1974 (2) TMI 72 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner, the Indian Institute of Technology, Kanpur, is a "dealer" under the U.P. Sales Tax Act.
2. Whether the supply of foodstuffs by the petitioner to residents of the visitors' hostel constitutes a "sale" under the U.P. Sales Tax Act.
3. Jurisdiction of the Sales Tax Officer to initiate proceedings for levy of sales tax on the petitioner.

Issue-wise Detailed Analysis:

1. Whether the petitioner, the Indian Institute of Technology, Kanpur, is a "dealer" under the U.P. Sales Tax Act:

The petitioner argued that it is not a "dealer" within the meaning of the U.P. Sales Tax Act as its primary function is educational, not commercial. The court referred to the powers and duties of the petitioner under section 6 of the Institutes of Technology Act, 1961, which include providing instruction and research, establishing and maintaining hostels, and doing all things necessary for the attainment of its objectives. The court found that the petitioner's activities, including maintaining the visitors' hostel and supplying foodstuffs, are integral to its educational purpose and not commercial in nature. The court relied on precedents such as University of Delhi v. Ram Nath and Swadeshi Cotton Mills Co. Ltd. v. Sales Tax Officer, which distinguished between institutions engaged in business and those whose commercial activities are incidental to their primary educational or charitable purposes. The court concluded that the petitioner's principal activity is academic, not commercial, and thus it is not a "dealer" under the U.P. Sales Tax Act.

2. Whether the supply of foodstuffs by the petitioner to residents of the visitors' hostel constitutes a "sale" under the U.P. Sales Tax Act:

The petitioner contended that the fee charged for foodstuffs in the visitors' hostel is a fixed fee unrelated to the actual consumption, and thus does not constitute a "sale." The respondents argued that the petitioner charges separately for foodstuffs supplied, citing instances where bills were issued to various entities. The court examined these instances and found that they were related to the petitioner's academic activities. The court noted that the supply of foodstuffs to hostel residents, including students, research scholars, and visitors connected with the Institute's activities, is an integral part of the petitioner's educational function. The court held that the supply of foodstuffs in this context does not amount to "carrying on the business of buying or selling goods" and thus does not constitute a "sale" under the U.P. Sales Tax Act.

3. Jurisdiction of the Sales Tax Officer to initiate proceedings for levy of sales tax on the petitioner:

The court found that since the petitioner is not a "dealer" and the supply of foodstuffs does not constitute a "sale," the Sales Tax Officer had no jurisdiction to initiate proceedings for the levy of sales tax on the petitioner. The court quashed the assessment order for the year 1968-69, the notices dated 3rd February, 1973, and the letter dated 14th March, 1973, and prohibited the Sales Tax Officer from continuing the assessment proceedings.

Conclusion:

The court held that the petitioner is not a "dealer" under the U.P. Sales Tax Act, and the supply of foodstuffs by the petitioner to residents of the visitors' hostel does not constitute a "sale." Consequently, the Sales Tax Officer had no jurisdiction to initiate proceedings for the levy of sales tax on the petitioner. The writ petition was allowed, and the assessment order, notices, and letter were quashed. The petitioner was entitled to its costs.