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The Indian Institute of Technology Vs. the State of Uttar Pradesh and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberWrit Petition No. 1768 of 1973
Judge
Reported in[1976]38STC428(All)
AppellantThe Indian Institute of Technology
RespondentThe State of Uttar Pradesh and anr.
Appellant AdvocateD. Swaroop and ;N.B. Singh, Advs.
Respondent AdvocateThe Standing Counsel
DispositionPetition allowed
Excerpt:
.....lunch and dinner. it is averred that in exceptional cases, which will be hardly one or two in the whole year, the director permits relations or other persons connected with the institute to reside in the hostel or to order dinner, etc......the institute to frame statutes to provide for establishment and maintenance of halls arid hostels. the institute, as already pointed out, is a residential institution.13. the relatives or friends of the students or even those persons who from time to time come to the institute in connection with the activities of the institute and are in that capacity allowed to stay in the visitors' hostel and supplied with foodstuffs cannot, in our opinion, be said to be 'all and sundry' as is the case of the sales tax officer in the counter-affidavit. the act of the petitioner in permitting them to stay in the hostel and providing them with foodstuffs, in our opinion, comes within clause (n) of section 6, which casts a duty upon the institute to do all such things as may be necessary,.....
Judgment:

N.D. Ojha, J.

1. The Indian institute of Technology, Kalyanpur, Kanpur, the petitioner, is a body corporate incorporated under the Institutes of Technology Act, 1961 (Act 59 of 1961). The powers and duties of an institution incorporated under the said Act, as contained in Section 6, which are relevant for the purposes of the present writ petition, are :

(a) to provide for instruction and research in such branches of engineering and technology, sciences and arts, as the Institute may think fit, and for the advancement of learning and dissemination of knowledge in such branches ;....

(d) to fix, demand and receive fees and other charges ;

(e) to establish, maintain and manage halls and hostels for the residence of students ;

(f) to supervise and control the residence and regulate the discipline of students of the Institute and to make arrangements for promoting their health, general welfare and cultural and corporate life ;....

(n) to do all such things as may be necessary, incidental or conducive to the attainment of all or any of the objects of the Institute.

2. Under the statutes framed in exercise of the powers conferred by Section 26 of the Act, the petitioner is a residential institution, and all students, research scholars and research fellows have to reside in the halls of residence and hostels built by the Institute. In pursuance of its objects the petitioner has constructed several hostels, one of them being the visitors' hostel. The petitioner, in furtherance of its objects, holds from time to time conferences and seminars and, in that connection, invites eminent technologists and academicians for lectures. These activities of the petitioner constitute inseparable components of its academic life. According to the petitioner, the said visitors' hostel was constructed in order to provide lodging and boarding facilities to the persons who came to the petitioner-Institute in connection with the educational and academic activities of the petitioner. The hostel was made to provide temporary accommodation to research scholars, research fellows and students and teachers who could not be immediately accommodated in the other halls of residence or hostels or anywhere else in the campus of the Institute. For the facility of those who come to reside in the visitors' hostel as aforesaid, the petitioner makes arrangement for supply of tea, breakfast, lunch and dinner, and charges from them the fee prescribed by the Director of the Institute.

3. Sometime in May, 1972, the petitioner was served with four notices purporting to be in respect of the years 1968-69, 1969-70, 1970-71 and 1971-72, all bearing the date 1st May, 1972, stating that the matter of assessment of sales tax for the preceding year ending on 31st March shall be heard on 12th May, 1972, on which date the visitors' hostel was required to produce its account books, cash memos, receipts, etc. The petitioner sent a reply to the aforesaid notice on 11th May, 1972, inter alia, asserting that the petitioner was not a 'dealer' within the meaning of the definition of that term under the U. P. Sales Tax Act and, as such, the notices were misconceived. Thereafter, the petitioner did not hear anything from the Sales Tax Officer, respondent No. 2, till February, 1973, when four fresh notices dated 3rd February, 1973, for the same years, namely, 1968-69, 1969-70, 1970-71 and 1971-72, were again served on the petitioner with contents similar to those of the earlier notices. The petitioner was required to appear on 24th February, 1973, for doing the needful. Copies of these four notices have been attached as annexures C-l to C-4 to the writ petition.

