TaxTMI 
TaxTMI 
1973 (1) TMI 90
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....owed the turnover of Rs. 4,329.24, being the value of food supplied by the assessee to its employees, as a deduction. The Deputy Commissioner (C.T.), Visakhapatnam, suo motu seeking to revise the assessment in so far as it relates to the exemption of the turnover amounting to Rs. 4,329.24, representing the value of the food supplied by the assessee to its employees, granted by the assessing authority, issued a notice to show cause why the aforesaid turnover should not be assessed to tax. The assessee submitted its explanation stating that a sum of Rs. 25 per month per head was being deducted from money wages paid to the workers, as per the provisions of G.O. Ms. No. 950 Home (Labour) dated 25th May, 1962, and hence, the supply of food to its employees does not constitute sale within the meaning of the Act. Rejecting the objection raised by the assessee the Deputy Commissioner held that food was supplied to the workers in lieu of money and the same was for any other valuable consideration and, therefore, the supply of food amounts to sale assessable to tax. Aggrieved by the decision of the Deputy Commissioner, the assessee preferred an appeal to the Sales Tax Appellate Tribunal. The....
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....owed the claim of the assessee. Mr. C. Suryanarayana Murthy, the learned counsel referred to the concept of contract in modern times and added that the supply of food by the assessee to its employees is only incidental to the contract of service agreed to by the parties, but does not amount to "sale". For a proper appreciation of the respective contentions advanced on behalf of the parties, it is necessary to advert, at the outset, to the concept of "sale". "Sale" is defined under section 2(n) of the Act as "every transfer of the property in goods by one person to another in the course of trade or business for cash, or for deferred payment, or for any other valuable consideration". It is trite law that the concept of sale under the Act has to be understood as a sale of goods within the meaning of section 4 of the Sale of Goods Act. The essential ingredients or elements of 'sale' are: (i) transfer of property or agreement to transfer property, (ii) by seller to buyer, (iii) pursuant to any bargain or agreement of sale or with mutual consent, and (iv) for the payment or promise of payment of a price or for consideration (See Poppatlal Shah v. State of Madras[1953] 4 S.T.C. 188 (S.C.....
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....lied to him, It has been the custom and practice of the assessee to pay wages partly in kind and partly in cash. Hence, there is no volition or free consent of the parties as the assessee is bound by the G.O. The primary intendment and object of the transaction between the assessee and its servants must be held to be not to sell food but to supply the same under a statutory obligation. Otherwise the employees have to pay much more than Rs. 25 per month for the supply of food made to them by the assessee. The transaction is really in the interests of the employees. The supply of food by the assessee to its employees would also be beneficial to it as it can expect better work and service from its employees. The submission of Mr. Mahadev that the supply of food by the assessee to its servants amounts to "sale " as there was "valuable consideration" within the meaning of section 2(n) of the Act and there was profitmotive, cannot be acceded to. Valuable consideration cannot be equated to the payment of wages in kind. The expression "any other valuable consideration" used in section 2(n) of the Act must mean any monetary payment other then payment in the nature of cash or deferred payme....
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....al or ancillary to, such trade, commerce, manufacture, adventure or concern, also amounts to business. This definition would doubtless support the submission of Mr. Mahadev that the element of profitmotive or gain is not a necessary ingredient for a valid sale to be assessable to sales tax. However, it must be held that this definition of "business" is not applicable to the case on hand. As pointed out earlier, this definition is only prospective and has come into force only on 1st April, 1966. We are now concerned with the assessment for the year 1964-65 which ended with 31st March, 1965, and, hence, we are not governed by the new definition of "business". The definition of "business" which was in force at the relevant time does not support the contention advanced on behalf of the sales tax department. We shall now turn to the decided cases relied upon by the State. In Dunkerley and Co. v. State of Madras[1954] 5 S.T.C. 216; A.I.R. 1954 Mad. 1130., (sic) it was held that sale of foodgrains by the company to its workmen without profit-motive was none the less a sale assessable to sales tax as there was transfer of property in the goods for consideration in the course of business o....
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....ments of "sale" are not present. However, the consumption of goods by a dealer in the course of his manufacturing process or business may be regarded as a "sale" assessable to sales tax. The supply of food by a hotel proprietor to his employees may be pursuant to the service contract or the usual custom prevalent in a particular area. Each case depends upon its own facts and circumstances. When Judged from the commercial or business point of view, the supply of food by a hotel proprietor to his employees must ordinarily, unless the contrary is established, be regarded as part payment of wages in kind which is incidental to the contract of service. We shall now refer to (i) Chandrabhava Boarding and Lodging v. State of Mysore A.I.R. 1968 Mys. 156., (ii) Chittar Mal Narain Das v. Commissioner of Sales Tax[1970] 26 S.T.C. 344 (S.C.)., (iii) Salar Jung Sugar Mills Ltd. v. State of Mysore[1972] 29 S.T.C. 246 (S.C.). and (iv) State of Himachal Pradesh v. Associated Hotels of India Ltd.[1972] 29 S.T.C. 474 (S.C.). cited by Mr. Balakoteswara Rao. Chandrabhava Boarding and Lodging v. State of Mysore(2) is a case arising under the Minimum Wages Act, 1948, wherein a Division Bench of the Mys....
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....ase of sugarcane, which was declared to be an essential commodity, did not absolutely impinge on the freedom to enter into contract, and delimiting areas for transactions or parties or denoting prices for transactions were all within the area of individual freedom of contract with limited choice. Therein, the grower could bargain for a higher price and could also ask for payment in advance. Payment might be made in cash or in kind. There was scope for rejection of goods as the sugarcane supplied by the grower would be accepted only after inspection. On a consideration of the entire facts, it was ruled that there was offer, inspection and appropriation of goods to the contract and the mutual assent was not only implicit but also explicit and the transactions constituted "sales" within the meaning of section 2(t) of the Mysore Sales Tax Act, 1957, exigible to tax. We shall now turn to the decision in State of Himachal Pradesh v. Associated Hotels of India Ltd.[1972] 29 S.T.C. 474 (S.C.)., which appears to be the nearest case on the point. Therein, the Associated Hotels of India Limited received guests in its several hotels. They provided lodging, public and private rooms, bath with ....
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....of sale and purchase of materials to be used in the course of executing the work or performing the service. But, then in such cases the transaction would not be one and indivisible, but would fall into two separate agreements, one of work or service and the other of sale." While considering the facts in that case, the learned Judge proceeded to observe thus: "The transaction in question is essentially one and indivisible, namely, one of receiving a customer in the hotel to stay. Even if the transaction is to be disintegrated there is no question of the supply of meals during such stay constituting a separate contract of sale, since no intention on the part of the parties to sell and purchase food-stuffs supplied during meal-times can be realistically spelt out. No doubt, the customer, during his stay, consumes a number of food-stuffs. It may be possible to say that the property in those food-stuffs passes from the hotelier to the customer at least to the extent of the food-stuffs consumed by him. Even if that be so, mere transfer of property, as aforesaid, is not conclusive and does not render the event of such supply and consumption a sale, since there is no intention to sell and....