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TMI Blog1964 (3) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... The question has been raised whether the activity of the mills in so far as they sell food in canteens constitutes business. It is true that the mills are under an obligation to maintain the canteens. But that circumstances does not alter the fact that this particular operation is a part of the general activity of the two mills in manufacturing goods. Maintaining canteens should be considered as a part of the general business of the mills. It is true that the mills do not earn a profit from the canteens as such. But that does not alter the fact that food is sold in the canteens. Profit is not an essential element of sale. A sale at cost price is also a sale. The stand taken by the respondents is further supported by clause (aa) of section 2: "Business of buying or selling includes such business carried on without the motive of making of profit." Clause (aa) of section 2 makes it clear that, although the canteens show no profit, this particular activity can be treated as business of buying or selling. The two mills are, therefore, liable to pay sales tax for the sale of food in the canteens. Dining-halls maintained by Aligarh Muslim University are on a different footing. The Unive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral interest. The question is: does a person statutorily obliged to establish and run a canteen or dining-hall for serving refreshments at a nonprofit basis, carry on "a business of buying and selling goods" so as to attract liability to sales tax? In Civil Miscellaneous Writ No. 2572 of 1963, Swadeshi Cotton Mills Company Limited is the petitioner. The petitioner-company carries on the business of manufacture and sale of textiles and allied goods at Kanpur. The petitioner has established and maintains within its factory premises a canteen where food-stuffs are prepared and sold exclusively to the workmen employed by the petitioner-company. The petitioner asserts that the canteen is run strictly at cost without any profit motive. The Sales Tax Officer, Special Investigation Branch, Kanpur, by a notice, which was served on the petitioner on 2nd May, 1962, required the petitioner-company to take the registration certificates from the Sales Tax Department under section 8-A, U.P. Sales Tax Act, 1948. The petitioner-company was called upon to furnish the figures of sales for the years 1958-59 to 1961-62. The petitioner-company on 5th May, 1962, sent a reply to the Sales Tax Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person who is aggrieved by any action of the Sales Tax Authorities, cannot in law be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he has an adequate remedy by way of an appeal, revision etc. Support for this objection is drawn from the Supreme Court decisions in C.A. Abraham v. Income-tax Officer, Kottayam and Another[1961] 41 I.T.R. 425; A.I.R. 1961 S.C. 609., and Bhopal Sugar Industry Limited, Madhya Pradesh v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bhopal[1963] 14 S.T.C. 410. In Abraham's case[1961] 41 I.T.R. 425; A.I.R. 1961 S.C. 609., the Supreme Court ruled that an aggrieved person cannot be permitted to abandon resort to statutory machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he has adequate remedy open to him by an appeal. Their Lordships went on to observe: "But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this Court. The petition having been entertained and leave having been granted, we do not think that we shall be justified at this stage in dismissing the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se rules, the petitioner was obliged to establish and maintain a canteen. The petitioner contends that it has no choice in running the canteen. It is a statutory obligation which it has to fulfil in order to carry on its main business of manufacture and sale of goods. Under the rules, the service of food and refreshments has to be on a non-profit basis. The petitioner-company has no choice even in respect of the price charged. They have to be approved by the managing committee. The petitioner asserts that the canteen is open only to its workmen and that it is subsidized by the company. The question is whether the provisions of the U.P. Sales Tax Act are applicable to the petitioner-company. By entry No. 48 of List II of the Seventh Schedule of the Government of India Act, 1935, the Provincial Legislatures were authorized to make laws regarding taxes on the sale of goods. By virtue of this entry, the U. P. Sales Tax Act was enacted in 1948. Section 2(c) of this Act defines a "dealer". It says, "'dealer' means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh, whether for commission, remuneration or otherwise and includes any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e precise question as to the signification of the term "carries on business" in the definition of "dealer" in the U.P. Sales Tax Act, 1948, arose for decision in this Court. Desai, C.J. (K.B. Asthana, J., concurring) held that the word "business" has been used in the definition of the word "dealer" in the narrow or restricted sense and not in the general or broad sense. It means an activity in order to earn a livelihood and to make a profit and does not mean simply remaining occupied with something. Their Lordships held that the Legislature did not use the word "business" merely to indicate a continuous activity because then it would have used such words as "practice", "activity" or "system". Their Lordships emphasized that gain or profit was a vital ingredient in the concept of "business" in the definition of "dealer" in the Act. This decision was rendered on 19th March, 1963. On 25th May, 1963, the U.P. Taxation Laws Amendment Act, 1963 (Act No. 14 of 1963) came into force. Section 4 of this Act introduced after clause (a) of section 2 of the U.P. Sales Tax Act, 1948, the following new clause: "(aa) Business of buying or selling includes such business carried on without the moti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He contended that the U. P. Taxation Laws Amendment Act, 1963, in so far as it inserts the aforesaid new clause with retrospective effect, violates the petitioner's fundamental rights guaranteed by Article 19 of the Constitution. The petitioner is a company registered under the Income-tax Act (sic.). In State Trading Corporation of India Limited v. Commercial Tax Officer and OthersA.I.R. 1963 S.C. 1811. , the Supreme Court has declared that the word "citizen" in Article 19 of the Constitution is confined to natural persons and not to juristic persons like companies registered under the Indian Companies Act. Such companies, not being "citizens", cannot ask for the enforcement of fundamental rights guaranteed by Article 19 of the Constitution. In this view, it is not open to the petitioner-company to urge that the Taxation Laws Amendment Act is void as it infringes Article 19 of the Constitution. Article 358 of the Constitution suspends the provisions of Article 19 of the Constitution while a proclamation of emergency is in operation. It says that nothing in Article 19 shall restrict the power of the State to make any law or to take any executive action while a proclamation of emer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk on 'Sale', 'to constitute a valid sale there must be a concurrence of the following elements, viz., (1) parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised." The contention for the petitioner is that the second necessary element, namely, mutual assent is lacking in the present case. It is said that the statute forces the petitioner to run a canteen. Under the Factory Rules, the petitioner has no choice in the conduct of the canteen or in fixing the prices or in the persons who can be served in the canteen. For this aspect, reliance is placed on the Supreme Court decision in New India Sugar Mills' case(1). In that case the course of dealing was that the Government of various States used to intimate to the Sugar Controller of India their requirements of sugar from time to time. Similarly, the factory owners used to send to the Sugar Controller a statement of stocks of sugar held by them. The Sugar Controller used to make allotments directing the sugar companies to supply sugar to the State Government in question specified quantities of sugar. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd acceptance in order to make a contract need not be in the ordinary form known to a trader. In order to ameliorate the lot of poverty-ridden labourers, the Legislature has made regulatory laws. The Factories Act and its Rules are an example. These impose conditions subject to which a person can carry on a business by employing more than 250 workers in a factory. One condition is that he must maintain a canteen for the benefit of his workmen. This is not an absolute restriction. It is open to a person not to carry on any business by employing more than 250 workmen, but if he does so he impliedly consents to make contracts in respect of refreshments etc., in a canteen established by him. The fact that the price is controlled by the managing committee is not material. The provision for the managing committee is ostensibly to ensure efficient management and to ensure a fair deal to the workers. It is not intended to control the offer or acceptance at the time when the transaction takes place. Under the law of sale of goods, the motive force impelling a person to create conditions wherein he would be in a position to make offers or accept them, is immaterial. It cannot be urged that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibited from taking any proceedings in virtue of the notice dated 20th February, 1963. It is contended that the University is not a "dealer" within the meaning of the Sales Tax Act and the transactions of supply of food and refreshments to the students do not answer the connotation of the term "sale". As such, the provisions of the U.P. Sales Tax Act are not attracted to the University and the respondent has no jurisdiction to proceed to assess the University to sales tax. The Aligarh Muslim University is predominantly a residential and teaching University. Chapter XII of the Academic Ordinances framed by the University provides that at least 75 per cent. of the students of the University shall be resident students. The University has established several "halls" for residential purposes. Each hall has several hostels and has a dining-hall, a prayer room, a common room and a playground. Chapter XLIX of the Regulations of the Academic Council provides that the dining-hall shall be under the supervision of a warden who shall supervise meals and shall be in charge of the supervision of the dining-hall and that the meals shall be served in the dining-hall morning and evening at noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one calendar month on medical grounds. It is apparent that the fee charged under the head "food and nashta" is not the actual price of the food in fact consumed by a student. It appears to be approximated with the expense that the University may incur in providing the food and nashta to the students. The remissions in the fees for food and nashta are an exception. Generally each resident student has to pay the monthly fee irrespective of the amount of food that he consumes or the number of days that he actually utilizes the dining-hall services. One essential ingredient of a "sale" is price in money paid or promised. The question for consideration is whether the fee charged by the University from each resident student is a price in money. In its nature and character price is essentially different from a fee. The following observations of Shah, J. (as he then was) are apposite*: " The argument in my view loses sight of the essential character of a fee. A fee is not a payment in the nature of price paid for buying an article or remuneration for services rendered pursuant to a contract. The fee levied is the distributive share of the liability under a scheme for distribution of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 S.C. 610. In this case Gajendragadkar, J. (as he then was) speaking for the court held that a group of hospitals run by the State for the purpose of giving medical relief to the citizens and for helping to impart medical education are an undertaking within the meaning of the term "industry" as defined in the Industrial Disputes Act. The definition of "industry" in that Act is very wide. It includes a trade or business or service. His Lordship in paragraph 12 of the judgment observed: "If all the words used are given their widest meaning, all services and all callings would come within the purview of the definition; even service rendered by a servant purely in a personal or domestic matter or even in a casual way would fall within the definition ........... We must, therefore, consider where the line should be drawn ........... and that no doubt is a somewhat difficult problem to decide." On the other hand, the learned counsel for the petitioner relies upon the case of National Union of Commercial Employees and Another v. M. R. Meher, Industrial Tribunal, Bombay, and OthersA.I.R. 1962 S.C. 1080. In this case Gajendragadkar, J., speaking for the court held that a firm of solicitors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more a mission and avocation rather than a profession or trade or business, however wide may be the connotation of the two latter words under the Act." The University dining-hall service cannot be compared with a hotel serving its guests. Arbuckle in his book "Student Personnel Services in Higher Education" at page 205 observes: "There is general agreement that the institution is responsible for the physical, mental and emotional well-being of the student who lives on the campus twenty-four hours a day. The college obviously has a greater responsibility to a dormitory student than a hotel has to one of its guests. If an institution of higher learning is interested in a complete education for its students, then it will accept the responsibility for the total living conditions that they experience during their stay on the campus." "The aim of education is the creation of a well educated, healthy young generation imbued with a rational progressive outlook on life": University of Delhi and Another v. B. Ram Nath and OthersA.I.R. 1963 S.C. 1873 at p. 1876 (para 9). The dining-hall service is an integral part of the University for imparting education to the students. It is indissolubly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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