4. The petitioner sent its reply to the aforesaid notices on 23rd February, 1973, reiterating the allegations made by it in its reply to the earlier notices. Subsequently, a representative of the petitioner also appeared before the Sales Tax Officer and tried to convince him that the petitioner was not a dealer and was not liable to be taxed. The Sales Tax Officer, however, appeared to be adamant in passing an ex parte order of assessment and initiating proceedings even for penalty, as was clear from his letter dated 14th March, 1973, a true copy of which was filed as annexure F to the writ petition. As such the petitioner instituted the present writ petition with the prayer to issue a writ of mandamus commanding the respondents, namely, the State of Uttar Pradesh and the Sales Tax Officer, Sector II, Swarupnagar, Kanpur, to forbear from making any assessment of sales tax on the petitioner and taking any proceedings pursuant to the notices and the letter dated 14th March, 1973, referred to above. A writ of certiorari was also prayed for to be issued quashing the notices and the letter aforesaid.

5. During the pendency of the writ petition an order of assessment was, however, passed for the year 1968-69. Annexure G to the writ petition is a copy of the aforesaid order, whereby sales tax in the sum of Rs. 1,200 was levied on the petitioner. The writ petition has subsequently been amended, and a prayer to quash the aforesaid order of assessment has been added.

6 The case of the petitioner, as set out in the writ petition, is that the fee charged from those who reside in the visitors' hostel is not the actual price of the food consumed by them and the principle of charging the fee is the same as in the case of other hostels where students reside, and that a fixed fee is charged for tea, breakfast, lunch and dinner and the same has no relation to the actual consumption and the charges paid by the residents have really a very remote relation to the actual value of the foodstuffs consumed by them. According to the petitioner, the transaction of supplying foodstuffs to the residents of the hostel cannot be termed as 'sale', nor can the petitioner be said to be 'carrying on the business of buying or selling goods' within the meaning of the U. P. Sales Tax Act.

7. The case of the respondents, however, as put forward in their counter-affidavit, particularly, paragraphs 4 and 13, is that the petitioner charges price of foodstuffs supplied to the visitors separately in the bills and that the customers of the petitioner include all and sundry, as would be clear from a few specimens of the bills issued by the petitioner. In paragraph 4 of the counter-affidavit three instances have been cited. One bill is dated 14th October, 1968, issued in the name of the Posts and Telegraphs Department, Delhi. The second bill is dated 6th May, 1968, issued in the name of Dinesh Chand and Party, and the third bill is dated 21st January, 1968, issued in the name of Heavy Electricals, Bhopal, and also members of HAL and IAL Aeronautics. These instances were given in support of the contention that the foodstuffs were supplied by the petitioner not only to the residents of the hostel but also to other customers, who were not only not academicians but 'all and sundry'.

8. A detailed reply to the averments referred to above has been given by the petitioner in the rejoinder affidavit. After reiterating the facts enumerated in this behalf in the writ petition it has been stated that the payment by the Posts and Telegraphs Department, Delhi, was in respect of its officers, who came to inspect the site in the campus of the Institute for shifting the post office. A request for shifting the office was made by the Institute itself. In regard to the item of Dinesh Chand and Party, the position stated in the rejoinder affidavit was that Dinesh Chand was a resident of hall No. 5. His relations and friends had come on that day and immediately no arrangement for providing meals could be made in hall No. 5 and, accordingly, Dinesh Chand and his friends and relations took the same at visitors' hostel. It is asserted that both these items could not be said to relate to persons unconnected with the Institute. So far as the item relating to members of HAL and IAL Aeronautics was concerned, the position was stated to be that the Institute itself had got an Aeronautical

9. Engineering Department and members of HAL and IAL had to visit the Institute in connection with the activities of the said department, and their visits were connected with the activities of the department and for the objects of the Institute,

10. In reply to paragraph 13 of the counter-affidavit it has been stated that foodstuffs are not sold by the petitioner but charges are made on different items, like tea, breakfast, lunch and dinner. It has been denied that the said facility is open to all and sundry, It is claimed that the said facility is open to the inmates of the hostel, who reside therein with the permission of the Director and such other persons who visit the Institute for purposes connected with the objects of the Institute. It is averred that in exceptional cases, which will be hardly one or two in the whole year, the Director permits relations or other persons connected with the Institute to reside in the hostel or to order dinner, etc., on fixed charges. The petitioner has also filed copy of one such bill as is issued to those who come and stay in the hostel, as annexure H to the writ petition, in support of its contention that no foodstuffs are sold by the petitioner but a fixed fee is charged for tea, breakfast, lunch and dinner, etc., which bears no relation to their actual consumption.

