1. This is an application under Article 226 of the Constitution of India for the issuance of a writ or writs in the nature of mandamus or certiorari against the respondents ordering them to refrain from issuing any notice to the petitioner either under Section 15 or Section 10 or under any other section of the Central Provinces and Berar Sales Tax Act, 1947 (hereinafter called the Act).
2. The petitioner, Bengal Nagpur Cotton Mills Club, Rajnandgaon, District Durg, claims to be a social and recreational club ; its alleged object being to arrange for the social entertainment and physical and mental recreation of its members. With a view of achieving its object, the petitioner says that it has to afford amenities in sports and indoor games to its members and has to supply cigarettes, soft drinks and foreign liquor to them. A notice under Section 15 (1) of the Act was served on the club to produce, before the Sales Tax Officer, documents and accounts of the club. The club was also asked to get itself registered under Section 8 of the said Act and a notice was served under Section 10 of the Act for submitting a return of accounts within two months of the date of the receipt of the said notice. The petitioner contends that it supplies goods to its members only, that the transaction is not a 'sale', that the club is not a 'dealer' and that it does not require registration. It further contends that it is not carrying on business of selling or supplying goods and that the levy of sales tax on 'supply of goods' in the Act is ultra, vires the Constitution. The petitioner, therefore, files this petition for quashing the orders of the respondents.
3. In the return, on behalf of the respondents, it is urged that the club supplies goods to its members on a commercial basis; that the club sells foreign liquor without registration under the Act; and that it was, therefore, asked to produce its books of account from 1948 and also to register under Section 8 of the Act. It is also contended that the club is an entity separate from the members composing it and the transactions regarding the supply of goods to its members come within the taxing liability of the Act, which, it is submitted, is intra vires the State Legislature and does not violate the Constitution of India.
4. Learned counsel for the petitioner places reliance on Cosmopolitan Club, Madras v. The Deputy Commercial Tax Officer, Triplicane Division A.I.R. 1952 Mad. 814 ; On appeal 6 S.T.C. 1, for the proposition that there is a difference between a members' club and a proprietary club; that in a members' club not running for profit every member has equal interest and share in the property and in the servants of the club ; and that if refreshments are served to members at cost price which includes sales tax already paid, such supply is not transfer of property in the course of trade or business within the meaning of the definition of 'sale' given in Section 2 (h) of the Madras Sales Tax Act (IX of 1939); and that the levy of sales tax on such supply of refreshments is illegal.
5. Now, the material portion of the definition of 'sale' in the said Madras Sales Tax Act of 1939 differs from that given in Section 2 (g) of the Central Provinces and Berar Sales Tax Act (No. XXI of 1947) as will be apparent from the following :-
Madras Act. C. P. Act.''Sale' with all its grammatical ''Sale' with all its grammaticalvariations and cognate expressions variations and cognate expressionsmeans every transfer of the means any transfer of property inproperty in goods by one person to goods for cash or deferred paymentanother in the course of trade or or other valuable consideration,business for cash or for deferred including a transfer of property inpayment or other valuable goods made in the course of theconsideration.' execution of a contract, but doesnot include a mortgage,hypothecation, charge orpledge;**'
6. The prominent requirement of the definition in the Madras Act that the transfer of property must be 'in the course of trade or business' is absent in the Act. We do not, however, think that due to this difference we can disagree with the main principle enunciated in Cosmopolitan Club, Madras v. The Deputy Commercial Tax Officer, Triplicane Division  3 S.T.C. 77 ; On appeal 6 S.T.C, 1 that the supply of refreshments in a members' club registered under Section 26 of the Companies Act, purchased out of club funds, composed of members' subscriptions is not a transfer of property from the club as such to a member. But it may be pointed out that in that case sales tax was already paid by the club, and therefore a decision on the point was necessary. In the present case there is nothing to show that the club has already paid any sales tax. The club's registers and accounts have yet to be inspected. However, as the point arising in this case is important and has been fully argued before us and as other cases are awaiting decision, we think we should express a considered opinion on the questions canvassed.
