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TMI Blog2001 (12) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 onwards the clubs were paying sales tax on the supply of refreshments to their members and continued to do so till India became a Republic and thereafter till about 1951. The Cosmopolitan Club, Madras, filed a writ petition in this Court in or about 1951, to forbear the State from levying and collecting sales tax on the value of refreshments supplied to its members. That was the case of Cosmopolitan Club v. Deputy Commercial Tax Officer [1952] 3 STC 77 (Mad.). Mack, J., who heard the matter, after noticing that the club had been paying sales tax since 1939 which grew from a comparatively insignificant levy of a few rupees a year, to a considerable sum and that not only that club but also the other clubs had been paying tax without demur or objections, considered the question as to whether the supply of refreshments by the petitioner club to its members charging a fixed rate, constitutes in law "sale". 4.. The learned Judge found that the articles and memorandum of association of the Cosmopolitan Club were based on that of the Eccentric Club, London and that it was a social or members club not conducted for gain or profit. The court took judicial notice of necessity to sustai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the 3rd edition of Halsbury's Laws of England were also quoted by the Bench. One of the passages dealing with the "incorporated club" stated that where every member is a shareholder, and every shareholder a member, it would appear that no licence need be taken out if liquor is supplied only to members and that licence would be required only in case of an ordinary proprietary club where some of the shareholders are not members and vice versa. 6.. After the decision of Mack, J. in the case of Cosmopolitan Club [1952] 3 STC 77 (Mad.), similar rulings were given much later by other High Courts of Madhya Pradesh and Mysore with regard to taxability of sale of refreshments in the club in Bengal Nagpur Cotton Mills Club v. Sales Tax Officer, Raipur [1957] 8 STC 781 and Century Club v. State of Mysore [1965] 16 STC 38. 7.. The Tamil Nadu General Sales Tax Act, 1959 repealed the Act of 1939. Sale was defined in section 2(n) of that Act in an expansive manner and included the transfer of property involved in the supply or distribution of goods. Thereafter, the Cosmopolitan Club was once again before this Court along with Young Men's Indian Association questioning the legality of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t came to be considered by a three Judge Bench of the apex Court in the case of Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd. [1968] 21 STC 317. The court distinguished the English cases on which the High Court had relied, and held that the decision of the court which was in appeal before them and which had followed the decision of the division Bench in [1963] 14 STC 1030 (Young Men's Indian Association (Regd.) v. Joint Commercial Tax Officer) was incorrect. The court held that the property of the society which ran the co-operative canteen was the property of the society; that the society is a person; that the property in the refreshments supplied to its members is vested in the society, and when refreshments are supplied for a price paid or promised, transfer of property in the refreshments results. The court then expressed the view that in the case of an unincorporated society, club or a firm, or an association, ordinarily the supply and distribution by such a society, club, firm or an association, of goods belonging to its members may not result in sale of the goods which are jointly held for the benefit of the members of the society, club, firm o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members in the matter of supply of various preparations to them, no sale would be involved as the element of transfer would be completely absent. The court concluded that "as no transaction of sale was involved, there could be no levy of tax under the provisions of the Act on the supply of refreshments and preparations by each one of the clubs to its members". 12.. In his concurring opinion, Shah, J. held that "If an incorporated members' club supplies its property to its members at a fixed tariff, the transaction would readily be deemed to be one for sale, even if the transaction is on a non-profit basis; such a transaction would be liable to sales tax. Where, however, the club is merely acting on behalf of the members to make available to them refreshments, beverages and other articles, the transaction will not be regarded as a sale, for the club is the agency through which the members have arranged that the refreshments, beverages and other articles should be made available". 13.. About twelve years after that judgment was delivered, the Constitution (46th Amendment) Act introduced a new clause (29A) in article 366 of the Constitution. The Statement of Objects and Reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... du). not leviable on the supply of refreshments to their members. Some of these clubs are incorporated while some others are not incorporated bodies. 16.. Though several grounds had been raised before the Tribunal the only ground urged before us for the petitioners by their learned counsel led by Mr. M.L. Verma, whose submissions were adopted by other counsel, was that article 366(29A) in sub-clause (e) refers only to unincorporated associations or body of persons, and therefore sale of refreshments by incorporated members clubs to their members is not covered by that clause, and the law laid down by the apex Court in the case of Young Men's Indian Association [1970] 26 STC 241 continues to hold the field. 17.. The complete answer to that, as rightly submitted by the learned Additional Advocate-General who argued for the State, is sub-clause (f) of clause (29A) of article 366 and corresponding subclause (vi) under section 2(n) of the State Sales Tax Act. Those provisions expressly provide that the supply of goods being food or any other article for human consumption or any drink, whether or not intoxicating where such supply or service is for cash, deferred payment or other val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not amount to sale. 21.. The supply of food, drink or refreshments having been expressly dealt with in sub-clause (f) of clause (29A), whether or not incorporated, clubs can no longer take shelter under that decision of the apex Court to avoid the payment of sales-tax on the refreshments delivered or supplied by them to their members, for valuable consideration. 22. The doctrine of mutuality in the field of sales tax has been done away with after the introduction of clause (29A) in article 366. That doctrine was applied initially to unincorporated bodies, members of which collectively obtained goods and thereafter released their rights in favour of each other in the goods supplied to each member. That doctrine was later expanded to cases where in reality the transaction was mutual, but through a corporate entity which was owned and controlled only by the members clubs. Article 366(29A) in subclause (e) treats the supply of goods for valuable consideration to members by unincorporated association as sale. Sub-clause (e) of article 366(29A) having thus struck at the root of the doctrine of mutuality, that doctrine can no longer be invoked by any one or any entity whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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