1956 (10) TMI 29 - HC - VAT and Sales Tax

Summary

Issues: Challenge to the legality of the levy of sales tax on transactions in the canteen run by the mills.

Analysis:
The writ petition challenged the levy of sales tax on transactions in the canteen run by the mills. The Sales Tax Officer assessed the petitioner to sales tax for various quarters, which was contested by the assessee. The Deputy Commissioner initially upheld the assessee's contention that the sales in the canteen did not represent business done by the mills. However, the Commissioner of Sales Tax later revised the decision and restored the assessment, leading to the challenge of this decision as being outside the scope of the Sales Tax Act.

The main ground of contention was whether sales tax could be levied on transactions not conducted in the course of business or trade. The petitioner argued that only activities carried out for commercial purposes with a profit motive are subject to sales tax. The Court referred to precedents from the Madras High Court, emphasizing that the Act seeks to levy sales tax only on transactions conducted in the course of business. The Court noted instances where sales made for ameliorative purposes without profit motives were not considered taxable under the Sales Tax Act.

In this case, the mills were obligated to run a canteen on a "no profit, no loss" basis due to statutory requirements under the Factories Act. The Court cited a similar case where the Madras High Court ruled that sales in canteens run for the benefit of employees, in compliance with statutory obligations, were not subject to sales tax. The Court agreed with this view and deemed it appropriate to issue a writ of certiorari quashing the orders of assessment passed by the Commissioner of Sales Tax in Mysore. The Court also directed the respondent to pay the petitioner's costs and advocate's fee.

In conclusion, the Court held in favor of the petitioner, allowing the writ petition and quashing the assessment orders by the Commissioner of Sales Tax.