7. 'Dealer' in the Act means 'any person who, whether as principal or agent, carries on in Madhya Pradesh the business of selling or supplying goods, whether for commission, remuneration or otherwise and includes a firm, a partnership, a Hindu undivided family and the Central or a State Government or any of their departments and includes also a society, a club or association selling or supplying goods to its members.' The word 'sale' has been denned in the Act, but not the word 'supply'. This word is absent in the Madras Act, the relevant section of which was stated and explained in para. 15 by Mack, J., in Cosmopolitan Club, Madras v. The Deputy Commercial Tax Officer, Triplicane Division  3 S.T.C. 77. As the word 'supply' is not found in that Act that decision does not help us. We have to interpret the section as it stands in the Act. It may be noticed that so far as this case is concerned, the Legislature has used four words of large import : 'club', 'business', 'supply' and 'or otherwise'. In our opinion, the Legislature knew the various kinds of clubs existing in the State: incorporated, unincorporated, members and proprietary clubs. Its intention was to bring all sorts of clubs under the general term 'dealer' if they were doing business of selling or supplying goods to members.
8. The word 'business' has a more extensive signification than 'trade'. Jesse], M.R., after referring to several dictionaries and decisions observed in Smith v. Anderson (1880) 15 Ch D. 247 that anything which occupies the time and attention and labour of a man for the purpose of profit is business. In In re A Debtor  1 Ch. D. 237, Lord Wright, M. R., observed that the word 'trade' is often confined to buying and selling commodities ; but business is a wider term. The word 'business' was added to 'trade' in Section 125(1) of Bankruptcy Act, 1914, in order to widen the scope of the section. It was added that the word 'business' at least covers a continuous occupation involving liabilities to others. In our opinion, if operations involving the making of a number of genuine commercial contracts extending over a long period of time are found, that will certainly be said to be carrying on a business. But the main question is : what is the meaning of business of 'supplying' goods to its members? Did the Legislature intend making a distinction In Pandit Banarsidas v. State of Madhya Pradesh  6 S.T.C. 93 it was held that, there is nothing sinister in the use of the word 'supply' and that the word must be held to be used as equivalent to supply for a price. Several cases on the provisions of the English Licensing (Consolidation) Act, 1910 (now of 1953) have sought to bring out the distinction between 'sale' and 'supply' of intoxicating liquor in clubs. Section 94 of the English Licensing (Consolidation) Act, 1910, for example, says 'intoxicating liquor shall not be supplied in a club for consumption off the premises ; and, if any person supplies or obtains any intoxicating liquor in contravention of the provisions of this section, he shall be liable to a penalty.' In Clarke v. Griffiths : Peacock v. Same  1 K.B. 226, the section came up for interpretation. Avory, J., at page 230 observed that the word 'supply' is substituted for the word 'sell' in other parts of the Act. It is really equivalent to 'serve'. At page 231 Shearman, J., stated : 'It is only necessary to turn to Section 93 and other sections in order to make it plain that 'supply' relates to members and 'sell' to other persons, and the supply begins when the members order the intoxicating liquor.
9. Graff v. Evans (1882) 8 Q.B.D. 375 is authority for the proposition that when the members of a bona fide club are the owners of the liquor consumed, which is merely distributed among them, that distribution is not sale. In the words of Darling, J., at page 123 of Humphrey v. Tudgay  1 K.B. 119 'the liquor being the liquor of the whole association, the member who takes some of it puts back into the club, not the liquor, but its equivalent in money. He only takes what is his own and replaces it with something of his own although not of the same kind or quality'. It was pointed out by Banks, J., at page 180 of Metford v. Edwards  1 K.B. 172 that if a number of persons under the name of a club combine together for the purpose of selling intoxicating liquor to others who until payment have no property in it, that would be a sale; and if 'sale' as distinguished from 'supply' takes place on the premises of a club, no matter how genuine, old established or well conducted, that transaction will not be protected by the mere registration of the club. This will also be so if the 'supply' or 'sale' to members is not bona fide and is really for the benefit of non-members. But in such a case the conduct of the members cannot be taken as the conduct of the club, unless it was done with the connivance of the management. Similarly, if the sale is of goods not part of the general stock in the ordinary way, it may amount to business within the Act. Everything depends upon the activities of the clubs and the kind of supplies that will be ordinarily expected. If a member orders the club to make and fix curtains at his house, the contract will be one of sale, though work and labour are involved in the making and fixing. See Love v. Norman Wright (Builders), Ltd.  1 K.B. 484, at p. 487.
