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Delhi Cloth and Genral Co. Mills Ltd. Vs. the Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtDelhi High Court
Decided On
Case NumberCivil Writ Petition Appeal No. 214 of 1968
Judge
Reported inILR1976Delhi28; [1976]38STC403(Delhi)
ActsBengal Finance (Sales Tax) Act, 1941 - Sections 2; Factories Act, 1948 - Sections 46; Delhi Factories Rules, 1950 - Rule 65
AppellantDelhi Cloth and Genral Co. Mills Ltd.
RespondentThe Union of India and anr.
Advocates: J.K. Seth,; Dalip Malhotra and; R.C. Chawla, Advs
Cases ReferredIn Tata Iron and Steel Company Ltd. v. State of Orissa (supra
Excerpt:
bengal finance (sales tax) act (1941), as applicable to delhi - sections 2(c), 11(1)--canteens maintained by the petitioners/assesseds for the benefit of their employees on no profit basis--whether the proceeds of the sale effected at the canteens liable to be included in the taxable turnover of the petitioner/assesseds for the levy of sales tax--whether the employer a `doaler' qua the canteens--whether the `sale' complete--factories act (1948), section 46--delhi factories rules (1950), rules 65, 68.; that ' business' for the purposes of sales tax should be understood in a commercial sense, i.e. as organized activity carried on with a view to earn profit or gain, unless there is any revision in the statute to the contrary,. rule 68(1) of the delhi factories rules, 1950, specifically.....t.v.r. tatachari, c.j.(1) these are four civil writ petitions and three sales tax references. as a common contention has been raised in all the seven matters, they have been heard together. the contention is that the turnover of the sales effected by the petitioners in the canteens run by them is not liable to be included in the taxable turnover for the purposes of levy of sales tax under the bengal finance (sales tax) act, 1941, as extended to the union territory of delhi with effect from 28th may, 1951, and as amended from time to time (hereinafter referred to as the sales tax act). (2) we shall first state the facts which led up to the filling of civil writ petition no. 214 of 1968 and the making of sales tax reference no. i of 1972. the petitioner in civil writ petition no. 214 of.....
Judgment:

T.V.R. Tatachari, C.J.

(1) These are four Civil Writ Petitions and three Sales Tax References. As a common contention has been raised in all the seven matters, they have been heard together. The contention is that the turnover of the sales effected by the petitioners in the canteens run by them is not liable to be included in the taxable turnover for the purposes of levy of sales tax under the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi with effect from 28th May, 1951, and as amended from time to time (hereinafter referred to as the Sales Tax Act).

(2) We shall first state the facts which led up to the filling of Civil Writ Petition No. 214 of 1968 and the making of Sales Tax Reference No. I of 1972. The petitioner in Civil Writ Petition No. 214 of 1968 and Sales Tax Reference No. 1 of 1972 is the Delhi Cloth & General Mills Company Limited which is a public Limited company registered under the Indian Companies Act, 1882, and has its Registered Office at Bara Hindu Rao, Delhi. It runs the following factories at Delhi : (a) The Delhi Cloth Mills, (b) S. D. Mills, (c) D.C.M. Silk Mills, (d) D.C.M. Chemical Works, and (e) D.C.M. Manufacturing Works As required by Section 46 of the Factories Act, 1948, read with Rule 68 of the Delhi Factories Rules, 1950, the company set up canteens in its factories mentioned above on a non-profit basis. The company has been registered as a dealer under Section 7 of the Sales Tax Act in respect of the business carried on by it in the aforesaid factories. As such, it has to submit quarterly returns of its turnover of the said effected by the said factories.

