Hostel catering incidental to academic function does not amount to business for sales tax liability

An educational institution's statutory hostel catering was treated as incidental to its dominant academic function, not as a commercial activity of buying and selling foodstuffs. Because the meals were supplied to students, research scholars and related visitors on fixed charges and there was no indication of trading in food, the Court held that the Institute was not a dealer under the U.P. Sales Tax Act. The Sales Tax Officer therefore had no jurisdiction to assess sales tax on the hostel food supply, and the assessment order, notices and consequential directions were set aside.

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Issues: Whether the petitioner-Institute was a dealer carrying on the business of buying and selling goods so as to be liable to sales tax under the U.P. Sales Tax Act, and whether the Sales Tax Officer had jurisdiction to assess it on the supply of foodstuffs in the visitors' hostel.

Analysis: The Institute was a residential educational institution created under the Institutes of Technology Act, 1961, with statutory duties to maintain hostels and do all things necessary, incidental or conducive to its objects. The supply of food to students, research scholars, research fellows and, incidentally, to visitors connected with the Institute's academic activities was held to be an integral part of that statutory educational function. The charges were fixed fees for meals and were not shown to have any relation to commercial trading in foodstuffs. Applying the distinction between a principal activity carried on commercially and an activity that is merely minor, subsidiary and incidental to a predominant academic function, the Court held that the hostel catering arrangement did not amount to business.

Conclusion: The petitioner was not a dealer within section 2(c) of the U.P. Sales Tax Act, and the Sales Tax Officer lacked jurisdiction to initiate sales tax proceedings against it.

Final Conclusion: The assessment order, notices and consequential direction were set aside, and the writ petition was allowed with costs.

Ratio Decidendi: Where the dominant function of an educational institution is academic and hostel catering is merely incidental to that function, the supply of meals on fixed charges does not amount to business or commercial trading for the purpose of sales tax liability.

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