9911796707
TMI Blog1951 (11) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were supplied to members as an amenity and not on any commercial basis. The letter was an appeal for exemption in the circumstances from the payment of sales tax. On this, the Government passed the G.O. sought to be quashed on the ground that they did not see sufficient justifica- tion for exempting the sale of refreshments by the Cosmopolitan Club, Madras, from liability to pay sales tax. In the original letter of the Cosmopolitan Club Ex. R-2 produced by Government, there was no specific objection to the levy of this tax as illegal under the Sales Tax Act. This allegation however appears in the common affidavit filed in support of these two petitions. C. M. P. No. 3415 of 1951 seeks for a writ by way of mandamus to direct the respondents to forbear from levying and collecting such sales tax in future. These two petitions were admitted by Raghava Rao and Viswa- natha Sastri, JJ., sitting as a Bench on the 9th of March this year. Mr. Jayarama Ayyar, who appears for the Cosmopolitan Club, says that he had to argue at some length before he persuaded them to admit them. There is no order of course giving any reasons for admission. The Government Pleader has, as may be expected, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... English case law quoted to support this position in Halsbury's Laws of England, Vol. IX, page 774. There have been however cases where writs by way of certiorari or mandamus have been granted to aggrieved persons despite their failure to explore other avenues open to them. In The King v. Postmaster- General Ex parte Carmichael(1), the applicant Mrs. Carmichael had, what Avory, J., held, a right of appeal under the Workmen's Compensation Act, which gave all the relief which she can require. I would be most reluctant to import into Indian law the view of Avory, J., which is rather an extreme one, expressed in the following sentence: "But even if that remedy is open to her, it is undoubtedly good law that if the application for a certiorari is made by a party aggrieved then it ought to be granted ex debito justitiae and the Court has not the general discretion which it would have when the application is made by one of the public who is not personally concerned." Halsbury's Laws of England, page 873, refers to a decision R.v. Blathwayt(2) in which a dissatisfied party was permitted to apply for a writ of certio- rari instead of appealing, though it was held that he could not do so till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Constitu- tion according to which no tax shall be levied or collected except by the authority of law. I do not think that the failure of the Cosmo- politan Club to object to this tax since 1939 and to explore the long and tedious avenue of appeal and revision provided by the Act is an impediment in the way of issuing a writ, if it be found that the sales tax levy is really illegal. There are some other cogent reasons, which appeal to me for a finding that the remedy by way of a writ under Article 226 is not only open to the petitioning Club but is also the appropriate and correct one. In the first place the appellate and revisional machinery provided by the Sales Tax Act is primarily in- tended for individual assessees, dissatisfied with the assessment made. This however is a case of the very legality of a sales tax levy itself on the petitioning Club and similar social Clubs being challenged. Before a suit can be filed for a declaration that the tax is illegal and claiming also consequential relief by way of refund of tax illegally collected, the whole gamut of the appellate and revisional machinery must take its course, and then a suit with the possibility of an appeal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by right and that the writs which lie under Article 226(1) are all discretionary writs which are dependent on the facts of each case, and the nature of the illegality and wrong alleged. 8.. A further preliminary point arises in view of an objection by the Government Pleader that the petitioning Club at no time speci- fically challenged the legality of this tax before filing this petition. In their letter to the Finance Minister, marked for ready reference as Ex. R-2 dated 22nd August, 1949, the Club asked for exemption from this tax on grounds that the refreshments were supplied to members as in their homes without any profit motive and so on. The only section dealing with exemption is Section 6 which empowers the Pro- vincial Government by notification to exempt or reduce sales tax on specified classes of goods at all or specified points in a series of sales by successive dealers or by any class of persons. The G.O. passed by Government declining to grant exemption in favour of the petitioning (1) [1928] 1 K.B. 291. Club is technically, legally or strictly correct as nowhere was the legality of this tax challenged as such in Ex. R-2. 