Statutory canteen sales are not a separate business where the activity is only incidental to manufacturing.

Sales in an employer-run canteen maintained under a statutory welfare obligation and without profit motive were not taxable under the U.P. Sales Tax Act because the charging provision applied only to a dealer carrying on business of buying or selling goods. Although the statutory definition of "business" had been broadened to include trade, commerce and incidental or ancillary transactions, the canteen was not an independent commercial venture. It was only incidental to the assessee's manufacturing activity and existed to discharge a legal obligation for employees. Running the canteen therefore did not amount to a separate business of buying and selling goods, and the turnover fell outside the tax net.

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Issues: (i) Whether sales effected in a canteen run by an employer under a statutory obligation and without profit motive were liable to sales tax under the U.P. Sales Tax Act; (ii) Whether running such a canteen amounted to carrying on the business of buying and selling goods.

Issue (i): Whether sales effected in a canteen run by an employer under a statutory obligation and without profit motive were liable to sales tax under the U.P. Sales Tax Act.

Analysis: The charging provision attracted tax only where the assessee was a dealer carrying on business of buying or selling goods. The statutory scheme had earlier expanded the concept of business by excluding profit motive, and later enlarged it further to include trade, commerce, manufacture, and transactions ancillary or incidental thereto. The canteen here was maintained to discharge the employer's statutory obligation under the factories law and was not itself the assessee's manufacturing business. On the reasoning ultimately accepted from the Supreme Court authorities discussed, canteen sales standing by themselves did not become taxable merely because the canteen served employees under compulsion of law.

Conclusion: The canteen turnover was not liable to sales tax.

Issue (ii): Whether running such a canteen amounted to carrying on the business of buying and selling goods.

Analysis: The word "business" in the relevant U.P. enactment had to be read in the light of the statutory definition and the later amendments. Even though profit motive was no longer essential, the activity still had to fall within business in the relevant statutory sense. The canteen was not the assessee's independent commercial undertaking; it was merely incidental or ancillary to the assessee's manufacturing activity and was maintained for employees under statutory compulsion. Such an activity did not amount to a separate business of buying and selling goods.

Conclusion: Running the canteen did not amount to carrying on the business of buying and selling goods.

Final Conclusion: The reference was answered in favour of the assessee. The revision succeeded, and the canteen sales were held outside the tax net under the Act.

Ratio Decidendi: An activity undertaken only to discharge a statutory welfare obligation, and which is merely incidental or ancillary to the assessee's principal manufacturing business, does not by itself constitute the business of buying and selling goods for sales tax purposes.

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