(3) In the quarterly returns of its turnover of the sales for the assessment year 1958-59, the company did not include the receipts in respect of the sales effected in the canteens on the ground that the said canteens were being run in compliance with a statutory obligation without any profit motive and, as such, the company could not be said to be carrying on business as a runner of canteens, that it was not, thereforee, a dealer so far as the sales effected in the canteens were. concerned, and that the sales effected in the canteens were thus not liable to sales tax and, thereforee, did not form part of the turnover assessable under the Sales Tax Act. The assessing authority did not accept the said contention and by its order, dated 29th March, 1963. included the receipts from the canteens amounting to Rs. 1.33,233.94 in the turnover and levied tax accordingly under Section 11(1) of the Sales Tax Act.

(4) Against that order, the company filed an appeal, No. 225 of 1963-64, under Section 20(1) of the Sales Tax Act before the Assistant Commissioner (Sales Tax) Delhi. By its order, dated 24th September, 1963, the appellate authority confirmed the order passed by the assessing authority so far as it related to the inclusion of the receipts from sales in the canteens.

(5) The company filed a revision petition No. R-318 of 63-64, under Section 20(3) of the Sales Tax Act before the Commissioner (Sales Tax), Delhi. By his order, dated 10th June, 1964, the Commissioner dismissed the revision petition.

(6) The company then filed a second revision petition, No. 28 of 1967, under Section 20(3) of the Sales Tax Act before the Chief Commissioner, Delhi. The said revision petition was assigned to and tried by Shri O. N. Vohra, Additional District Judge, Delhi. By his order, dated 1st September, 1967, the learned Additional District Judge allowed the said revision petition, set aside the order passed by the assessing authorities below and directed that the company be assessed on the turnover for the assessment year 1958-59 after excluding the receipts of the sales from the canteens. The assessing authorities did not challenge the said decision and it had become final between the parties.

(7) During the pendency of the assessment proceedings in respect of the: assessment year 1958-59, the company submitted returns of the turnover in respect of the sales during the four quarters of the assessment year 1959-60 in which again it did not include the receipts from the sales in the canteens. The assessing authority included the receipts from the sales in the canteens for the first quarter of 1959-60 amounting to Rs. 75, 244 in the turnover for the said quarter. The company preferred an appeal, No. 175 of 1964-65, against that order to the Assistant Commissioner (Sales Tax) Delhi under Section 20(1) of the Sales Tax Act, who rejected the same by his order, dated 6th June, 1964. The company filed a revision petition, No. R-218 of 1964-65, under Section 20(3) of the Sales Tax Act before the Assistant Commissioner of Sales Tax.

(8) During the pendency of the revision petition for the assessment year 1958-59 which was subsequently decided by the Additional District Judge, the petitioner had also submitted returns for the turnover for the assessment years 1960-61, 1961-62, 1962-63 and 1963-64. In those returns also, it did not include the receipts from the sales in the canteens. The assessing authority assessed the sales tax on the aforesaid turnovers without including the receipts from the sales in the canteens by his order, dated 30th December, 1967. The company then received a notice, dated 4th March, 1968, from the Commissioner of Sales Tax under Section 20(3) of the Sales Tax Act staling that he proposed to revise, of his own motion, the assessment order, dated 30th December, 1967, passed by the assessing authority for the period from 1st April, 1963, to 30th March, 1964, on the ground that the said order of assessment was erroneous inasmuch as no tax had been levied on the sales effected in respect of the canteens run by the company.

(9) The company thereupon filed Civil Writ Petition, No. 214 of 1968, praying that the said notice may be quashed, and a direction be issued that the receipts from the sales in the canteens are not liable to be included in the taxable runover for the purposes of assessment to sales tax for the subsequent years under the Sales Tax Act. The respondents to the Writ Petition are (1) Union of India and (2) The Commissioner of Sales Tax, New Delhi.

(10) In respect of the assessment year 1959-60, the company filed an application before the Lt. Governor, Delhi, under Section 20(1) of the Sales Tax Act requiring him to state the case and refer a question of law to this High Court stated to arise out of the order of Shri O.N. Vohra, Additional District Judge, Delhi, in Revision Petition No. 149 of 196R, dated 22nd July, 1969. The Lt. Governor, acceding to the prayer, referred the following question :

'WHETHER on the facts and in the circumstance of the case the proceeds of sales made through the canteens run by the applicants for the benefit of their employees should form any part of the applicant's turnover?'.

