Co-operative canteen supplies to members are not taxable sales where the society acts only as agent for members.

A co-operative canteen confined to employees of the Accountant General's office was held not to be a dealer under the Tamil Nadu General Sales Tax Act, 1959, because its activities were restricted to members, there was no material of sales to outsiders, and its business references were incidental to the object of supplying refreshments. Supply of refreshments to members was also held not to involve a sale, since the members were treated as owners of the foodstuff and the society acted only as their agent. The assessee's claim for exemption therefore succeeded and the assessments could not be sustained.

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Issues: (i) Whether the co-operative canteen was a dealer liable to assessment under the Tamil Nadu General Sales Tax Act, 1959. (ii) Whether supply of refreshments to members by the co-operative canteen involved a sale.

Issue (i): Whether the co-operative canteen was a dealer liable to assessment under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The membership was confined to employees of the Accountant General's office, the activity under the bye-laws was limited to members, and there was no material to show sale to outsiders. The bye-laws indicated that the society was constituted to make refreshments available to members and that references to business and profit were only incidental to the main object and the treatment of surplus. The society was also subsidised by Government. On that footing, the earlier view taken in the same appellant's case was followed.

Conclusion: The appellant was not established to be a dealer.

Issue (ii): Whether supply of refreshments to members by the co-operative canteen involved a sale.

Analysis: The supply was confined to members who were themselves treated as the owners of the food stuff even during preparation. In such a situation, the society functioned only as an agent of the members and the transaction lacked the element of sale necessary for taxability.

Conclusion: No sale was involved in the supply of refreshments to members.

Final Conclusion: The assessee's claim for exemption succeeded and the assessments could not be sustained.

Ratio Decidendi: A co-operative society supplying refreshments only to its own members, without dealing with outsiders and functioning merely as an agent in the common arrangement, is not a dealer and such internal supply does not amount to a taxable sale.

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