1974 (6) TMI 52 - HC - VAT and Sales Tax

Club's Catering Services Deemed Privileges, Not Commercial Dealings

Sports Club of Gujarat Ltd. Versus Commissioner of Sales Tax, Gujarat, Ahmedabad

The High Court held that the club's catering activities, including regular services and special dinner parties, were privileges for members and did not ... - Issues Involved:1. Whether the club is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, in respect of its catering activities.2. The distinction between regular catering services and special dinner parties.3. The application of the settled legal position regarding members' clubs and their activities.4. The impact of the club's registration as a dealer on its status under the Act.Detailed Analysis:1. Whether the club is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, in respect of its catering activities:The Tribunal had to determine if the club's catering activities made it a 'dealer' under section 2(11) of the Act. The definition of a dealer includes any person or entity that carries on the business of buying or selling goods, including clubs that sell goods to their members. The Tribunal found that the club's catering services to its members and their limited guests were incidental to its main objective of promoting sports and did not constitute a business activity. Therefore, the club was not considered a dealer for these activities.2. The distinction between regular catering services and special dinner parties:The Tribunal distinguished between regular catering services and special dinner parties. While regular catering to members and their limited guests was deemed incidental to the club's main objective, special dinner parties were seen differently. The Tribunal noted that these parties, booked by individual members for their invitees, bore characteristics of a business, such as a profit motive. Therefore, the Tribunal initially held that the club acted as a dealer for these special dinner parties. However, upon review, it was found that even special dinner parties were a privilege extended to members and not open to outsiders, thus retaining the club's non-commercial character.3. The application of the settled legal position regarding members' clubs and their activities:The judgment extensively discussed the settled legal position regarding members' clubs, citing several cases. It emphasized that members' clubs do not assume a commercial character merely by incorporating as a company or by providing services to their members. The club's activities, including catering, were for the members' benefit and did not involve any commercial transactions with outsiders. The court referenced the Eccentric Club case and other relevant judgments, reinforcing that the club's activities were self-serving and non-commercial.4. The impact of the club's registration as a dealer on its status under the Act:The club had registered itself as a dealer under the Act, which was argued by the learned Government Pleader to imply its status as a dealer. However, the court held that such registration did not estop the club from contesting its status under the Act. The court cited the principle that there can be no estoppel against a statute and that the club's mistaken registration did not alter the legal interpretation of its activities.Conclusion:The High Court concluded that the club did not assume a commercial character through its catering activities, whether regular or special dinner parties, as these were privileges extended solely to its members. Therefore, the club was not a dealer under section 2(11) of the Bombay Sales Tax Act, 1959. The reference was answered in the negative, and the respondent-State was ordered to pay the costs of the petitioner-club.