1998 (9) TMI 581 - SC - VAT and Sales Tax

Whether appellants are liable to pay sales tax under the Andhra Pradesh General Sales Tax Act, 1957 on the supplies of food and drink to their members? Held that - No determination by the fact-finding authorities of the relationship between the appellants and their members in the matter of supply by the former to the latter of food and drink and such like; that is to say, was the club acting as the agent of the members or did the property in the food and drink pass from the club to the members. Thus think it appropriate, therefore, that the matters should go back to the assessing authorities who will determine, on facts in regard to each appellant. What was the said relationship and, with that finding in mind, decide, whether or not the appellants are liable to sales tax in this behalf under the provisions of the Andhra Pradesh General Sales Tax Act, 1957.

Summary

Issues:
1. Liability of members' clubs to pay sales tax on supplies of food and drink to their members under the Andhra Pradesh General Sales Tax Act, 1957.

Detailed Analysis:
The Supreme Court heard an appeal by members' clubs against a Division Bench of the High Court of Andhra Pradesh's judgment and orders, which held that the clubs are liable to pay sales tax on supplies of food and drink to their members. The appellants contended that when a members' club provides food or drink to its members, it does not constitute a sale as the club acts as the agent of the member. They relied on previous court judgments to support this argument, emphasizing that a club is essentially identified with its members, and if the club is merely acting as an agent for its members in supplying goods, no sale takes place as there is no transfer of property involved.

The Supreme Court noted that in some cases, the appellants had filed writ petitions against sales tax notices without a determination by the authorities regarding the nature of the relationship between the clubs and their members in the supply of food and beverages. In other cases, where assessments had already been made, there was no inquiry into this relationship either. Therefore, the Court decided to remand the matters back to the assessing authorities to establish the factual relationship between each appellant and their members in terms of supply. The authorities were instructed to determine whether the clubs were acting as agents for the members or if the property in the goods passed from the club to the members. Both the appellants and the sales tax authorities were allowed to raise all contentions, and decisions were to be made independently of the High Court's judgment under appeal.

Ultimately, the Supreme Court allowed the appeals, setting aside the judgment and orders of the High Court, as well as the previous assessment orders and appeal orders. No specific costs were awarded in the matter. The Court emphasized the need for a factual determination of the relationship between members' clubs and their members in the context of supplying food and drink to ascertain the liability for sales tax under the Andhra Pradesh General Sales Tax Act, 1957.