1964 (11) TMI 86 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Southern Railway Employees' Workshop Canteen can be considered a "dealer" under the Madras General Sales Tax Act, 1959.
2. Whether the sales made by the canteen constitute "business" under the Act.
3. The impact of the amendments introduced by Act 15 of 1964 on the definition of "business."
4. The validity of the sales tax assessment and collection from the petitioner.

Issue-wise Detailed Analysis:

1. Whether the Southern Railway Employees' Workshop Canteen can be considered a "dealer" under the Madras General Sales Tax Act, 1959:
The petitioner argued that the canteen, operated under statutory obligation per section 46 of the Factories Act and Madras Factories Rules, 1950, should not be deemed a dealer. The canteen serves food on a non-profit basis, negating any commercial aspect. The definition of "dealer" in section 2(g) of the Madras General Sales Tax Act, 1959, includes any person engaged in the business of buying and selling. The petitioner contended that the absence of a profit motive should exclude the canteen from this definition.

2. Whether the sales made by the canteen constitute "business" under the Act:
The petitioner emphasized that "business" as defined in section 2(d) of the Act includes trade, commerce, or manufacture, whether or not profit accrues. However, previous judicial interpretations, such as in Sri Meenakshi Mills Ltd. v. State of Madras, suggested that a profit motive is integral to the concept of business. The petitioner referenced several cases to support the view that the absence of a profit motive should exempt the canteen from being considered a business under the Act.

3. The impact of the amendments introduced by Act 15 of 1964 on the definition of "business":
The amendment to section 2(d) of the 1959 Act expanded the definition of "business" to include activities carried out without a profit motive. Section 9 of the Amendment Act validated the levy and collection of sales tax on such activities, regardless of profit motive. The Government Pleader argued that this amendment negated the need to establish a profit motive for assessing sales tax.

4. The validity of the sales tax assessment and collection from the petitioner:
The petitioner challenged the assessment and collection of Rs. 2,229-09 nP. as sales tax for 1959-60, arguing it was illegal and ultra vires the Constitution. The court examined whether the statutory amendments and the broader definition of "business" justified the assessment. The court noted that the power to tax sales under Entry 54 in List II of the Seventh Schedule of the Constitution is not confined to sales with a profit motive. The court also addressed the petitioner's argument about the absence of a contractual bargain in canteen sales, concluding that fixed prices do not eliminate the element of a contract.

Conclusion:
The court held that the amendments in Act 15 of 1964, which included activities without a profit motive within the definition of "business," were valid and within the State Legislature's power. The validating provision in Section 9 of the Amendment Act upheld the sales tax assessment. Consequently, the petitions were dismissed, and the assessment and collection of sales tax from the petitioner were deemed lawful. The court emphasized that the absence of a profit motive does not exclude an activity from being considered a business under the amended Act.