1976 (4) TMI 198 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the turnover of sales effected in the canteens run by the petitioners is liable to be included in the taxable turnover for the purposes of levy of sales tax under the Bengal Finance (Sales Tax) Act, 1941.
2. Whether the assessee is a "dealer" within the meaning of the Sales Tax Act concerning sales in the canteens.
3. Whether the sales in the canteens constitute "sales" within the meaning of the Sales Tax Act, considering the statutory obligation under the Factories Act, 1948, and the Delhi Factories Rules, 1950.

Issue-wise Detailed Analysis:

1. Inclusion of Turnover of Sales in Canteens under Sales Tax Act:
The primary contention raised by the petitioners was that the turnover of sales effected in the canteens run by them should not be included in the taxable turnover for the purposes of levy of sales tax under the Bengal Finance (Sales Tax) Act, 1941. The petitioners argued that the canteens were being run to comply with a statutory obligation without any profit motive, and therefore, the sales in the canteens should not be considered part of the taxable turnover.

2. Definition of "Dealer" under the Sales Tax Act:
The court examined whether the assessee could be considered a "dealer" under the Sales Tax Act concerning the sales in the canteens. According to section 2(c) of the Sales Tax Act, a "dealer" is defined as "any person who carries on the business of selling goods in the Union Territory of Delhi." The court considered various judgments which consistently held that "business" for the purposes of sales tax should be understood in a commercial sense, i.e., as an organized activity carried on with a view to earn profit or gain. Rule 68(1) of the Delhi Factories Rules, 1950, specifically provides that food, drinks, and other items served in the canteen shall be sold on a non-profit basis. The court concluded that the assessees, so far as the sales in their respective canteens are concerned, could not be said to be "carrying on the business of selling goods" within the meaning of the definition of the term "dealer" in section 2(c) of the Sales Tax Act. Consequently, they cannot be treated as "dealers" for the sales in the canteens, and the receipts from these sales are not liable to sales tax under the Act.

3. Nature of Sales in Canteens under Statutory Obligation:
The court also addressed whether the sales in the canteens could be considered "sales" within the meaning of the Sales Tax Act, given that the canteens were run to fulfill a statutory obligation under section 46 of the Factories Act, 1948, and rule 68 of the Delhi Factories Rules, 1950. The court referred to several judgments where it was held that although one of the ingredients for a transaction to be a contract of sale is mutual consent between the parties, it would be sufficient if the contract comes into existence by mutual consent, even if any restrictions are placed by law regarding the terms of the contract. The court noted that while the assessees were under a statutory obligation to provide and maintain the canteens, the actual transactions in the canteens involved mutual consent between the assessees and the workers. The court concluded that the transactions in the canteens were indeed "sales" within the meaning of the Sales Tax Act.

Conclusion:
The court held that the assessees could not be considered "dealers" under the Sales Tax Act concerning the sales in the canteens, and therefore, the receipts from these sales were not liable to sales tax. The court allowed the writ petitions and quashed the impugned assessment orders and notices. The references were answered accordingly, and the petitions were allowed with no order as to costs.

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