1994 (12) TMI 300 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the supply of food, refreshments, and drinks by the applicant-club to its members amounts to a "sale" u/s 2(g) of the Bengal Finance (Sales Tax) Act, 1941, and u/s 2(1d) of the West Bengal Sales Tax Act, 1954.
2. The applicability of the 46th Amendment of the Constitution to the applicant-club.
3. The principle of mutuality and agency in the context of the applicant-club's transactions with its members.

Summary:

1. Supply of Food and Drinks as "Sale":
The Tribunal examined whether the supply of food, refreshments, and drinks by the applicant-club to its members constitutes a "sale" u/s 2(g) of the Bengal Finance (Sales Tax) Act, 1941, and u/s 2(1d) of the West Bengal Sales Tax Act, 1954. The applicant argued that it acts as an agent of its members, and thus no sale is involved. However, the Tribunal concluded that transactions with temporary members do constitute a sale, making the applicant liable for sales tax on these transactions.

2. Applicability of the 46th Amendment:
The Tribunal analyzed the impact of the 46th Amendment of the Constitution, which expanded the definition of "sale" to include the supply of goods by an unincorporated association or body of persons to its members. The Tribunal noted that sub-clause (e) of Article 366(29A) does not apply to an incorporated club like the applicant. However, sub-clause (f) allows for the imposition of sales tax on the supply of food, drink, etc., for cash, deferred payment, or other valuable consideration, provided there is no identity between the supplier and the receiver.

3. Principle of Mutuality and Agency:
The Tribunal considered whether the principle of mutuality and agency applies to the applicant-club's transactions with its members. It concluded that there is identity between the club and its permanent members, and thus the principle of mutuality applies, exempting these transactions from sales tax. However, the same principle does not apply to transactions with temporary members, as there is no reciprocity or mutuality, making these transactions taxable.

Conclusion:
The Tribunal declared that the applicant-club is a "dealer" and liable to pay tax under the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1954, for transactions with temporary members. However, it is not liable for similar transactions with permanent members. All past and future assessments must follow this judgment, and any excess payments made by the applicant should be refunded. The operation of the judgment is stayed for eight weeks.