10. Then, 'turnover' is denned in Section 2 (j) of the Act in the following words:-
'turnover' means the aggregate of the amounts of sale prices and parts of sale prices received or receivable by a dealer in respect of the sale or supply of goods or in respect of the sale or supply of goods in the carrying out of any contract, effected or made during the prescribed period ; and the expression 'taxable turnover' means that part of a dealer's turnover during such period which remains after deducting therefrom'-
(a) his turnover during that period on-
(i) the sale of goods declared tax-free under Section 6 ;
(ii) sales to a registered dealer of goods declared by him in the prescribed form as being intended for resale by him by actual delivery in Madhya Pradesh for the purpose of consumption in that State or of goods specified in such dealer's certificate of registration as being intended for use by him as raw materials in the manufacture of any goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State, and of containers and other materials used in the packing of such goods;
(iii) sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910, of goods for use by it in generation or distribution of such energy;
(iv) such other sales as may be prescribed; and
(b) such part of the balance remaining after making the deductions allowed by paragraphs (i) to (iv) of Sub-clause (a) as is equal to-
(i) one-seventeenth part in respect of sales of goods mentioned in Part I of Schedule I;
(ii) one-sixty-fifth part in respect of sales of goods mentioned in Part II of Schedule I ; and
(iii) one-thirty-third part in respect of sales of goods not mentioned in Schedule I or Schedule II;
It will be manifest that the Act seeks to levy tax only on the aggregate of the amounts of sale prices and parts of such prices received or receivable by a dealer in respect of the sale or supply of goods. Reading this definition with those of 'sale' and 'dealer' we think that the word 'supply' should not be interpreted in its literal absolute sense, but must be given a limited and qualified sense. In The State of Bihar v. The Bengal Chemical and Pharmaceutical Works Ltd.  5 S.T.C. 28, the majority view expressed was that the word 'supply' should be interpreted noscitur a sociis, that is, that meaning should be given to the word which it shares with the word 'sale' occurring before it, on the principle laid down by Lord Bacon that copulatio verborum indicat acceptationem in eodum sensu (the coupling of words together shows that they are to be understood in the same sense). The words, as they are, take colour and meaning from their context. The same view has been followed by the Patna High Court in Karamchand Thapar and Ors. v. The State of Bihar  7 S.T.C. 58, where it has been laid down that 'supply' is merely a form of sale and despatch, and there can be no supply of goods in this sense unless there is sale. With due respect to their Lordships we think that though the two concepts of 'sale' and 'supply' are distinct and the Legislature knew the distinction, yet when it used the expression 'business of supplying goods' in Section 2(c) of the Act it meant that property in goods will be transferred to those to whom the goods are supplied in the same way as in a transaction of sale, that is, in a transaction akin to sale and as a business deal. To this extent, we respectfully agree with the opinion of the Patna High Court.
11. The learned Advocate-General argued that the club as a legal entity is separate from its members; and if it supplies goods to them for price, it would amount to sale. Though this proposition is not well settled, there are certain English decisions which lend support to the contention advanced. It was observed at page 410 by Lindley, L. J., in Farrar v. Farrars Ltd  40 Ch. D. 395, that a sale by a member of a corporation to the corporation itself is in every sense a sale valid in equity as well as at law. This principle in some different circumstances has been applied in Wurzel v. Hoitghton Main Home Delivery Service, Limited  1 K.B. 380. In that case Sub-section (4) of Section 2 of the English Road and Rail Traffic Act, 1933, came up for interpretation. The Sub-section provided that 'a private carrier's licence (referred to as 'a C Licence') shall entitle the holder thereof to use the authorised vehicles for the carriage of goods for or in connection with any trade or business carried on by him, subject to the condition that no vehicle which is for the time being an authorised vehicle shall be used for the carriage of goods for hire or reward....' An incorporated society, whose members consisted exclusively of persons employed at a colliery, had as its object, the business of delivering to its members coal supplied to them from the colliery by the colliery company. For the purposes of its business the society owned a motor vehicle in respect of which it held 'a C licence' under the above sub-section. The society used the vehicle for making a delivery of coal at the house of one of its members, the charge for the delivery being deducted from the wages of the member payable by the colliery company and subsequently paid by that company to the society. On an information against the society for having failed to comply with the condition, to which the licence was subject under the above subsection, by using the vehicle for the carriage of goods for hire or reward, it was held that, as the society was incorporated, it was a legal entity separate and distinct from its individual members ; and consequently that in using the vehicle for the carriage of coal to one of the members at a charge, it used the vehicle for 'the carriage of goods for hire or reward' within the meaning of the sub-section and was guilty of the offence with which it was charged. In another case (Wurzel v. Atkinson and Ors.) the material circumstances were in all respects similar to those above mentioned ; but the society, which carried on the business and owned the vehicle and against which the information was laid, was an unincorporated society. Lord Hewart, C.J., delivering the judgment, observed that, as the society was unincorporated it had no separate existence apart from its individual members who were themselves the owners of the vehicle and the recipients of the payments made for the use of it; and consequently it was held that when the vehicle was used for the carriage of coal to the member it was not used for the 'carriage of goods for hire or reward' within the meaning of the sub-section, and that the society was not guilty of the offence charged against it.
