1954 (7) TMI 28 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Competency of the writ petitions.
2. Definition and applicability of the term "sale" under the Madras General Sales-tax Act, 1939.
3. Whether the supply of refreshments by the club to its members constitutes a sale.
4. Jurisdiction of the High Court to issue writs despite the existence of alternative remedies.
5. Profit motive and its relevance to the definition of "sale."

Detailed Analysis:

1. Competency of the Writ Petitions:
The State argued that the petitions were incompetent because the Sales-tax Act provided a hierarchy of tribunals for redressal. The Club had not exhausted these remedies, and thus the petitions for writs were not maintainable. The Court noted that at the time the petitions were filed, the provisions for investigating complaints by assessees were not as elaborate as they are now. The amendments made in 1951 provided more comprehensive remedies, but these were not available when the petitions were filed. Furthermore, the Court emphasized that the existence of an alternative remedy does not oust the jurisdiction of the Court to issue a writ in appropriate cases. The Court cited several precedents to support this view, including 'Rex v. North; Ex parte Oakey', which held that the existence of a right of appeal does not preclude the issuance of a writ of prohibition where there is a breach of a fundamental principle of justice.

2. Definition and Applicability of the Term "Sale":
The Court analyzed the definition of "sale" under Section 2(h) of the Madras General Sales-tax Act, 1939, which requires a transfer of property in goods in the course of trade or business for valuable consideration. It was noted that the transaction must be commercial in nature, involving a profit motive. The definition of "dealer" also emphasizes the commercial nature of the transaction. The Court referred to several authorities, including 'Graham v. Lewis' and 'Inland Revenue Commrs. v. Eccentric Club Ltd.', to elucidate that the term "carrying on business" implies a profit motive.

3. Supply of Refreshments by the Club to Its Members:
The Court examined whether the supply of refreshments by the Club to its members constituted a sale. It was determined that the Club was not a profit-making concern and that the transactions lacked a profit motive. The Court referred to the memorandum and articles of association of the Club, which confirmed that the Club was not designed for making a profit. The Court also cited English decisions, such as 'Graff v. Evans' and 'Metford v. Edwards', which held that the supply of goods by a club to its members does not constitute a sale. The Court concluded that the turnover in respect of the sales in question could not be assessed to sales-tax.

4. Jurisdiction of the High Court to Issue Writs:
The Court held that the existence of an alternative remedy does not deprive the Court of its jurisdiction to issue a writ. The Court emphasized that it has the discretion to grant relief in appropriate cases, even where an adequate alternative remedy exists. The Court cited several authorities, including 'Lakshmindra Theertha Swamiar v. Commr., Hindu Religious Endowments Madras' and 'Rashid Ahmed v. Municipal Board, Kairana', to support this view.

5. Profit Motive and Its Relevance to the Definition of "Sale":
The Court reiterated that a transaction must have a profit motive to be considered a sale under the Act. The Court referred to the decision in 'Gannan Dunkerley & Co. v. State of Madras', which held that the word "business" in the definition of "dealer" implies a profit motive. The Court concluded that the Club's transactions lacked a profit motive and thus did not constitute sales within the meaning of the Act.

Conclusion:
The appeal was dismissed, and it was held that the supply of refreshments by the Club to its members did not constitute a sale under the Madras General Sales-tax Act, 1939. The Court also emphasized that the existence of alternative remedies does not oust its jurisdiction to issue writs in appropriate cases.