(11) The facts which have led up to the filing of the Civil Writ Petitions Nos. 251 of 1971, 350 of 1972, and 278 of 1975, and the making of sales tax references Nos. 8 and 9 of 1972 are the following. The petitioner in the said Writ Petitions is M/s. Biria Cotton. Weaving and Spinning Mills Company which is a public limited company registered under the Indian Companies Act, 1882, and having its Registered Office at Delhi. It is also registered as a factory under the Factories Act, 1948. As required by Section 46 of the Factories Act, read with Rule 68 of the Delhi Factories Rules, 1960, the said company set up a canteen in its factory mentioned above on a nonprofit basis. The company has also been registered as a dealer under Section 7 of the Sales Tax Act and, as such, has to submit quarterly returns of its turnover of the sales effected by it. In respect of the turnover of its sales for the assessment year 1966-67, it did not include the receipts in respect of the sales effected in the canteen on the same ground as the one taken by the Delhi Cloth and General Mills Company. The said contention was not accepted by the assessing authority, and by its order, dated 7th January, 1971, included the said receipts from the canteen in the taxable turnover of the company. The company thereupon filed Civil Writ Petition No. 251 of 1971 praying that the said assessment order be quashed, and that a direction be issued that the receipts from the sales in the canteen are not liable to be included in the taxable turnover of the company for the purposes of assessment to sales tax for the assessment year 1966-67 and for the future assessment years. Similarly, on the assessing authority passing an order, dated 15th March, 1972, in repect of the assessment year 1969-70 and an assessment order, dated 31st January, 1975, in respect of the assessment year 1970-71 including the receipts from the sales in the canteen in the taxable turnover of the company, the company has filed Civil Writ Petition Nos. 350 of 1972 and 278 of 1975 respectively, praying that the said assessment orders may be quashed.

(12) In respect of the assessment years 1960-61 and 1962-63, oh the assessing authority including the receipts from the sales in the canteen by its orders, dated 16th February, 1965, and 18th October, 1966, respectively, the company preferred appeals Nos. 43 of 1965-66 and 1110 of 1966-67 to the Assistant Commissioner of Sales Tax, Delhi, under Section 20(1) of the said Act who rejected the said appeals by his orders, dated 19th August, 1965, and 26th April, 1968/17th May, 1968, respectively. Against the said orders, the company preferred revision petitions Nos. 311 of 1965-66 and 299 of 1968-69 to the Chief Commissioner who rejected them by his orders, dated 6th December, 1968, and 20th January 1969, respectively. The company then preferred second revision petitions, Nos. 8 of 1969 and 113 of 1969 under Section 20(3) of the Sales Tax Act which were assigned to Shri O. N. Vohra, Additional District Judge, Delhi, who rejected the same by his orders, both dated 13th August, 1969. Thereupon, the company filed applications Nos.65 and 66 of 1969 before the Lt. Governor, Delhi, requiring him to state the case and refer a question of law to this High Court. The Lt. Governor, acceding to the prayer, preferred the following question in the two cases to this High Court:

'WHETHER on the facts and circumstances of the case, the proceeds of sales made through the canteens run by the applicants for the benefit of their employees should form part of the applicant's turnover.'

The references have since been numbered in this Court as Sales Tax References Nos. 8 and 9 of 1973.

(13) The question that is raised in all these cases is as to whether the proceeds of sales made in the canteen run by the particular assesses for the benefit of its employees on a non-profit basis form part of the taxable turnover of the assessed. The learned counsel for the assesseds contend that the proceeds of the sales made in the canteen cannot form part of the taxable turnover of the assessed under the Sales Tax Act inasmuch as the assessed, so far as the said sales in the canteen are concerned, is not a 'dealer' within the meaning of the Sales Tax Act, because (a) the assessed, in making the sales in the canteen, cannot be said to be carrying on 'the business of selling goods' within the meaning of the Sales Tax Act and (b) the sales are not strictly 'sales' within the meaning of the Act for the reason that the canteen is being run in order to fulfill the statutory obligation under Section 46 of the Factories Act, 1948, and Rule 68 of the Delhi Factories Rules, 1950.

