Andhra HC (Pre-Telangana)
Jublee Hills International Centre, ... vs The Commercial Tax Officer And Ors. on 14 February, 1992
Equivalent citations: 1992(2)ALT725
JUDGMENT A. Gopal Rao, J.
1. These writ petitions can be disposed of by a common judgment as the question involved in all these matters is one and the same, viz., whether the petitioner-club in each of these cases is a 'dealer' under the Andhra Pradesh General Sales Tax Act, and whether it is liable to pay sales tax.
2. The averments in the three writ petitions are substantially the same and, it will suffice if the averments in Writ Petition No. 12920 of 1988 are stated, to understand the controversy in these matters. The petitioner claims that the petitioner-club is a 'society', registered under the Andhra Pradesh Societies Registration Act and its objects are to promote social, cultural, sports, recreational, charitable and educational activities etc., and to do acts incidental thereto. It is a non-profit organisation and it is not at all the object of the petitioner to carry on business. The source of finance of the petitioner is subscriptions paid by members and also by donations. The catering activity of the centre is not in the course of business and the centre, therefore, does not fall under the definition of 'dealer' under Section 2(e) of the Andhra Pradesh General Sales Tax Act (hereinafter called 'the Act) and, therefore, the provisions of the Act are not attracted. It is further alleged that the supply of goods by the petitioner to its members does not constitute 'transfer of property' and not eligible to sales-tax. Therefore, the petitioner-association was not required to get itself registered as a 'dealer' under the Act. While so, on 6.8.1988, the respondent-Commercial Tax Officer, Khairatabad, seized certain account books relating to the supplies of foodstuffs and drinks by the petitioner-centre to its members and got recorded a statement of the Manager (Accounts) of the petitioner under coercion to his dictation to the effect that the canteen business is being carried on from 1-7-1987 and the Bar from February, 1988 and that it will make an application for registration as a dealer under the Act and shall file monthly A-2 returns by 8-8-1988. On 18-8-1988, the Manager (Accounts) wrote to the respondent explaining the circumstances in which the statement was obtained from him and making it clear that the provisions of the Act have no application to the petitioner-club. While so, the petitioner received a show-cause notice on 17.8.1988 from the respondent, proposing to levy tax on the petitioner-centre, treating it as a club doing business of supplying of goods and drinks, taxable under Section 5-C of the Act. It is also stated that though the petitioner could challenge the assessment order as and when passed by filing an appeal, as it is not an effective remedy, the petitioner has filed this writ petition for issuance of a writ of mandamus or any other appropriate writ or order declaring that the petitioner is not a 'Dealer' under the Act and the catering facilities made available by the petitioner to its members are not taxable under the Act and to quash the impugned notice O.R.No. 14/1988-89, dated 17-8-1988 issued by the respondent and also for a direction to the respondent to return the general ledger for the year 1987-38 and three bill books seized by him on 6-8-1988. As stated earlier, the averments in the other two writ petitions and the prayer therein are substantially the same.
3. The respondents, however, claimed that the petitioner-clubs would come under the definition of 'dealer' under Section (2) (e) (i) of the Act, and their activity falls under the definition of the word 'business' under the Act.
4. Sri Dasaradharam Reddy, learned counsel for the petitioners in all the writ petitions, relying upon the decisions rendered in:
Cricket Club v. Labour Union, Bombay, , Joint Commercial Tax Officer v. Young Men's Indian Association, (970) 26 STC 241, Base Repair Organisation v. State of A.P., (1983) 53 STC 223, Amba Bhavani v. Government of Andhra Pradesh, (1986) 63 STC 40, and Hotel Dwaraka v. Union of India, (1985) 58 STC 241 , has contended thus;-
(i) even after the Constitution (Forty-sixth Amendment) Act 1982, the unincorporated clubs cannot be taxed as there is no transfer of goods to the members by the clubs;
(ii) assuming that the incorporated clubs are covered by the Forty-Sixth Amendment Act 1982, they cannot be taxed as they are not carrying on any business' within the meaning of Section 2(bbb) of the Act.
(iii) in any event, Section 5-C of the Act does not cover the clubs; and
(iv) assuming that the Constitution (Forty-Sixth Amendment) Act 1982 covers the clubs, unless the relevant provisions of the Act are also suitably amended, the clubs cannot be taxed under the said Act.
5. The learned Government Pleader for Commercial Taxes contends that after the Constitution (Forty-Sixth Amendment) Act, 1982 and the consequential amendments of the relevant provisions of the Act by Act 18 of 1985, the transactions effected by the petitioners fall under the definition of 'sale' exigible to sales-tax and, therefore, they have to get themselves registered under the Act as 'dealers' and file the returns. It is further contended by the learned Government Pleader, basing on the decision rendered on 17.11.1989 in W.P.No. 11848 of 1989, that the petitioners should first exhaust the alternative remedies available to them under the Act by way of filing appeals before approaching this Court under Article 226 of the Constitution of India, and these Writ Petitions filed by the petitioners questioning the show-cause notices issued to them by the department are not maintainable.