11. On a perusal of the various affidavits and the provisions of Section 6 of the Act, as also the relevant provisions of the statute as mentioned in the writ petition, we are of the opinion that the petitioner is under statutory obligation to maintain a hostel such as the visitors' hostel, and its activity in supplying foodstuffs to the occupiers of the hostel is an integral part of the objects of the petitioner-Institute.

12. So far as the students, research scholars and research fellows, who come to reside in the visitors' hostel in the manner stated in the writ petition are concerned, there seems to be no difficulty, as the activity of supplying foodstuffs to these persons comes specifically under Section 6(c) of the Acr, according io which, one of the duties of the Institute is to establish, maintain and manage halls and hostels for the residence of students. It is again covered by the relevant statutes framed under Section 26(j) of the Act, which empowers the Institute to frame statutes to provide for establishment and maintenance of halls arid hostels. The Institute, as already pointed out, is a residential institution.

13. The relatives or friends of the students or even those persons who from time to time come to the Institute in connection with the activities of the Institute and are in that capacity allowed to stay in the visitors' hostel and supplied with foodstuffs cannot, in our opinion, be said to be 'all and sundry' as is the case of the Sales Tax Officer in the counter-affidavit. The act of the petitioner in permitting them to stay in the hostel and providing them with foodstuffs, in our opinion, comes within Clause (n) of Section 6, which casts a duty upon the Institute to do all such things as may be necessary, incidental or conducive to the attainment of all or any of the objects of the Institute. It is in this context that it has to be determined as to whether the petitioner is a 'dealer', namely, whether it carries on the business of buying and selling goods within the meaning of Section 2(c) of the U. P, Sales Tax Act.

14. In University of Delhi v. Ram Nath [1963] 24 F.J.R. 509 (S.C.) while considering the question whether the University of Delhi was an industry within the meaning of the Industrial Disputes Act, the Supreme Court held that the distinctive purpose and object of education would make it very difficult to assimilate it to the position of any trade, business or calling or service within the meaning of Section 2(j) of the Industrial Disputes Act, and that education seeks to build up the personality of the pupil by assisting his physical, intellectual, moral and emotional development. To speak of this educational process in terms of industry sounds incongruous. While repelling the argument that the university was an industry inasmuch as it employs subordinate staff and its subordinate staff does the work assigned to it, it was held that in the main scheme of education the subordinate staff plays such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend its industrial colour to the principal activity of the university, which is imparting education. The work of promoting education is carried on by the university and its teachers, and if the teachers are excluded from the purview of the Act, it would be unreasonable to regard the work of imparting education as industry only because its minor, subsidiary and incidental work may seem to partake of the character of service which may fall under Section 2(j).

15 The question as to whether the Madras Gymkhana Club was an 'industry' within the meaning of the Industrial Disputes Act came up for consideration before the Supreme Court in Secretary, Madras Gymkhana Club Employees' Union v. Management of the Gymkhana Club [1967] 33 F.J.R. 157 (S.C.). In that case it was urged that since the club had employees who were engaged in the production of material and other services, it was an industry. The argument was repelled, and it was held that it is true that the affairs of the club are organised in the way business is organised, and that there is production of material and other services and in a limited way production of material goods mainly in the catering department, but these circumstances are not truly representative in the case of the club, because the services are to the members themselves and for their own pleasure and amusement and the material goods are for their consumption. In other words, the club exists for its members. No doubt, occasionally strangers also take benefit from its services but they can only do so on invitation of members. No one outside the list of members has the advantage of these services as of right. Nor can these privileges be bought. In fact, they are available only to members or through members. It was further held that the circumstance that guests are admitted is irrelevant to determine if the club is an industry. Even with the admission of guests being open, the club remains the same, that is to say, a members' self-serving institution. No doubt, the material needs or wants of a section of the community is catered for, but that is not enough. This must be done as part of the trade or business or as an undertaking analogous to trade or business.

