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TMI Blog1954 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to pay sales tax. By an order dated 21-9-1949 the Government negatived the request. In paragraph 10 of the affidavit filed by the Honorary Secretary of the Club it is stated: The amount till now paid by the club to the State of Madras is ₹ 10,198-3-11 and the petitioner submits that the levy of sales tax on the total value of the refreshments supplied to its members is 'ultra vires' and illegal and the State of Madras had no jurisdiction or power to levy such tax. 2. In March 1951, the Club filed two petitions in this court. One, O.M.P. No. 3414 of 1951 (See AIR1952Mad814 ) was for the issue of a writ in the nature of a writ of certiorari calling upon the respondent to Bend up the records of their proceedings in O. o. Ms. No. 2472, dated 21-9-1949, Revenue Department, Government of Madras in the matter of sales-tax on the supply of refreshments to the members by the petitioner and connected papers and quash the same as having been passed without jurisdiction. 3. The other, C.M.P. No. 3415 of 1951 (See AIR1952Mad814 ), was for the Issue of a writ of mandamus or other appropriate writ or order directing the respondents to forbear from levying and col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the first of these four cases Subba Rao J. dismissed an application for the issue of a writ of certiorari to quash the orders of the Board of Revenue, affirming the assessment that had been made on the petitioner on the ground that he had an alternative remedy by way of a suit. 9. In the second case, also decided by Subba Rao J. he dismissed another application for the issue of a writ of prohibition directing the Government to forbear from assessing the petitioner to sales-tax on the ground that the Act Is a self-contained one and provides a hierarchy of tribunals to enable the aggrieved person or authority to get a final and authoritative adjudication on the validity or the correctness of the assessments made by the Sales-tax authorities. In view of the fact that an adequate remedy has been provided in the Act itself he dismissed the application for the issue of a writ. 10. The third case was decided by a Bench and it held Inter alia, where the assessees were duly served with notice under the Act and had ample opportunity of putting forward before the Tribunals all contentions based on the provisions of the Act or the Rules thereunder but did not avail themselves of it, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable to a dissatisfied assessee did not therefore then exist. 2. As will be presently explained, one of the contentions of the Club is that the supply of refreshments by it to its members did not and could not constitute a sale at all and that to the extent that the Act sought to tax such transactions by calling them sales when they were not really such, the vires of the Act was to that extent open to question. The Club may properly have thought that the authorities set up under the Act would have declined to entertain such a line of reasoning. 3. The existence of an alternative remedy, even an adequate alternative remedy, does not oust the Jurisdiction of this court to issue a writ in appropriate cases. 14. 'Rex v. North; Ex parte Oakey', 1927 1 KB 491 (P), was a case in which the Vicar of a Parish was in his absence ordered by the Consistory Court to pay the expenses of repairing a fresco and the costs of the petition. The order was passed on 24-7-1925. On February 11, 1928 a monition was issued to him ordering him to pay the said amount under threat of sequestration. On March 9 the Vicar applied for a writ of prohibition. The petition was opposed on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us a complete and precise scheme for regulating the issue of permits, providing what matters are to be taken into consideration as relevant, and prescribing appeals and revisions from subordinate bodies to higher authorities. The remedies for the redress of grievances or the correction of errors are found in the statute itself and it is to these remedies that resort must generally be had. It will be noticed that the qualifying word used is generally and not invariably . There is a substantial difference between the two words. If the learned Judges had said invariably that decision would have been clearly an authority for the view that a writ of the kind prayed for cannot be Issued. But, from the circumstance that the word generally is used, one is entitled to conclude that the discretion of the court to act where an adequate alternative remedy exists is perhaps attenuated but not) extinguished. 17. In this connection reference may be usefully made to the observations of the learned Chief Justice of the Supreme Court in the decision in -- 'Himatlal Harllal Mehta v. State of Madhya Pradesh' [1954]1SCR1122 . The question for consideration before the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the circumstances of the present case. Explanation II to Section 2(g) of the Act having been declared 'ultra vires', any imposition of sales-tax on the appellant in Madhya Pradesh is without the authority of law, and, that being so a threat by the State by using coercive machinery of the impugned Act to realise it from the appellant is a sufficient infringement of his fundamental right under Article 19(1)(g) and it was clearly entitled to relief under Article 226 of the Constitution. The contention that because a remedy under the impugned Act was available to the appellant it was disentitled to relief under Article 226 stands negatived by the decision of this court in -- 'State