2001 (12) TMI 844 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of the law declared in Joint Commercial Tax Officer v. Young Men's Indian Association.
3. Impact of the Constitution (46th Amendment Act), 1982 on the definition of "sale."
4. Status of the petitioner as an incorporated or unincorporated body.
5. Discriminatory treatment by the State Government.
6. Principle of no taxation by intendment.

Issue-wise Detailed Analysis:

1. Constitutionality of section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959:
The petitioner initially challenged the constitutionality of section 2(n)(v) of the Tamil Nadu General Sales Tax Act, 1959, which levies tax on the supply of goods by unincorporated associations to their members for valuable consideration. However, the petitioner later accepted the constitutionality of this provision.

2. Applicability of the law declared in Joint Commercial Tax Officer v. Young Men's Indian Association:
The petitioner argued that the law declared by the Supreme Court in Joint Commercial Tax Officer v. Young Men's Indian Association [1970] 26 STC 241 should apply, which held that the supply of goods by a club to its members did not constitute a sale. However, this judgment was based on the law as it stood before the Constitution (46th Amendment Act), 1982, which significantly altered the legal landscape.

3. Impact of the Constitution (46th Amendment Act), 1982 on the definition of "sale":
The Constitution (46th Amendment Act), 1982, introduced clause (29A) in Article 366, expanding the definition of "tax on the sale or purchase of goods." Sub-clauses (e) and (f) specifically addressed the supply of goods by unincorporated associations to their members and the supply of goods as part of any service, respectively, deeming such transactions as sales. This amendment altered the previous legal position, making the transfer of title to goods no longer an essential ingredient of a sale in certain circumstances.

4. Status of the petitioner as an incorporated or unincorporated body:
The petitioner claimed to be an incorporated body under the Tamil Nadu Societies Registration Act, 1975. However, the court, referencing the Supreme Court's decision in Board of Trustees, Ayurvedic and Unani Tibia College v. State of Delhi AIR 1962 SC 458, held that registration under the Societies Registration Act does not confer corporate status. The petitioner, therefore, was considered an unincorporated association, falling within the scope of sub-clause (e) of Article 366(29A).

5. Discriminatory treatment by the State Government:
The petitioner alleged discriminatory treatment, citing a letter from the State Government exempting a state-owned corporation from sales tax under similar circumstances. The court, referencing Supreme Court judgments in Chandigarh Administration v. Jagjit Singh AIR 1995 SC 705 and Gursharan Singh v. New Delhi Municipal Committee AIR 1996 SC 1175, held that Article 14 cannot be used to perpetuate an illegality. The State's erroneous exemption did not entitle the petitioner to similar treatment. The State was initiating action to rectify the error.

6. Principle of no taxation by intendment:
The petitioner argued that there could be no tax by intendment in the absence of express words. The court found this argument irrelevant to the present case, as section 2(n)(v) of the Tamil Nadu General Sales Tax Act clearly provided for the levy of tax on the supplies in question, in conformity with Article 366(29A)(e) of the Constitution.

Conclusion:
The court dismissed the writ petition, upholding the taxability of the transactions under section 2(n)(v) of the Tamil Nadu General Sales Tax Act, in light of the Constitution (46th Amendment Act), 1982, and the petitioner's status as an unincorporated association. The court also rejected the petitioner's claim of discriminatory treatment and the argument against taxation by intendment.

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