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TMI Blog1966 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... production and administrative charges. This absence of a profit motive is also relied upon to show that the petitioner did not engage in any business of buying or selling. On these allegations, it is claimed that the State Government of Madras, represented by the joint Commercial Tax Officer, P.T., Madras, was not justified in collecting sales tax from the petitioner for the aforesaid three years. The prayer in W.P. No. 647 of 1964 is for the issue of a writ of mandamus against the respondent, the State Government, to forbear from enforcing the demand for sales tax. The prayer in W.P. No. 648 of 1964 based on the same allegations is for a writ of prohibition against the respondent, State Government from enforcing the aforesaid demand for sales tax. The State of Madras in their counter-affidavit allege that during 1959-60, 1960-61 and 1961-62 the petitioner-Railway had turnovers exceeding Rs. 15 lakhs, Rs. 22 lakhs and Rs. 24 lakhs respectively, under the items of supply of refreshments in the refreshment rooms. It is urged that though the main business of the Railway was not selling food and refreshments, nevertheless the continuous course of conduct on the part of the Railway ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in line with the definition of "dealer" in section 2(g). To constitute an activity into business in the light of the above definitions, a profit motive was necessary, but it was immaterial whether profit accrued or not. That was the purport of the several decisions arising out of the Madras General Sales Tax Act dealing with assessments, in the period before the amendments in 1962 and 1964. These decisions are very well known, and it is unnecessary to recapitulate them here. Section 2(g) specifically brought the Central Government or the State Government within the definition of "a dealer" provided they carried on "such" business, the word "such" referring in turn to the definition of "business" in section 2(d). In other words, the Central Government or the State Government could be assessed to sales tax for transactions in this period only if (i) they were engaged in a business activity involving the buying, selling, supplying or distributing goods etc., and (ii) the business activity was undertaken with a profit motive, whether profit accrued or not. The Act was amended in 1962 when, in the main part of the definition of "a dealer" in section 2(g), the Central Government and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and it runs thus: "Notwithstanding anything contained in any judgment, decree or order of any court, no levy or collection of any tax under the provisions of the principal Act and of rules made thereunder in respect of sales in the course of business, whether or not it is carried on with a motive to make gain or profit shall be deemed to be invalid or ever to have been invalid on the ground only that such levy or collection was not in accordance with law and such tax levied or collected or purporting to have been levied or collected shall, for all purposes, be deemed to be and always to have been validly levied or collected.............." The result of this amendment was that even if there was a sale in the course of business at any time before the amendment in 1964, whether it was by a Central Government or a State Government or any other private parties, it was immaterial whether it was carried on with a profit motive or not; if there was an assessment to sales tax of such sales, the assessment would be validated retrospectively. Learned counsel, Sri Thyagarajan, appearing for the petitioner, urges that in the case of the Central Government in the Southern Railway, the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shop Canteen v. Deputy Commercial Tax Officer, Tiruchirapalli[1965] 16 S.T.C. 187., in a case arising out of the assessment of a canteen run on a non-profit basis by the Southern Railway at its Golden Rock Workshop, I made the following observations at page 194 of the report: "The industry was expected to look for its profits to Its principal activity, and the buying and selling that takes place in the canteens was treated as a subsidiary activity of an ameliorative character which should be conducted without an idea to make a profit thereby. As long as the sales thus conducted in the course of such ameliorative activity are regular, continuous and do not in any way differ from similar activity conducted by a private person, for example a tradesman or a merchant who makes living out of It, it will continue to be a trading activity, even though a profit motive is absent. Such an activity will be one in the nature of trade or commerce." In Swadeshi Cotton Mills Co., Ltd. v. Sales Tax Officer[1964] 15 S.T.C. 505., the Allahabad High Court had to consider a retrospective provision, which brought persons buying and selling even without a profit motive within the ambit of the Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principal activity of the Railway is one of transport, catering must be regarded as something unconnected with it and should be excluded for the purpose of sales tax assessment. But there is no basis for disconnecting in the manner suggested, the transport activity from catering activity. The catering activity is confined only to meet the needs of passengers of the Railway. In many cases the passengers are long distance passengers, and obviously they look to the Railway for providing them with adequate food and refreshments, whether in refreshment stalls at the railway stations, or in the dining carriages attached to the railway carriages themselves, so that even when the train is in motion, the requirements of passengers by way of food and drink might be met. There was a time when such catering business was entrusted by the Railway to private contractors like Spencer Co. But later on, for reasons which need not be enquired into here, the Railways took over this catering business, and made it part of their transport activity. No doubt the rules insist that no profit should be earned on this aspect of their activity. But that did not make the activity any the less an integral p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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