1997 (6) TMI 342 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the society is a dealer under the Bihar Finance Act, 1981.
2. Whether the supply of food, refreshments, and beverages by the society to its members constitutes a sale.
3. Whether the orders passed by the Assistant Commissioner, Commercial Taxes, and the Joint Commissioner, Commercial Taxes, rejecting the petitioners' claim were valid.
4. Whether the ex parte orders of assessment and demand notices issued during the pendency of the writ petition were enforceable.
5. Whether the constitutional amendments and the amendments in the Bihar Finance Act affect the taxability of supplies made by the society.

Issue-wise Detailed Analysis:

1. Whether the society is a dealer under the Bihar Finance Act, 1981:
The society, Ranchi Gymkhana Club, argued that it was not a dealer within the meaning of the Bihar Finance Act, 1981. The court analyzed the definitions of "dealer" and "sale" as amended by the Bihar Finance Act, 1984, which included societies, clubs, and associations supplying goods to their members. The court concluded that the society qualifies as a "dealer" under section 2(e) of the Act.

2. Whether the supply of food, refreshments, and beverages by the society to its members constitutes a sale:
The petitioners contended that the supply of food and beverages to its members did not constitute a sale but was a service. The court referred to the constitutional amendments, particularly clause (29A) of article 366, which included the supply of goods by clubs to their members within the definition of "sale." The court held that the supply of food, refreshments, and beverages by the society to its members constituted a sale within the meaning of section 2(t) of the Act.

3. Whether the orders passed by the Assistant Commissioner, Commercial Taxes, and the Joint Commissioner, Commercial Taxes, rejecting the petitioners' claim were valid:
The court examined the orders dated August 15, 1982, and October 18, 1995, rejecting the petitioners' claim that the supply of food, refreshments, and beverages did not attract the provisions of the Act. The court upheld these orders, stating that the petitioners' contention was not sustainable in light of the constitutional and statutory provisions.

4. Whether the ex parte orders of assessment and demand notices issued during the pendency of the writ petition were enforceable:
During the pendency of the writ petition, the respondent authorities issued ex parte orders of assessment and demand notices for tax periods 1990-91 to 1994-95. The court noted that these orders and notices were challenged by the petitioners through an amendment petition. The court did not delve into the merits of the assessment orders but allowed the petitioners to challenge them through appeals or revisions within six weeks, ensuring they would not be dismissed on the grounds of limitation.

5. Whether the constitutional amendments and the amendments in the Bihar Finance Act affect the taxability of supplies made by the society:
The court discussed the impact of the Forty-sixth Amendment of the Constitution, which introduced clause (29A) in article 366, and the subsequent amendments in the Bihar Finance Act. The court rejected the petitioners' argument that the amendments did not override the law of agency in the case of a members' club. The court held that the amendments brought the supply of food, refreshments, and beverages within the tax net, regardless of the club's status as a members' club.

Conclusion:
The court concluded that Ranchi Gymkhana Club is not a members' club, is not founded on the doctrine of mutuality, and does not operate on the principle of agency. Therefore, it qualifies as a "dealer" under section 2(e) and the supply of food, refreshments, and beverages made by it are covered by the definition of "sale" under section 2(t) of the Act and are taxable. The writ petition was dismissed, but the petitioners were allowed to challenge the assessment orders through appeals or revisions within six weeks.

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