1964 (11) TMI 86

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....effected at the canteen by the petitioner to these workers, and therefore the petitioner could not be deemed to be engaged in business so far as this canteen is concerned, and it could not also be treated as a dealer for the purpose of the Madras General Sales Tax Act of 1959 (Act 1 of 1959), hereinafter called the Act. Nevertheless, the first respondent assessed the petitioner to sales tax on its sales effected in 1959-60 and collected from it unauthorisedly Rs. 2,229-09 nP. towards sales tax assessment. The appeal to the second respondent against the order of assessment failed. The contention of the petitioner is that the levy is illegal and ultra vires the Constitution. Writ Petition No. 1347 of 1962 is filed to quash the above assessment order by a writ of certiorari. Writ Petition No. 1348 of 1962 is filed for the issue of a writ of mandamus or other appropriate writ directing the return of the sales tax amount unlawfully collected. The claim thus put forward that the levy was illegal and opposed to the provisions of the Constitution was denied by the department in their counter-affidavit. The learned counsel for the petitioner relied upon section 46 of the Factories Act....

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....he activity should be commercial in nature, and that the aspect of a profit motive should be present as an essential requirement in the transaction of a person before he can be assessed as a dealer to sales tax, in respect of them; but these requirements are absent in the present case. He also referred to a series of decisions which have laid down propositions in more or less the same terms as mentioned above. Sri Meenakshi Mills Ltd. v. State of Madras [1954] 5 S.T.C. 291. was a case of a canteen run by a factory under the statutory obligation, and a Bench of this Court held that the word "business" in the definition of "dealer" in the Madras General Sales Tax Act, 1939, was used in a commercial sense an integral part of which was the motive to make profits by sales or purchases, and that if this was wanting, a person merely buying or selling would not be a dealer. Another early decision of this Court in Gannon Dunkerley and Co. v. State of Madras [1954] 5 S.T.C. 216. is also to the same effect. It may be pointed out that the 1939 Act did not contain a definition of the word "business". "Dealer" was defined in that Act but it was less comprehensive than in the 1959 Act, which a....

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...., regardless of any idea for gain or profit and (2) a narrower or restricted meaning which is the commercial, legal or trade meaning of occupation for livelihood or profit such as a commercial or industrial establishment or enterprise. In the narrower sense it applies only to that in which one engages for the purpose of livelihood, profit or the like. In stressing the purpose of livelihood or the profit motive it is essential that livelihood or profit be at least one of the purposes for which the employment is pursued though it is enough if there is a bona fide intention to earn a livelihood or make a profit". and the second and narrower meaning was preferred for application to the U.P. Sales Tax Act of 1948. The above decisions are relied upon by the learned counsel for the petitioner for attacking the assessment in these cases as being opposed to the principles of General Sales Tax Act even after its amendment in 1959. The learned Government Pleader, while not disputing the above interpretation of the law as laid down in the 1959 Act, and in the decisions which interpreted that law, and which have been cited above, however, referred to an amendment of the Madras Act, by Act 15....

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....diction in terms. If "business" for the purpose of the Madras General Sales Tax Act were to be given the narrower meaning mentioned in the Allahabad High Court's decision, which is cited above, namely an activity designed for one's livelihood, i.e., for earning profit, then the provision in the amendment, that a profit motive is unnecessary would imply a self-contradiction in the language of the definition itself. Before dealing with this point more fully, I will refer to the power of the State Legislature to enact sales tax legislation, derived from Entry 54 in List II of the Seventh Schedule of the Constitution, which relates to tax on the sale or purchase of goods other than newspapers. The significance of Entry 54 in List II came up for consideration before the Supreme Court in State of Madras v. Gannon Dunkerley & Co. [1958] 9 S.T.C. 353; [1958] 2 M.L.J. 66. Venkatarama Aiyar, J., who delivered the opinion of the Bench, after an elaborate discussion of the authorities, came to the conclusion that the expression "sale of goods" in the entry must be construed in the sense which it has in the Indian Sales of Goods Act. But the definition of "sale" in the Sale of Goods Act obvious....

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....nue to be a trading activity, even though a profit motive is absent. Such an activity will be one in the nature of trade or commerce. Learned counsel Sri Thyagarajan, appearing for the petitioner, next urged that the element of a contract or a bargain between the purchaser and the seller is an essential condition for a sale even under the Sale of Goods Act, but in a canteen, where the prices of foodstuffs are fixed beforehand, such an element of bargain will be absent. I am unable to agree. One is familiar with hotels where everyday, prices of different kinds of food-stuffs are announced. The customer selects those items which are attractive and which are within the means of his purse. It is open to him to select what he desires to buy and what he could afford to buy. The element of bargain is clearly present in such sales. Solely for the reason that the prices are fixed beforehand, it cannot be concluded that the element of contract between the buyer and the seller is left out. Referring to an identical argument, the Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. v. Sales Tax Officer [1964] 15 S.T.C. 505. observed: "The petitioner-company displays the goods in the ca....

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....lling' includes such business carried on without the motive of making of profit."   Following the view of the Supreme Court in Mazagaon Dock Ltd. v. Commissioner of Income-tax and Excess Profits Tax [1958] 34 I.T.R. 368. and in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1958] 34 I.T.R. 368., it was held that the word "business", which is a word of wide import, should be construed in fiscal statutes in a broad rather than a restricted sense, that all that the word "business" connotes is some real, substantial and systematic or organised course of activity or conduct with a set purpose, and that what the U.P. State Legislature did was that it brought the definition of "business" in conformity with the views of the Supreme Court. Sales at the canteen were, therefore, held to be assessable to sales tax under the new definition, but the sales of the Aligarh University were held to be not assessable. The reason for this was that the University did not charge any price as such for the food-stuffs, but levied an inclusive fee on the residential students, the fee including cost of food, refreshments as well as other services rendered to the students by the ....