1970 (4) TMI 151 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of canteen sales in turnover for sales tax assessment.
2. Definition and interpretation of "business" under the Andhra Pradesh General Sales Tax Act.
3. Compulsion to provide canteen services under the Factories Act and its impact on the characterization of sales.

Issue-Wise Detailed Analysis:

1. Inclusion of Canteen Sales in Turnover for Sales Tax Assessment:
The petitioner, Hyderabad Allwyn Metal Works Limited, argued that sales at the canteen should not be included in their turnover for sales tax purposes, as these sales were not part of their "business" but were made to comply with statutory requirements under the Factories Act. The Commercial Tax Officer disagreed and included the canteen sales in the turnover, a decision upheld by the Assistant Commissioner of Commercial Taxes and the Sales Tax Appellate Tribunal. The petitioner sought a writ of certiorari to quash this inclusion.

2. Definition and Interpretation of "Business" under the Andhra Pradesh General Sales Tax Act:
The court traced the legislative history and judicial precedents to understand the definition of "business." Initially, under the Madras General Sales Tax Act of 1939 and the Hyderabad General Sales Tax Act of 1950, "business" was not defined, but "sale" and "dealer" were defined in a way that implied a profit motive. Judicial precedents, such as Gannon Dunkerley and Co. v. The State of Madras and Sree Meenakshi Mills Ltd. v. State of Madras, held that "business" involved an activity to earn profit. However, the definition was amended in 1966 to include activities "whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit." The court held that the amended definition made the profit motive immaterial, and thus, the supply of food and drink at the canteen constituted "business" under the Andhra Pradesh General Sales Tax Act.

3. Compulsion to Provide Canteen Services under the Factories Act and Its Impact on the Characterization of Sales:
The petitioner contended that the sales were "compulsory" due to statutory obligations and could not be considered as voluntary business activities. The court rejected this argument, stating that compliance with the law does not negate the intention to conduct the activity. The court referred to various Supreme Court decisions, including New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar, and Andhra Sugars Ltd. v. State of Andhra Pradesh, which clarified that statutory compulsion does not preclude the existence of a contract of sale. The court noted that the transactions between the company and its workers involved mutual assent and privity of contract, fulfilling the requirements of a sale under the Sale of Goods Act.

The court also examined the Factories Act and the relevant Rules, which mandated the provision of a canteen but allowed discretion in the choice of food, pricing, and management. The court concluded that the transactions in the canteen were sales and constituted business for the purposes of the Andhra Pradesh General Sales Tax Act.

Conclusion:
The writ petitions were dismissed, and the court upheld the inclusion of canteen sales in the turnover for sales tax assessment. The court emphasized that the amended definition of "business" under the Andhra Pradesh General Sales Tax Act made the profit motive irrelevant, and statutory compulsion to provide canteen services did not negate the characterization of these transactions as sales. The petitioner was ordered to pay costs, including an advocate's fee of Rs. 100 in each case.