9.. Mr. Jayarama Ayyar for the Club filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged in the affidavit supporting these writ petitions, and in para. 3 of the counter affidavit opposing it, there is the specific contention that "the supply of refreshments by the petitioner in law constitutes a sale or transfer of property in the refreshments by the Club to its members." The Government Pleader concedes that the legal position has been examined, nor is there any likelihood in a case of this kind that Government would have conceded on a mere challenge of the legality of this tax paid with- out demur for over 10 years that they collected it illegally during this long period. There is of course no provision in the Constitution requiring notice to Government before putting it on its defence as under Section 80, Civil Procedure Code. There is no inflexible rule. I am of the opinion that, in the particular circumstances of these petitions, they should not be rejected on this ground, and that the legality of this tax can only be properly investigated by this Court on a petition under Article 226. 11.. The simple point for determination is whether the supply of refreshments by the petitioning Club to its members charging a fixed rate constitutes in law a sale. The Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere can in the first place be no doubt that the petitioning Club is a members' Club which is not conducted for profit or gain. In Inland Revenue Commissioners v. Westleigh Estates Company Ltd. (2) it was held by the Court of Appeal, reversing the decision of Rowlatt, J., that the Club being a members' and not a proprietary Club, the Club was not carrying on any "undertaking of a similar character to that of a trade or business" and was therefore not liable to corporation profit tax because its accounts showed a surplus of income over expenditure. 14.. Now from its constitution, the petitioning Club is a society of persons, each of whom contributes funds, out of which the Club expenses are met. Such contribution is made by means of entrance fees, or monthly or annual subscriptions and other charges paid by members. It is not recognised as having any legal existence apart from the members of which it is composed. All the members of the petitioning Club are on an equal footing with an equal interest in the Club and its property. The President, Honorary Secretary, Treasurer and so on are all unpaid officers, nor would in effect a paid full-time Secretary divest such a Club of the dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pro- perty must be in the course of trade or business. A members' Club, such as the petitioning Club, does not do any trade or business in purchasing from outside the requirement of members and supplying it to them at a fixed charge. On these two grounds, the levy of sales tax on such supplies of refreshments by Clubs to members must be held to be illegal. 16.. Mr. Jayarama Ayyar has referred me to some English case law, all drawn from the domain of public house licensing. Though the analogy is not perhaps very happy in this State which is now committed to prohibition they strongly reinforce the view I have taken. The oldest decision is Graff v. Evans(1) one of the year 1882, in which the manager of a bona fide members' club was prosecuted for selling by retail intoxicating liquors without a licence under the Licensing Act of 1872. Holding that the transaction was not a sale, some interesting reasons were given both by Field, J., and Huddleston, B. Field, J., was of the opinion that Foster, to whom the manager Graff supplied the liquor, was an owner of the property together with all the other members of the Club and was entitled to obtain the goods on payment of the fixed price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of a members' Club, it does not sell goods to its members when it supplies them with refreshments and other requirements purchased out of Club funds to which the members have contributed and in which they have a joint legal interest and that a sales tax levy on such turnover is illegal. C.M.P. No. 3414 (1) [1915] 1 K.B. 172. (2) 8 Q.B.D. 373. (3) [1940] 1 K.B. 576. of 1951 for the issue of a writ of certiorari or other appropriate writ to quash G.O. Ms. No. 2472 dated 21st September, 1949, is dismissed as not pressed, and C.M.P. No. 3415 of 1951 which seeks by way of a writ of mandamus to direct the respondents to forbear from levying and col- lecting sales tax on the value of the refreshments supplied to the mem- bers by the Club is allowed and a writ in these terms will issue. The parties will bear their own costs. This is in some respects an unusual petition, the unusual feature attaching to the case being that Government have perfectly bona fide collected this tax on this and similar Clubs for more than 10 years without any demur, protest or challenge as to legality. The finding that this tax is illegal, which I have had under law to give, may raise some hopes in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
