Issue (i): Whether the railway canteen activity amounted to 'business' so as to make the petitioner a 'dealer' liable to sales tax under the Punjab General Sales Tax Act, 1948.
Analysis: The activity of supplying foodstuffs through the canteen was examined in the light of the settled test that business in a taxing statute denotes a course of dealings carried on with a profit motive. The canteen was run on a no profit no loss basis and was treated as an amenity rather than a commercial venture. On that footing, the activity did not satisfy the statutory concept of business necessary to attract dealer liability.
Conclusion: The issue was answered in the affirmative in favour of the assessee and against the department.
Issue (ii): Whether sales tax could be levied on the petitioner's sales in view of article 285(1) of the Constitution of India.
Analysis: The goods were purchased and sold by the railway, and at the time of sale they remained property of the Union. Since article 285(1) exempts the property of the Union from all taxes imposed by a State, the sales tax burden fell on Union property and was therefore constitutionally barred. The levy under the State law could not survive against such sales.
Conclusion: The issue was answered in the affirmative in favour of the assessee and against the department.
Final Conclusion: The references were answered by holding that the railway canteen activity did not attract sales tax liability, and the State levy was constitutionally inapplicable to the Union's sales.
Ratio Decidendi: For liability to sales tax under a taxing statute, the activity must amount to business carried on with a profit motive, and sales of Union property are immune from State taxation under article 285(1) of the Constitution of India.
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