(14) It would be convenient to set out here the relevant provisions of law for proper appreciation of the aforesaid two reasons.

(15) Section 4(1) of the Sales Tax Act provides for the incidence of taxation under the Act as under :

'WITH effect from such date as the Chief Commissioner may by notification in the official gazette, appoint, being not earlier than thirty days after the date of such notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the date so notified............'

It will be seen that an assessed has to be a 'dealer' before the charging Section 4(1) becomes applicable.

(16) The term 'dealer' is defined in Section 2(c) of the Sales Tax Act, as it stood at the relevant time, as meaning :

'ANY person who carries on the business of selling goods in the Union Territory of Delhi and includes the Government.'

The term 'sale', with its grammatical variations and cognate expressions, is defined in Section 2(g) of the said Act as meaning:

'ANY transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of goods on hire-purchase or other system of payment by Installments. but does not include a mortgage or hypothecation of or a charge or pledge on goods.'

Section 46 of the Factories Act, 1948, provides as follows :

'46. Canteens (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. (2) Without prejudice to the generality of the foregoing power, such rules may provide for (a) the date by which such canteen shall be provided; (b) the standards m respect of construction accommodation, furniture and other equipment of the canteen: (c) the foodstuffs to be served therein and the charges which may be made therefore; (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen; (e) the delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c). Rules 65(2) and 68(1) of the Delhi Factories Rules, 1950, provide as under : '65(2) The occupier of every factory notified by the Chief Commissioner and wherein more than two hundred and fifty workers are 'ordinarily employed' shall provide in or near the factory an adequate canteen according to the standards prescribed in these rules.' '68(1) Prices to be charged: (1) Food, drink, and other items served in the canteen shall be sold on a non-profit basis and the prices charged shall be subject to the approval of the canteen Managing Committee.'

(17) The first reason suggested by the counsel for their contention that the assessce is not a 'dealer' within the meaning of the Sales Tax Act so far as the sales in the canteen are concerned, is that in making the said sales in the canteen, the assessed cannot be said to be carrying on 'the business of selling goods' within the meaning of the Sales Tax Act. In support of the said argument, the learned counsel relied upon some decisions.

(18) In Gannon Dunkerley & Co. (Madras) Ltd. v. The State of Madras, 5 Sales Tax Cases 216(1), the assessed company, Gaiinon Dunkerley & Co. was carrying out certain engineering contracts, etc. and to facilitate the execution of their works which situated all over the State and to provide amenities to the workmen, it was distributing food grains to the workmen and debiting the cost thereof against the wages which it had to pay to them. The question arose as to whether the assessed company was liable to pay sales tax on the value of the food grains supplied to the workmen. After referring to the definition of 'dealer' in the Madras General Sales Tax Act No. 9 of 1939, which was similar to the definition in the Bengal Finance (Sales Tax) Act, as extended to the Union Territory of Delhi, and after considering certain English decisions, a Division Bench of the High Court of Madras (Satyanarayana Rao and Rajagopalan JJ.) held that the word 'business' employed in the definition of 'dealer' in the Madras General Sales Tax Act was used in the sense of buying or selling with a view to earn profit, that in the case before them the supply of food grains to the workmen by the assessed was not carried out with a view to earn profit, and that the assessed was not, thereforee, a 'dealer' within the meaning of the Act so far as the supply of 'ood grains was concerned and was not liable to sales tax on the value 3f the food grain'.