12. The same principle has been applied to social clubs in some American cases. The following observation occurs at page 404, Article 283, Vol. 30, of American Jurisprudence :-
A considerable number of courts have held that when a bona fide social club purchases and keeps on hand liquors to be distributed to its members without profit, although for pay, and as a mere incident of the general purposes of the club, the title to the liquor rests in the members in common, not in the club, and that, therefore, delivery of liquor to a member who orders and pays for it is not a sale which will support a criminal prosecution under the liquor law.... The theory that liquor ordered by the club belongs to the members in common is by some courts held inapplicable to an incorporated club, on the ground that such a corporation is a legal entity vested with the title to the liquor, which passes on its delivery to a member for pay. Apart from the question whether the club is incorporated it is held in a number of cases that the distribution by a club of liquor purchased by it to members who respectively pay for that delivered to them, is a sale, which will justify a conviction of an offence of the club charter. This is true, it is held, irrespective of whether the club makes a profit from the transactions and notwithstanding the distribution of liquor is merely incidental to its general purposes.
The latter view and the view expressed in Wurzel v. Houghton Main Home Delivery Service Limited  1 K.B. 380 have not been accepted in important decisions of the English Courts which have followed Graff v. Evans (1882) 8 Q.B.D. 375.
13. In Trebanog Working Men's Club v. Macdonald  1 K.B. 576, it was held that the incorporated societies being legal entities as distinct from the members can act as their agents or trustees, the real interest in the liquor being in the members; and the supply of the liquor to individual members would not constitute a sale thereof. In this view of the matter the question whether a club is incorporated or not will not be material.
14. A club can do the business of supplying goods to its members; but if it is found that this business is 'for commission, remuneration, or otherwise' the club must be held to be a 'dealer' within the definition of the term in Section 2(c) of the Act. The words 'or otherwise' are important and very wide. Generally, when they follow an enumeration they receive an ejusdem generis interpretation. But sometimes the context may show that the doctrine of ejusdem generis may not be applicable. In National Association of Local Government Officers v. Bolton Corporation  A.C. 166 the definition of 'workman' as given in the conditions of Employment and National Arbitration Order, 1940, and identical with that given in the English Industrial Courts Act, 1919, came up for interpretation before the House of Lords. The material portion of that definition is reproduced below :-
'Workman' means any person who has entered into or works under a contract with an employer, whether the contract be by way of manual labour, clerical work or otherwise....
Viscount Simon, L. C., observed at pp. 176-177 :-
The use of the words 'or otherwise' does not bring into play the ejusdem generis principle, for 'manual labour' and 'clerical work' do not belong to a single limited genus. The only common class to which manual labour and clerical work can be said to belong is the broad class of 'mode of service'. I agree entirely with the Lord Chief Justice when he says that: 'The sentence is to be read as if it said 'whether by way of manual labour, clerical work, or some duty which is neither manual labour nor clerical work' '. As the derivation of 'otherwise' shows, 'or otherwise' means 'or in another way'.
15. In another case, Eton Rural District Council v. Thames Conservators  1 Ch. D. 540, the first sub-section of Section 9 of the Land Drainage Act, 1930, came up for interpretation. It runs thus :
It shall be the duty of every catchment board to take steps for the commutation of all obligations imposed on persons by reason of tenure, custom, prescription or otherwise, to do any work (whether by way of repairing of banks, maintaining of water-courses or otherwise) in connexion with the main river....
