1990 (8) TMI 356 - AT - VAT and Sales Tax

Summary

Issues:
1. Challenge to notices of assessment by an unincorporated club regarding sales tax liability.
2. Determination of whether an unincorporated club supplying goods to its members constitutes a dealer under the West Bengal Taxation Tribunal Act, 1987.
3. Interpretation of the Forty-sixth Amendment of the Constitution regarding taxation on supply of goods by unincorporated associations.
4. Analysis of legislative competence in levying taxes on unincorporated clubs post-Constitutional amendment.

Analysis:

1. The application was filed by a club challenging assessment notices for a 5-year period, claiming it is not a dealer under the Bengal Finance (Sales Tax) Act, 1941, as it acts as an agent for its members and does not engage in sales transactions. The club argued that the State Legislature did not provide for taxing such transactions, as they do not constitute sales under the Act.

2. The respondents contended that the club is a dealer, and the sales to its members are taxable. They argued that the Forty-sixth Amendment expanded the scope of taxation to unincorporated clubs, making them liable for sales tax. The main issue was whether the club, by supplying goods to members, qualifies as a dealer under the Act.

3. The Forty-sixth Amendment broadened the definition of "tax on sale or purchase of goods" to include taxation on the supply of goods by unincorporated associations to their members. The Amendment validated the State's authority to tax such transactions, empowering the State Legislature to legislate on the matter.

4. The Tribunal analyzed the legislative competence post-Constitutional amendment and concluded that while the State had the power to tax supply of goods by unincorporated clubs, it failed to enact specific provisions in the Act to make such transactions taxable. The absence of legislative action to deem these transactions as sales led to the decision that the unincorporated club in question was not a dealer and not liable for sales tax.

In conclusion, the Tribunal allowed the application, quashing the assessment notices, as the unincorporated club was not considered a dealer under the Act due to the lack of legislative provisions deeming its transactions with members as sales. The judgment emphasizes the importance of legislative action in defining taxable transactions, even after constitutional amendments expand the scope of taxation.