Deemed sale under association-to-member supply survives the Forty-sixth Amendment and supports taxability of pooled procurement.

After the Forty-sixth Constitutional Amendment, the Tamil Nadu amendment deeming supply of goods by an unincorporated association to its members as a taxable sale was treated as valid and within legislative competence. A society registered under the Societies Registration Act was held to fall within that statutory category for the post-amendment scheme. On the facts, the association's pooled procurement, import, apportionment and pricing of wattle extract to members under the consolidated service scheme satisfied the elements of sale, and the earlier mutuality or agency theory did not defeat taxability. The supply was therefore regarded as a deemed sale liable to sales tax.

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Issues: (i) Whether section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959, as amended pursuant to the Forty-sixth Constitutional Amendment, was valid and within legislative competence; (ii) Whether the supply and distribution of wattle extract by the association to its members under the pooled consolidated service scheme amounted to sale liable to tax.

Issue (i): Whether section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959, as amended pursuant to the Forty-sixth Constitutional Amendment, was valid and within legislative competence.

Analysis: The constitutional amendment expanded the meaning of tax on sale or purchase of goods by including supply of goods by an unincorporated association or body of persons to its members for consideration. The State amendment to section 2(n) reproduced that enlarged field and was treated as a valid deeming provision. The earlier distinction drawn in pre-amendment cases was held no longer decisive for the post-amendment statutory scheme. The Court also held that a society registered under the Societies Registration Act is not to be treated as an incorporated association in the strict legal sense, and therefore falls within the statutory category covered by the amended provision.

Conclusion: Section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959 was upheld as valid, and the challenge to its constitutional validity failed.

Issue (ii): Whether the supply and distribution of wattle extract by the association to its members under the pooled consolidated service scheme amounted to sale liable to tax.

Analysis: The scheme showed that the association pooled members' requirements, negotiated and imported the goods in its own name, apportioned the goods, fixed the price by adding charges described as service charges, and retained control through its executive committee. The members were not all on an equal footing, and the association was not functioning merely as a mutual agent or a true members' club in the sense required by the earlier mutuality cases. On the facts, the transactions possessed the essential elements of sale, namely competent parties, assent, transfer of property, and price, and were not governed by the pre-amendment agency theory relied on by the petitioners.

Conclusion: The supply of wattle extract by the association to its members was held to be a sale and liable to tax.

Final Conclusion: The petitions failed, the statutory challenge was rejected, and the association's supply of goods to its members was held taxable under the amended sales tax framework.

Ratio Decidendi: After the Forty-sixth Constitutional Amendment and the corresponding State amendment, supply of goods by an association to its members for consideration is taxable as a deemed sale where the statutory conditions are satisfied, and the pre-amendment mutuality or agency reasoning does not prevail against the amended deeming provision.

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