19. Vaisey, J., applied the ejusdem generis rule to the words 'or otherwise' which appear twice in the sub-section. In the first context he observed that the three words 'tenure', 'custom', 'prescription' all seem to indicate an obligation which attaches to some particular land and these words exclude by implication merely personal obligations. In the second context also, it was observed that the ejusdem generis principle of construction must apply ; for, by using the words 'whether by way of repairing of banks, maintaining of water courses or otherwise' as descriptive of work in the main river, the sub-section clearly limits the work to structural works, and excludes other operations, such as the running of a line of steamships on the river.
16. These two cases are sufficient to show where the ejusdem generis rule should be invoked and where it cannot be applied.
17. In our opinion, the rule should be applied in the present case, as 'commission' and 'remuneration' both belong to the same genus, i.e., they refer to some payment or consideration in some form for services rendered. We do not think that in a non-proprietary members' club the element of 'profit' in the price charged to the member makes any difference. The excess paid by the member does not entirely cease to be his property. He has a share in it just as he has a share in the stocks carried by the club. The same is, however, not true if goods are sold or supplied to non-members. The profit thus made is on a different footing and the club can be said to run a business. In such an event the club as an entity is viewed vis a vis persons not belonging to the club. But where the club supplies goods to its own members an excess charged to build up a fund to provide other amenities does not make the transaction a business one, nor the supply a sale. In such a case the payment is a voluntary contribution to the funds of the club to enable it to cater for other needs and amenities. This will be so if the goods are supplied to the members bona fide by the club, even if some of the goods are ultimately consumed by non-members. The conduct of the member cannot make any difference if the conduct of the club is bonafide and honest. It is obvious enough that the club is bound to satisfy the taxing authorities that it is not carrying on a business of selling or supplying goods to non-members. It may be mentioned here that this fact has not yet been found and no decision has been given one way or another. In this view of the matter, the club is bound to produce under Section 15 of the Act accounts, registers, or documents, if required by the Commissioner. It is only after inspection of the accounts and relevant papers that the authorities concerned can arrive at the conclusion whether it should be registered as a 'dealer' or not.
18. In Poppatlal Shah v. The State of Madras  S.C.R. 677 at p. 684, their Lordships of the Supreme Court while dealing with Section 2(h) of the Madras General Sales Tax Act [939, observed that stress is laid on the element of transfer of property in a sale and no other, and that the language gives no indication of the popular meaning of sale. In Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai Prakash  1 S.C.R. 243, the Supreme Court clearly laid down that a liability to be assessed to sales tax can only arise if there is a completed sale, under which price is paid or is payable; and that a State Legislature cannot, by enlarging the definition of 'sale' as including something else, arrogate to itself a power which is not conferred upon it by the Constitution.
19. It will, therefore, be clear that under the Central Provinces and Berar Sales Tax Act, sales tax can be levied only on the gross turnover on sales. In other words, if a transaction does not constitute 'sale', there can be no valid imposition of sales tax. A person may supply goods and still he may not be liable to sales tax, if the transaction done by him cannot be held to be 'sale' within the meaning of Section 2 (g) of the Act.
20. Even accepting the view that an incorporated society is a legal entity, as distinct from the members composing it, we agree with the view expressed in Trebanog Working Men's Club v. Macdonald  1 K.B. 576 that such a society can act as the agent or trustee of the members. If the agent or the trustee supplies goods to the members and charges commission or agency brokerage, even then, ordinarily, the supply of goods would not amount to a transaction of sale and the transfer of property from the incorporated club to its members will not amount to a sale within the definition of the Act or even of the Sale of Goods Act. In this view we are fortified by the observations made in Sista's Limited v. The State of Bombay  7 S.T.C. 343 and Pannalal Babulal v. Commissioner of Sales Tax, U.P., Lucknow  7 S.T.C. 722. The ground of attack that the Act is ultra vires loses its significance when the words 'supply' and 'club' are thus read to indicate only 'sales' and 'supplies' for price and in the course of business. The transactions between a non-proprietary club and its members stand outside the Act.
24. As mentioned above, no sales tax has yet been levied on the petitioner club and so, in our opinion, no legal right of the petitioner has yet been infringed. It will be advisable for the club to produce its books of account before the Commissioner so that the authorities concerned may decide whether the petitioner should be registered as a dealer or not. The petition on this point is dismissed. Without inspecting the accounts and the account books, in our opinion, the authorities cannot determine the question whether the club should be registered as a dealer or not. The notice to the club asking it to get itself registered as a 'dealer' within the meaning of the said Act cannot, therefore, be justified. We, therefore, quash it. In the circumstances of the case, we pass no order as to costs.