6. Since the matter has been argued at length on merits, we propose to give a disposal on merits itself instead of directing the petitioners to prefer appeals, as contended by the learned Government Pleader.
7. The point that falls for our consideration is - Whether the petitioners are 'dealers' liable to pay the sales tax under the Act?
8. It may straight-away be mentioned here that all the above decisions relied upon by the learned counsel for the petitioners were rendered prior to the Constitution (Forty-Sixth Amendment) Act, 1982 and the amendment of the provisions of the Act by virtue of Act 18 of 1985. Therefore, those decisions do not govern the facts of the present cases.
9. Our decision on the points now raised by the learned counsel will entirely depend upon the interpretation of the relevant provisions of the A.P. General Sales Tax Act as amended by Act 18 of 1985 read with Clause (29-A) of Article 366 of the Constitution of India, inserted by the Constitution (Forty-Sixth Amendment) Act, 1982.
10. The Parliament enacted the Constitution (Forty-Sixth Amendment) Act, 1982 which came into force on 2nd February, 1983. under Section 4 of the said Act, Clause (29-A) was inserted in Article 366 of the Constitution of India and, it reads as follows:
"(29-A) 'tax on the sale or purchase of goods' includes-
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, 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 valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."
11. It will be noticed that, subsequently, the Act was also suitably amended by Act 18 of 1985, with effect from 1.7.1985. The provisions under the said Amendment Act, to the extent they are relevant, may usefully be extracted thus:
"2(bbb) Business includes:-(i) any trade, commerce or manufacture or any adventureor concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, ad venture or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and
(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern."
"2(e) 'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods (or delivering goods on hire-purchase or on any system of payment by instalments, or carries on or executes any works contract involving supply or use of material) directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes-
(i) local authority, a company, a Hindu undivided family or any society (including a co-operative society), club, firm or association which carries on such business;
(ii) a society (including a co-operative society), club or association which buys goods from, or sells, supplies or distributes goods, to its members;
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"2(n) 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods (whether as such goods or in any other form in pursuance of a contract or otherwise) by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration or in the supply or distribution of goods by a society (including a co-operative society), club, firm, or association to its members, but does not include a mortgage, hypothecation or pledge of, or a charge on the goods;
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Explanation V:-Notwithstanding anything contained in this Act or in the Sale of Goods Act 1930, the sale of goods includes the supply, by way of or as part of any service or in any manner whatsoever, 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 valuable consideration and such supply of any goods shall be deemed to be a sale of those goods by the person making the supply of those goods to the person to whom such supply is made:
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"2(q) 'tax' means a tax on the sale or purchase of goods payable under this Act and includes,-
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(v) a tax on the supply of goods by any un-incorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(vi) a tax on the supply, by way of or as part of any service or in any other manner whatsoever 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 valuable consideration;"
"2(s) 'Turnover' means,
(i) the total amount set out in the bill of sale;
(ii) the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the bill of sale does not set out correctly the amount for which the goods are sold; or
(iii) if there is no bill of sale, the total amount charged as the consideration for the sale or purchase of goods by a dealer either directly or through another, on his own account or on account of others, whether such consideration be cash, deferred payment or any other thing of value and shall include,-
(a) (the value of any goods) as determined by the assessing authority, ........... ................. ................. ........... ................. .................
(iii) to have been supplied or distributed by a society, including a co operative society, Club, firm or association to its members, where the cost of such goods is not separately shown or indicated by the dealer, the cost of such goods as shown or indicated.........."
"5. Levy of tax on sales or purchases of goods:
(1) Save as otherwise provided in this Act, every dealer shall pay a tax under this Act for each year on every rupee for his turn over of sales or purchases of goods in each year irrespective of the quantum of his turnover at the rates of tax and at the points of levy specified in the Schedules;
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(3) For the purpose of this section and the other provisions of this Act, the turnover which a dealer shall be liable to pay tax shall be determined after making such deduction from his total turnover, and in such manner as may be prescribed;
(4) The taxes under this section shall be assessed, levied and collected in such manner, as may be prescribed;
Provided that,-
(i) in respect of the same transaction, the buyer or the seller but not both, as determined by such rules as may be prescribed, shall be taxed;
(ii) where a dealer has been taxed in respect of the purchase of any goods, in accordance with the rules referred to in Clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him."
"5-C. Tax in respect of supply of articles of food or drink in restaurants or catering houses or hotels:
Every dealer running any restaurant or eating house or hotel (by whatever name called), who supplies, by way of or as part of any service or in any other manner whatsoever 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 valuable consideration shall, on the total amount charged by the said dealer for such supply, pay a tax at the rate of five paise on every rupee on the aggregate of such amount realised or realisable by him during the year (Provided that, no such tax shall be levied if the total turnover of the dealer including such aggregate during the year is less than Rs. 2,00,000)."
