1964 (3) TMI 74 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of mills to pay sales tax for food sold in canteens.
2. Liability of Aligarh Muslim University to pay sales tax for fees charged for dining-halls.
3. Jurisdiction of the High Court under Article 226 in tax matters.
4. Definition and scope of "business" under the U.P. Sales Tax Act.
5. Retrospective application of the U.P. Taxation Laws Amendment Act, 1963.
6. Concept of "sale" under the Sale of Goods Act.

Issue-wise Detailed Analysis:

1. Liability of Mills to Pay Sales Tax for Food Sold in Canteens:
The court held that the sale of food in the canteens maintained by the mills is liable to tax under the U.P. Sales Tax Act, 1948. The mills are considered "dealers" as defined in section 2(c) of the Act, which includes any person or association of persons carrying on the business of buying or selling goods. Despite the mills running the canteens on a non-profit basis, clause (aa) of section 2 clarifies that the business of buying or selling includes such business carried on without the motive of making a profit. Therefore, the mills are liable to pay sales tax for the sale of food in the canteens.

2. Liability of Aligarh Muslim University to Pay Sales Tax for Fees Charged for Dining-Halls:
The court found that the Aligarh Muslim University is not engaged in any commercial activity and is predominantly an educational institution. The supply of food to students in dining-halls is incidental to the general academic activity of the University. The University does not carry on the business of buying or selling goods and is not a "dealer" as defined in section 2(c) of the Act. Consequently, the University is not liable to pay sales tax on the fee charged from students for covering the expenditure over dining-halls.

3. Jurisdiction of the High Court under Article 226 in Tax Matters:
The court addressed the preliminary objection raised by the respondent that the U.P. Sales Tax Act provides a complete machinery for obtaining relief in respect of any improper orders passed by the Sales Tax Authorities. The court referred to the Supreme Court decisions in C.A. Abraham v. Income-tax Officer and Bhopal Sugar Industry Limited v. D.P. Dube, which held that an aggrieved person cannot abandon resort to statutory machinery and invoke the jurisdiction of the High Court under Article 226 when an adequate remedy is available. However, since the petitions were entertained and leave was granted, the court decided to address the merits of the petitions.

4. Definition and Scope of "Business" under the U.P. Sales Tax Act:
The court discussed the definition of "business" in the context of the U.P. Sales Tax Act. The term "business" usually connotes some commercial activity. The U.P. Taxation Laws Amendment Act, 1963, introduced a new clause (aa) in section 2, stating that the business of buying or selling includes such business carried on without the motive of making a profit. This amendment fundamentally changed the concept of "carrying on business" in the context of the Act, excluding the profit motive from the essential ingredients of carrying on business of buying or selling.

5. Retrospective Application of the U.P. Taxation Laws Amendment Act, 1963:
The petitioner contended that the retrospective application of the U.P. Taxation Laws Amendment Act, 1963, violated its fundamental rights under Article 19 of the Constitution. However, the court noted that the petitioner, being a company, is not a "citizen" and cannot claim the protection of Article 19. Additionally, Article 358 suspends the provisions of Article 19 during a proclamation of emergency, which was in operation since October 1962. Therefore, the petitioner could not challenge the validity of the Amendment Act on these grounds.

6. Concept of "Sale" under the Sale of Goods Act:
The court examined whether the transactions in the canteens and dining-halls constituted "sales" under the Sale of Goods Act. The court held that the transactions in the canteens of the mills were "sales" as there was mutual assent between the vendor and the purchaser. The petitioner-company displayed goods in the canteen, inviting offers from the workmen, who voluntarily made offers by purchasing the goods. In contrast, the fee charged by the University from students was not considered a price for the food-stuffs consumed but a fee for the service provided, which does not constitute a "sale" under the Sale of Goods Act.

Conclusion:
- The mills are liable to pay sales tax for the food sold in their canteens.
- The Aligarh Muslim University is not liable to pay sales tax for the fees charged for dining-halls.
- The High Court has jurisdiction to entertain the petitions under Article 226 despite the availability of alternative remedies.
- The definition of "business" under the U.P. Sales Tax Act includes activities carried on without a profit motive.
- The retrospective application of the U.P. Taxation Laws Amendment Act, 1963, is valid and does not violate the petitioner's fundamental rights.
- The transactions in the mills' canteens are "sales" under the Sale of Goods Act, while the fee charged by the University is not.

Judgments:
- Civil Miscellaneous Writs Nos. 2572 of 1963 and 1447 of 1963 are dismissed with costs.
- Civil Miscellaneous Writ No. 1291 of 1963 is allowed with costs. The order dated 13th March, 1963, is quashed, and the respondents are prohibited from pursuing the assessment proceedings initiated under the notice dated 20th February, 1963.

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