Statutory factory canteen sales treated as welfare service, not business sales, under the dominant object test.

Canteen sales in a factory maintained under section 46 of the Factories Act, 1948 and the relevant State Rules were treated as a statutory welfare facility rather than a commercial venture. The framework regulated staffing, hygiene, pricing and management, and required charges on a non-profit basis with committee approval, showing that the dominant object was service to workers. Applying the dominant object test, the activity was characterised as performance of a legal welfare obligation, not sale of food as a business activity. On that basis, the document states that the canteen sales were not exigible to tax.

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Issues: Whether canteen sales in a factory can be treated as taxable business sales when the canteen is maintained under the Factories Act and the relevant Rules for the welfare of workers.

Analysis: The canteen was required to be maintained under section 46 of the Factories Act, 1948, and the State Rules regulated its structure, staffing, hygiene, pricing, and management. The statutory framework showed that the canteen was a welfare facility for workers, not a commercial venture. The prices were to be charged on a non-profit basis and subject to committee approval, which supported the conclusion that the real character of the activity was service to employees. Applying the dominant object test, the substance of the transaction was not sale of food as a business activity but performance of a welfare obligation imposed by law.

Conclusion: Canteen sales were not exigible to tax and the question was answered in the affirmative in favour of the assessee.

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