of Bombay v. United Motors (India) Ltd.' [1953]4SCR1069 above referred to. There it was held. that the principle that a court will not issue a prerogative writ when an adequate alternative remedy was available could not apply where a party came to the court with an allegation that his fundamental right had been infringed and sought relief under Article 226. Moreover, the remedy provided by the Act is of an onerous and burdensome character. Before the appellant can avail of it he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In paragraph 1480 it is stated: In cases other than those which have been mentioned the writ is discretionary . Paragraph 1481 runs: Although the writ is not of course it will nevertheless be granted 'ex debito Justitlae', to quash proceedings which the court has to quash, where it is shown that the court below has acted without jurisdiction or in excess of, jurisdiction, if the application is made by an aggrieved party and not merely by one of the public and if the conduct of the party applying has not been such as to disentitle him to relief; and this is the case even though 'certiorari' is taken away by statute, and although there is an alternative remedy'.' 20. And then there is a foot note where it is stated; In cases where the writ is discretionary it may be refused on the ground that the applicant has another efficient remedy, e.g., a remedy by appeal. 21. The correct position appears to be this where there is an alternative remedy and that remedy is adequate, this Court will ordinarily be very reluctant to interfere by the issue of a writ. The existence of such a remedy does not however deprive this Court of its jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandamus may be the subject of appeal, but the court of appeal requires to be satisfied that such discretion has been wrongly exercised before it will overrule such a decision on appeal. 'The grant of a peremptory writ of mandamus is a determination of a right according to the merits of the case, and not the determination of a matter of discretion, and is subject to review as if it were a decision in an action. And we are not satisfied that Mack J. exercised the discretion he had either erroneously or improperly. 24. Coming to the merits of the matter. The contention on the part of the State is that the Club is a dealer within the meaning of Section 3 of the Madras General Sales-tax Act. Section 2 (h) of the Act defines sale in these terms: 'Sale'... .means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration.... Section 2 (b) defines a dealer as any person 'who carries on the business of buying or selling goods'. (Underlined, here .in ' ' is ours.) Then there is an explanation -- it is a little wrongly placed -- which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of those matters, does not carry on business. I think that the expression has a narrower meaning than that of doing business or having business to do. In my opinion it imports that the person has control and direction with respect to a business, and also that it is a business, carried on for some pecuniary gain. 27. There is a further discussion of the subject in the -- 'Inland Revenue Commrs. v. Eccentric Club Ltd.', 1924 1 KB 390 (Q). Of the three cases dealt with in that Judgment, that which is relevant to the present purpose is that of 'Inland Revenue Commrs. v. Eccentric Club Ltd. (Q)'. The facts there were as follows: A company limited by guarantee was formed for the purpose of carrying on the Eccentric Club. The members of the Club were to be the subscribers to the memorandum of association and such other persons as might apply for admission and be admitted as members. An applicant could not become a member of the company Unless he had been first of all chosen to be a member of the club, but, if he was elected to be a member of the club he was required to be a member of the company. The business of the company was to carry on the club and any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b, the objects of which are immune from every taint of commerciality , the transactions of sale and purchase being merely incidental to the attainment of the main object. What is in fact being carried on, putting technicalities aside, is a members' club and not a proprietary club, nor any undertaking of a similar character. Sargant L. J. was also of the same view. At page 430 he observed: On the same principle it seems to me that the present case stands as a question of substance on the same footing as if no Incorporated company had been interposed between those who are mutually providing and receiving social amenities, and accordingly, that this process of providing these amenities cannot be considered the carrying on of a trade or business any more than the provision in that case of mutual insurance. The exposition of the law by the learned Judges in the two cases Just referred to would become clearer when by way of contrast we read the decisions in -- 'Cornish Mutual Assurance Co. V. Inland Revenue Commrs.', 1926 AC 281 (R) and -- 'English and Scottish Joint Co-operative Whole Sale Society Ltd. v. Commrs. of Agricultural Income Tax, Assam'. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less there is a continuous series of sales the association dealt with in the explanation would not be liable to pay tax. The question as to whether the explanation was designed to rebut an argument that no sale was involved when the goods belonging to a partner are transferred to him, i.e., to cover cases of release, will be considered later. It is not necessary to define all the situations to which the explanation would apply or its exact scope, but it is sufficient to state that in any event we are clearly of the opinion that the ex-planation is not sufficient or apt to impose tax liability on transactions of sale unattended with profit motive. 