1974 (7) TMI 113 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the receipts from the canteen are part of the applicant's business as a dealer.
2. Whether the receipts from the canteen for supply of food to the employees constitute sales within the meaning of section 2(g) of the Orissa Sales Tax Act and should be included in the petitioner's taxable turnover.

Detailed Analysis:

Issue 1: Whether the receipts from the canteen are part of the applicant's business as a dealer.

The petitioner, engaged in mining limestone, runs a canteen under statutory compulsion and an agreement with the trade union. The canteen supplies food and drink to employees on a no-profit basis, incurring losses. The petitioner's business, as per its certificate of registration, is mining limestone, not running a canteen. The taxing authorities included the canteen receipts in the taxable turnover, which was upheld by the Assistant Commissioner of Sales Tax and the Additional Sales Tax Tribunal.

The court examined the definitions of "dealer," "goods," "sale," "sale price," and "turnover of sales" under the Orissa Sales Tax Act. Food and drink are "goods," and their transfer for payment constitutes a "sale." However, these transactions would only be included in the taxable turnover if the petitioner is considered a "dealer."

The petitioner argued that the canteen does not constitute a business due to the lack of profit motive and statutory compulsion. The court referenced Supreme Court decisions, which clarified that "business" involves a course of dealings with a profit motive. However, an activity integrated with the business, even without a profit motive, can be considered a component of the business.

The court concluded that the canteen, though run on a no-profit basis, is integrally connected with the mining business, providing amenities and incentives to workers. Thus, the petitioner carries on business in running the canteen, and the receipts from the canteen are part of the taxable turnover.

Issue 2: Whether the receipts from the canteen for supply of food to the employees constitute sales within the meaning of section 2(g) of the Orissa Sales Tax Act and should be included in the petitioner's taxable turnover.

The petitioner contended that sales in the canteen under statutory compulsion do not constitute "sale" within the meaning of the Sales Tax Act. The court examined relevant Supreme Court decisions, which established that statutory orders regulating supply and distribution do not eliminate the freedom to enter into contracts. The court cited the case of Salar Jung Sugar Mills Ltd. v. State of Mysore, which held that legislative measures fixing prices and regulating supply are within the realm of planning economic needs and do not exclude the concept of "sale."

The court also referenced Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh, which concluded that transactions of supplying food and drink in a statutorily required canteen constitute sales and business for the purposes of the Sales Tax Act. The court found these principles applicable to the present case.

The court disagreed with decisions cited by the petitioner, which held that sales in canteens on a no-profit basis under statutory compulsion do not constitute "sale." The court emphasized that the running of the canteen is an integral part of the mining business, and the transactions of selling food to workers constitute sales.

Conclusion:
1. Running of a canteen separately is not done with a view to earn profit and would not constitute a business if considered separately.
2. The canteen cannot be dissociated from the mining business; it is an integral component of the mining business.
3. Despite statutory compulsion, the transactions of selling food in the canteen constitute sales due to the integrated nature of the business.

The court answered question No. (1) in the negative and question No. (2) in the affirmative, concluding that the receipts from the canteen are part of the taxable turnover. The references were discharged with no order as to costs.

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