12. The Constitution (Forty-Sixth Amendment) Act, 1982 was enacted by the Parliament, which came into force from 2nd February, 1983. By the said Amendment Act, Article 366 of the Constitution was amended by adding Clause (29-A) to Article 366. Consequent to the Amendment Act, the definition of 'sale' has been widened. Supply by way of or as part of any service or in any other manner whatsoever 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 valuable consideration, shall be deemed to be a sale of those goods by the person making the supply. Certain provisions in the Act were also amended by Act 18 of 1985. Explanation-V to Section 2(n) of the said Amendment Act has specified that, notwithstanding any thing contained in this Act or the Sale of Goods Act, 1930, the 'sale of goods' includes the supply, by way of or as part of any service or in any other manner whatsoever, 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 valuable consideration and such supply of any goods shall be deemed to be a 'sale' of those goods by the person making the supply of those goods to the person to whom such supply is made. Therefore, it is clear that mere supply by way of or as part of any service, of goods for human consumption is deemed to be a 'sale' of those goods under the Act. The petitioners, as part of their catering activity, are in fact supplying by way of or as part of service, goods such as food, drinks and other articles for human consumption, to its members. Similarly, 'turnover' under Section 2(s) of the Act was amended by Act 18 of 1985. Clause (iii) of Section 2(s) (a) will make it clear that the value of the goods supplied or distributed by a society, including a co-operative society, club, firm or association to its members, will be 'turnover' under the Act.
13. The definition of 'dealer' under Section 2(e) of the Amended Act includes a society (including a co-operative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to its members or which carries on business. Similarly, under Section 2(q) of the Amended Act, 'tax' has been defined to mean a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration and also tax on the supply, by way of or as part of any service or in any other manner whatsoever 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 valuable consideration.
14. Section 5-C of the Amended Act which is the charging section will establish that every dealer, running any restaurant or eating-house or a hotel (by whatever name called) who supplies, by way of or as part of any service or in any other manner whatsoever of goods being food or any other article for human consumption or any drink (whether or not intoxicating), shall pay a tax on the total amount charged by the said dealer for such supply. Section 5-C of the Amended Act is wide enough to include the petitioners also as admittedly they are serving food and drinks in their premises as is being done in a restaurant, or eating-house Oi1 a hotel. The mere fact that the word 'club' is not included in this section will not, by itself, absolve the petitioners from paying the tax as, the 'club' will come within the meaning of the words "by whatever name called" in that section. This is because, the petitioner-clubs are supplying food and drinks by way of or as part of service to its members and guests of the members, who attend the clubs. The petitioners, who are indulging in such transactions or activities will, undoubtedly come within the meaning of the word 'dealer' under the Act. Consequently, they are liable to pay the taxes due on the 'turnover' under the Act.
15. The petitioners cannot claim immunity from the provisions of the Act merely on the ground that the Constitution (Forty-Sixth Amendment) Act, 1982 does not specifically mention about the supplies effected by unincorporated institutions to its members. In view of the amendments carried on under Act 18 of 1985 to the Act (A.P. General Sales Tax Act, 1957), the definition of 'sale' under the Act covers supply or distribution of goods by a society (including a co operative society), club, firm or association to its members. Any transfer of goods for a price from an incorporated or unincorporated club or association to its members is a 'sale' exigible to tax. The question of supply on 'no-profit or no-loss basis' is irrelevant since the definition of "business' in Section 2(bbb) of the Act covers such transactions also. In that view of the matter, the contention of the petitioners that even the incorporated institutions are not liable to pay tax because there is no profit motive, is not tenable.
16. The learned counsel for the petitioner placed reliance on the decision in Calcutta Swimming Club v. C.T.O., (1991) 83 STC 197 and contended that the Constitution (Forty Sixth Amendment) Act, 1982 merely gave the State Legislatures competence to levy a tax on the supply of goods by unincorporated clubs to its members and, without bringing an appropriate legislative measure by the State in conformity with such competence, the clubs are not liable to pay tax under the Act. In our view, this contention is also not tenable as, in the above said case (Calcutta Swimming Club v. C.T.O., (1991) 83 STC 197), the Tribunal was dealing with the Bengal Finance (Sales Tax) Act, 1941 where there is no specific provision, deeming the supply of goods to members of unincorporated clubs to be 'sales'. As mentioned already, the Amended Act, in this State, has got specific provisions deeming the supply of goods to members by the clubs as 'sales'. Therefore, that decision has no application to the facts of the cases on hand.
17. None of the petitioners have questioned any of the provisions of the Act.
18. In view of what is stated above, we are of the view that the Petitioner-clubs come within the meaning of 'dealer' under the Act. The petitioners are, therefore, liable to pay tax on the 'turnover'.
19. All the writ petitions, therefore, fail and are accordingly dismissed. No costs. Advocate's fee Rs. 200/- in each.