1971 (2) TMI 96 - HC - VAT and Sales Tax

Summary

Issues:
1. Sales tax liability of a cooperative society running a restaurant for its members.
2. Exemption claim by the cooperative society under the Madras General Sales Tax Act.
3. Dispute regarding the nature of transactions between the society and its members.
4. Jurisdiction of the department to assess the cooperative society.

Detailed Analysis:
1. The primary issue in this case is the sales tax liability of a cooperative society that operates a restaurant for its members. The society, comprised of practicing advocates in Madras, initially paid sales tax on refreshments supplied to members until September 1962. However, it later claimed exemption from sales tax based on non-liability under the Madras General Sales Tax Act and entitlement to exemption. The Joint Commercial Tax Officer issued a notice proposing a final assessment for the society for the year 1962-63, leading the society to seek a writ of mandamus.

2. The cooperative society argued for exemption from sales tax, contending that the transactions with its members should not be considered sales liable to tax. The respondent disputed this claim, arguing that the society did not have complete title to its property, and transactions with members should be treated as sales subject to tax. The court referenced previous Supreme Court judgments, including Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd. and Joint Commercial Tax Officer v. Young Men's Indian Association, which discussed the criteria for determining whether transactions between a society and its members constitute sales for tax purposes.

3. The court noted the complexity of the legal issue surrounding the nature of transactions between the society and its members. It highlighted the requirement for the society to prove that it was acting as an agent of its members in providing facilities, as stated in the Enfield case. The court acknowledged the lack of conclusive evidence in the case, emphasizing the need for factual scrutiny to determine the applicability of relevant legal principles. Due to insufficient material and absence of final assessments, the court found it challenging to ascertain which legal principles should govern the assessment of the cooperative society.

4. In the absence of clear facts and material to apply the law correctly, the court declined to issue a writ of mandamus against the department's assessment proposal. The court emphasized the necessity for the cooperative society to provide all relevant material to substantiate its exemption claim, allowing the department to review the evidence and proceed lawfully. Ultimately, the court dismissed the writ petition but granted the petitioner the opportunity to present additional material to support its contention for exemption, enabling a fair assessment by the department.