16. In Cricket Club of India v. Bombay Labour Union [1969] 35 F.J.R, 353 (S.C.) it was held that the services provided in the club for members have to be treated as activities of a self-serving institution and on account of such activities the club could not be termed as an 'industry' within the meaning of the Industrial Disputes Act.

17. Management of Safdar Jung Hospital, New Delhi v. Kuldip Singh Sethi [1970] 38 F.J.R. 246 (S.C) was a case where a question cropped up as to whether the Safdar Jung Hospital, New Delhi, was an 'industry' within the meaning of the Industrial Disputes Act. In that connection, it was held that if a hospital, nursing home or dispensary is run as a business in a commercial way, there may be found elements of an industry there, but hospitals run by Government and even by private associations, not on commercial lines but on charitable lines or as part of the functions of Government Department of Health cannot be included in the definition of 'industry'.

18. In Swadeshi Cotton Mills Co. Ltd. v. Sales Tax Officer A.I.R. 1965 All. 86 it was urged for the Sales Tax Officer that the Aligarh Muslim University was a 'dealer' within the meaning of the U. P. Sales Tax Act, inasmuch as it maintained dining halls, wherein it served food and refreshments to its resident-students. The argument was repelled, and it was held that in maintaining dining halls the Aligarh Muslim University is not engaged in any commercial activity. The university is an educational institution. Its activites are predominantly academic. It is not engaged in business according to the usual sense of the term. Supply of food to students in dining halls is incidental to the general academic activity of the university. The incidental provision of food in dining halls does not imply that the university carries on the business of buying or selling goods and the university is not a dealer as defined in Clause (c) of Section 2 of the Sales Tax Act. The dining hall service was held to be an integral part of the university while imparting eduction to the students. It was observed that the dining hall service is indissolubly blended with, and is an inseparable component of, education of the university. Relying on the observations made by the Supreme Court in the case of University of Delhi [1963) 24 F.J.R. 509 (S.C.) it was held that the activity of providing meals to its residential students is such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend a business colour to the university so as to make it an institution carrying on the business of buying and selling goods.

19. The distinction laid down in the aforesaid decisions between a case, on the one hand, where the principal activity of an institution is doing business in a commercial way, and, on the other hand, a case where its principal activity is predominantly academic or charitable and an activity which may appear to have some incidents of business is only minor, subsidiary and incidental to the principal activity and is an integral part of it, is apposite and affords valuable guidance.

20. Reverting to the facts of the instant case, it is clear that the petitioner is essentially a residential institution where all students, research scholars and research fellows have to reside in the halls of residence and hostels built by the Institute and, in that connection, it has to supply foodstuffs to the inmates of the hostels as also incidentally to the relatives of the inmates and other persons who come and stay in the hostel in connection with the activities of the Institute. It is further clear from annexure H to the writ petition that the charges for foodstuifs are paid to the petitioner on the basis of fixed fee for tea, breakfast, lunch and dinner, which has no relationship to the actual quality or quantity of the foodstuffs consumed. Accordingly, it cannot be said that the petitioner's principal activity is doing business in a commercial way of buying and selling foodstuffs. On the other hand, it is apparent that the principal activity of the petitioner is predominantly academic and the supply of foodstuffs in the manner stated above is minor, subsidiary and incidental to the principal activity and is an integral part of its academic activity. Consequently, the petitioner cannot be dubbed as a 'dealer' within the meaning of Section 2(c) of the U. P. Sales Tax Act. The Sales Tax Officer had accordingly no jurisdiction to initiate proceedings for levy of sales tax on the petitioner.

21. In the result, the writ petition succeeds and is allowed, the order of assessment for the year 1968-69 (annexure G to the writ petition) as also the notices dated 3rd February, 1973 (annexures C-1 to C-4 to the writ petition), and the direction contained in the letter dated 14th March, 1973 (annexure F to the writ petition), are quashed, and respondent No. 2 is prohibited from continuing the assessment proceedings initiated in pursuance of the aforesaid notices and letter. The petitioner will be entitled to its costs.


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