(19) In Sree Meenakshi Mills Ltd. v. State of Madras, 5 STC 291, the assessed company was running canteens for the benefit of its employees, and the question arose as to whether the turnover relating to the sales effected by the assessed in the canteens was liable to be included in the taxable turnover and subjected to sales tax. The same Division Bench, as was referred to abpves followed its earlier decision in the case of Gannon Dunkerley & Co. (supra) (1) and held that the word 'business' was used in the Madras General Sales Tax Act in the commercial sense, an integral part of which was the motive to make profit out of the sales or purchases, and if that was wanting, a person buying or selling would not be a 'dealer'. In that view, the learned Judges held that the assessed in the case before them was not a 'dealer' in respect of the turnovers relating to the sales in the canteens, and that it could not be validly assessed to tax under the Act. '

(20) In Deputy Commercial Tax Officer, Triplicane Division, and another v. The Cosmopolitan Club, 6 Sales Tax Cases 1(3), the assessed, the Cosmopolitan Club, was supplying refreshments to its members, and the question arose as to whether sales tax could be levied on the value of refreshments supplied by the Club to its members. A Division Bench of Madras High Court (Balakrishna Ayyar and Rajagopala Ayyangar JJ.) held as follows :

'IT will be noticed that to constitute a sale with the meaning of the Act at least three ingredients are required : (i) there must be a transfer of property in goods, (ii) the transfer must be in the course of a trade or business, and (iii) it must be for valuable consideration. In the absence of any of these ingredients, the transaction will not be 'sale' within the meaning of the Act.'

Explaining the second ingredient, the learned Judges observed as follows :

'NOW, the expression 'in the course of trade or business' which is incorporated in the definition of 'sale' makes it plain that the transaction must be commercial in its nature, that is to say, the transaction must have its inception in a hope of profit i.e. with a profit motive.'

Then, after considering certain decisions, the learned Judges obsered

'THE Club being an association not designed for making a profit nor striving after profit, there being no intention to make a profit by or out of the sale of refreshments to members, and there being no taint of commerciality in the transaction, the turnover in respect of the sales in question cannot in our view be assessed to sales tax.'

The learned Judges referred also to the decisions in the cases of Gannoii Dunkerley & Co. (supra) and Sree Meenakshi Mills Ltd. (supra) (1). In Davanagera Cotton Mills Ltd. v. State of Mysore and another, 8 STC 793, a Divison Bench of the High Court of Mysore (Sreenivasa Rao and Hombe Gowda JJ.) held that where the assessed mills maintained a canteen on a 'no-profit no-loss basis' for the benefit of the employees in conformity with the requirement of the Factories Act, the turnover relating to sales effected in the canteen was not liable to be taxed under the Mysore Sales Tax Act No. Xlvi of 1948. Though a reference was made to the provision in Section 46 of the Factories Act and the rules there under, there was no discussion as regards the effect of the said provision in the Factories Act and the rules. The conclusion of the learned Judges was based on the view that the Act did not seek to levy sales-tax on all transactions but only on such transactions as are effected in the course of business, i.e. for commercial purposes with a view to earn profit, following the view taken by the Madras High Court in the three decisions we have already referred to above.

(21) The aforesaid view that the expression ''business' employed in the definition of a 'dealer' in Section 2(b) of the Madras General Sales Tax Act was used in the sense of buying and selling goods with a view to earn profit and should be understood in a commercial ' sense, was reiterated by another Division Bench (Rajagopalan and Ramachandra lyer JJ.) in Trustees of the Port of Madras v. The State of Madras, 11 Sales Tax Cases 224 (6), following the aforesaid earlier decisions.

(22) In Chairman, Committee of Management, Integral Coach Factory Canteen, Madras v. Deputy Commercial Tax Officer, Perambur Division, 13 STC 827 Veeraswami J. (as the learned Judge then was) followed the aforesaid decisions in Sree Meenakshi Mills Ltd. (supra) and Trustees of the Port of Madras. (supra). The learned Judge distinguished the decision of a Division Bench (Jagadisan and Srinivasan JJ.) of the Madras High Court in Madras Electricity Department Canteen, Madras v. The State of Madras 13 STC 288, by pointing out that in that case the Electricity Board did not appear to be under statutory obligation to run a canteen on a non-profit basis and there was no prohibition to sell lunch and tiffin to persons who were not members of the Canteen which necessarily implied that the Canteen had a business or profit motive.

