1957 (4) TMI 47 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the petitioner club is a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947.
2. Whether the transactions between the club and its members constitute a "sale" under the Act.
3. Whether the levy of sales tax on the supply of goods by the club to its members is intra vires the Constitution.
4. Whether the club's supply of goods to its members for a price amounts to "business" under the Act.
5. Whether the notice served to the club for registration and submission of accounts is justified.

Issue-wise Detailed Analysis:

1. Whether the petitioner club is a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947:
The petitioner club contends that it is not a "dealer" as it only supplies goods to its members, which does not constitute a "sale". The respondents argue that the club supplies goods on a commercial basis and should be considered a "dealer". The court examined the definition of "dealer" in the Act, which includes a club supplying goods to its members. The court concluded that the Legislature intended to encompass various types of clubs under the term "dealer" if they engage in the business of selling or supplying goods to members.

2. Whether the transactions between the club and its members constitute a "sale" under the Act:
The petitioner argued that the supply of goods to its members is not a "sale" as defined in the Act. The court noted that the definition of "sale" in the Central Provinces and Berar Sales Tax Act differs from that in the Madras Sales Tax Act. The court highlighted that the word "supply" is not defined in the Act and must be interpreted in context. The court referred to various cases and concluded that the supply of goods to members in a non-proprietary club does not constitute a "sale" if the transaction is bona fide and not for profit.

3. Whether the levy of sales tax on the supply of goods by the club to its members is intra vires the Constitution:
The petitioner contended that the levy of sales tax on the supply of goods to its members is ultra vires the Constitution. The court examined the definitions of "sale" and "dealer" and concluded that the word "supply" should be interpreted in a limited and qualified sense. The court agreed with the view that the supply of goods by the club to its members does not amount to a "sale" and, therefore, the levy of sales tax on such transactions is not justified.

4. Whether the club's supply of goods to its members for a price amounts to "business" under the Act:
The court analyzed the meaning of "business" and concluded that if the club's operations involve genuine commercial contracts extending over a long period, it would be considered as carrying on a business. However, the court noted that the supply of goods to members in a non-proprietary club, even if there is an excess charge to build up a fund, does not constitute a business transaction. The court emphasized that the club must prove that it is not carrying on a business of selling or supplying goods to non-members.

5. Whether the notice served to the club for registration and submission of accounts is justified:
The petitioner challenged the notice served under sections 8, 10, and 15 of the Act. The court held that the club is bound to produce its accounts, registers, and documents for inspection to determine whether it should be registered as a dealer. The court quashed the notice asking the club to register as a dealer without inspecting the accounts and account books. The court advised the club to produce its books of account before the Commissioner for a proper determination.

Conclusion:
The petition was partly allowed. The court quashed the notice asking the club to register as a dealer but dismissed the petition regarding the production of accounts for inspection. No order as to costs was made.

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