30. Mr. Veeraswami, the learned Government Pleader, argued that the word sale is used in the explanation in a sense different from that given in the definition of the word. No doubt the opening words of Section 2 of the Act contian the saving expression: Unless there is anything repugnant in the subject or context...... but, these words of routine caution are not sufficient to justify the assumption that the word sale Is used in the explanation in a sense different from that given in the definition of the word itself. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to sales-tax, 37. Mr. Jayarama Alyar, the learned advocate for the Club, went one step further and argued that the supply of refreshments by the Club to its members did not constitute a sale at all. He cited the case of -- 'Graff v. Evans', (1882) 8 QB D 373 (V), in which a manager of a bona fide club was prosecuted for selling by retail intoxicating liquors without a license under the licensing Act, 1872. The learned Judges held that there had been no sale at all in the case. According to them when the manager, Graft supplied liquor to a member he was only doing so to one who was entitled to obtain the goods on payment of the price fixed, and, there was no transfer either of the general or absolute property in the goods but only a transfer of a special interest. 'That decision was followed in -- 'Metford v. Edwards', 1915 1 KB 172 (W). The facts there were these. In 1911, a club was newly registered with the clerk of the justices in accordance with the Licensing Act, 1910. In the course of the same year the club was also registered with the Registrar of Friendly Societies under the Friendly Societies Act, 1896. On 5th October 1912 the club was enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d among them that distribution is not a sale. The same result seems to me to follow where the club is not a bona fide club.... In my opinion that which was established in '(1882) 8 Q B D 373 (V)' in the case of a bona fide club is equally true in the case of a club which is not bona fide, and when it was found that the liquor consumed by the members was the general property of the club the magistrate ought to have dismissed the summonses. I agree, therefore, that the appeal must be allowed. 38. According to these English decisions the circumstance that the club is incorporated makes no difference to the question on hand. See --'Trebanog Working Men's Club and Institute Ltd. v. Macdonald'; 'Monkwearmouth Conservative .Club Ltd. v. Smith', 1940 1 KB 576 (X). The facts there were these. Two members' clubs were incorporated under the Industrial and Provident Societies Acts and the Companies Acts respectively, the share holders and the members in each case being identical. They purchased intoxicating liquor and supplied it from time to time to individual members for payment as in an ordinary club. It was held that the incorporated societies were lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law given in paragraphs 659 and 660 may also be noticed: 659. Proprietary clubs: Proprietary clubs stand on a different footing. The members not being the owners of nor interested in the property of the club, the supply to them of food or liquor, though at a fixed tariff, is a sale; and accordingly, if intoxicating liquor is supplied, the premises must be duly licensed. 660. Incorporated clubs: With regard to incorporated clubs, a distinction must be drawn, in order to reconcile the authorities. Where such a club has all the characteristics of a members' club consistent with its incorporation, that is to say, where every member is a share-holder, and every shareholder a member, it would appear that no licence need be taken out if liquor is supplied only to members. If some of the share-holders are not members, or some of the members are not share-holders, though most of them may be, a license is required for the sale of intoxicants, as In the case of an ordinary proprietary club. 40. Mr. Veeraswami, the learned Government Pleader argued that whatever one may say in respect of the rule that the supply of refreshments by an unincorporated club to its members is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of competent Jurisdiction has given to them. We also notice that in 'AIR 1954 Mad 1130 (T)', Satyanarayana Rao and Rajagopalan JJ, have observed: It therefore follows that the building contracts, which the assessees entered into during the assessment year, on which the turnover was calculated, do not involve any element of sale of the materials and are not In any sense contracts for the sale of goods as understood in law......If the amendments introduced in 1947 by the Provincial Legislature are intended to eaten in the net of tax contracts of the nature with which we are concerned, we should hold that to that extent the amendments introduced are ultra vires of the Provincial Legislature as they had no power to tax transactions, which are not sales of goods. It will be appreciated that these remarks would apply to the case on hand if it be held that the supply of refreshments by the club to the members does not amount to a sale in law. However, we do not now finally decide the question whether the supply of refreshments by a non-proprietary incorporated club to its members amounts to a sale or not. We have merely indicated some of the aspects of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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