1995 (1) TMI 379 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment under the M.P. General Sales Tax Act and Entry Tax Act for running a mill-canteen.
2. Challenge to the assessment orders on grounds of natural justice violation.
3. Determination of whether the activity in the canteen amounts to sale liable to tax or service to the workers.

Detailed Analysis:
1. The petitioner, running a mill-canteen, was assessed under the M.P. General Sales Tax Act and Entry Tax Act for a specific period. The mill, under the Factories Act, was obligated to provide a canteen for its workers and had contracted the petitioner to manage it. The assessment imposed tax liability based on the assumption of sale of edible articles to the mill workers. The petitioner challenged the assessment orders through various levels of appeal, including revision petitions and appeals before different authorities.

2. The petitioner contended that the assessment orders violated principles of natural justice. The Regional Deputy Commissioner set aside the initial assessment order and remanded the case for fresh assessment. However, subsequent assessments by the Additional Sales Tax Officer upheld the tax liability, leading to appeals and dismissals by higher authorities, including the Board of Revenue. The petitioner sought quashing of the assessment orders based on these grounds.

3. The central issue for consideration was whether the activity in the canteen constituted a sale liable to tax or a service to the mill workers not subject to tax. The petitioner relied on a previous decision to argue that the nature of the activity, not the status of the operator, determined the tax liability. The court analyzed the legal definitions of sale and service, emphasizing that the dominant purpose of the canteen was to provide welfare services under the Factories Act. The court concluded that the activity in the canteen was a service to the workers and not a sale, thereby quashing the assessment orders and prohibiting tax liability on the transactions in question.

In conclusion, the court allowed the petition, quashed the assessment orders, and directed the respondents not to treat the petitioner liable for tax on canteen transactions, determining them to be services to the workers. The judgment highlighted the distinction between sale and service in the context of canteen operations, emphasizing the legal and logical basis for the decision.