1968 (5) TMI 49 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the supply of goods by the petitioner-society to its members constitutes a sale under the Orissa Sales Tax Act, 1947.
2. Whether the petitioner-society qualifies as a "dealer" under section 2(c) of the Act.
3. Whether section 2(c) of the Act, including societies, clubs, or associations within the definition of "dealer," is ultra vires of the Legislature.
4. Whether the sales or supplies by the petitioner-society to its members are in the course of business.

Issue-wise Detailed Analysis:

1. Whether the supply of goods by the petitioner-society to its members constitutes a sale under the Orissa Sales Tax Act, 1947:

The petitioner contended that the supply of goods to its members does not constitute a sale as defined under the Orissa Sales Tax Act, 1947, as there is no transfer of absolute or general ownership in the property from one to another for consideration in cash. It was argued that the society and its members are not independent legal persons, and the property is jointly owned by all members. However, the court held that the petitioner-society is a distinct legal entity by being a body corporate with an independent existence, capable of transferring property. The court concluded that the supply of goods by the society to its members for a price constitutes a sale as defined in the Act.

2. Whether the petitioner-society qualifies as a "dealer" under section 2(c) of the Act:

The petitioner argued that it is not a "dealer" as defined in section 2(c) of the Act, as its activities are not in the course of business. The court examined the definition of "dealer" which includes any person who carries on the business of purchasing or selling or supplying goods, and specifically includes societies, clubs, or associations supplying goods to their members. The court found that the petitioner-society, by supplying goods to its members for a price, falls within the definition of "dealer" under the Act.

3. Whether section 2(c) of the Act, including societies, clubs, or associations within the definition of "dealer," is ultra vires of the Legislature:

The petitioner argued that section 2(c) of the Act, as it includes societies, clubs, or associations within the definition of "dealer," is ultra vires of the Legislature. The court referred to the Supreme Court's decision in Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd., which held that the State Legislature has the power to define "dealer" and include certain bodies within its meaning. The court concluded that the inclusion of societies, clubs, or associations within the definition of "dealer" is within the legislative competence of the State Legislature and is not ultra vires.

4. Whether the sales or supplies by the petitioner-society to its members are in the course of business:

The petitioner contended that the sales or supplies to its members are not in the course of business, as there is no profit-motive. The court referred to the Supreme Court's observation that a scheme for supplying goods to members by a society for a price may partake of the nature of trade, even if not actuated by a profit-motive. The court held that the existence of a profit-motive is not essential for the creation of a taxable entity and that the petitioner-society's activities of supplying goods to its members for a price are in the course of business, making it liable to sales tax.

Conclusion:

The court dismissed the petition, holding that the supply of goods by the petitioner-society to its members constitutes a sale under the Orissa Sales Tax Act, 1947, the petitioner-society qualifies as a "dealer" under section 2(c) of the Act, the inclusion of societies, clubs, or associations within the definition of "dealer" is not ultra vires of the Legislature, and the sales or supplies by the petitioner-society to its members are in the course of business. The petitioner-society is thus liable to be assessed to sales tax.

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