(23) In Swadeshi Cotton Mills Company Limited v. Sales Tax Officers. Special Investigation Branch, Kanpur and another. 15 STC 505, a Division Bench of the Allahabad High Court (V. G. Oak and Satish Chandra JJ.) held that the concept of 'carrying on business' in the U.P. Sales Tax Act (No. 15 of 1948), was fundamentally changed by Section 2(aa) of the U.P. Sales Tax Act, 1948, introduced in the Act by the U.P. Taxation Laws Amendment Act, 1963, with retrospective effect, and, thereforee, a company running a canteen for its workers on a non-profit basis under the provisions of the Factories Act carries on the business of selling goods at the canteen and is liable to sales tax under the U.P. Sales Tax Act, 1948. The decision was thus based on the new Section 2(aa) introduced by amendment in 1963 whereby a business carried on without the motive of making profit was expressly included in the expression 'business of buying and selling' for the purposes of the Act.

(24) In The State of Gujarat v. Rajpur . 19 STC 1, the Supreme Court referred to the definition of 'dealer' in Section 2(6) of the Bombay Sales Tax Act (3 of 1953), as meaning 'any person who carries on the business of selling goods in the State of Bombay, whether for commission, remuneration or otherwise . . . . .' and observed at page 5 as follows :

'AS pointed out by this Court in State of Andhra Pradesh v. M/s. Abdul Bakshi & Bros. 15 STC 644, a person to be a dealer must be engaged in the business of buying or selling or supplying goods. The expression 'business' though extensively used in taxing statutes, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation or profession which occupies the time, attention and labour of person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive,. By the use of the expression 'profit motive' it is not intended that profit must in fact be earned.'

(25) In Director of Supplies and Disposals, Calcutta v. Member, Board of Revenue, West Bengal Calcutta, 20 STC 398, the Supreme Court reiterated the same view regarding the necessity for the existence of a profit motive.

(26) The decision in Deputy Commissioner of Commercial Taxes v. Sri Thirumagal Mills Limited, 20 Sales Tax Cases 287(11), shows that the definition of 'business' in Madras General Sales-tax Act U of 1959) was amended in 1964 by Madras Act 15 of 1964 with retrospective offect making it clear that business may be with or without a motive to make gain or profit and whether or not any profit accrues.

(27) In Commissioner of Sales Tax, Gujarat v. Anil Co-operative Credit Society, 24 STC 180, the assessce society ran a canteen for the benefit of its members without any profit motive, and it was held by the High Court of Gujarat (P. N. Bhagwati, C. J.) on a difference of opinion between Divan and Mehta JJ. that the word 'business' in Section 2(11) of the Bombay Sales Fax Act No. 51 of 1959 must be interpreted to mean a systematic or organized course of activity pursued with the set purpose of making profit, and since profit motive was admittedly absent in the activity of the assessce, it could not be regarded as 'business' within the meaning of Section 2(11). The learned Chief Justice referred to the decision of the Supreme Court in Deputy Commercial Tax Officer. Saidapet, Madras and another v. Enfieid India Ltd. Co-operative Canteen Ltd., 21 STC 317, and distinguished the same by pointing out that Explanationn to Section 2(g) of the Madras General Sales Tax Act, 1959 (as it stood in 1968) made it clear that a society .shall be deemed to be a dealer for the purposes of the Act if it buys Or sells goods 'whether or not in the course of business', and also that the Supreme Court was not in fact concerned in that case with the question whether an activity can be regarded as business even in the absence of a profit motive, and indeed it could not be, since the Explanationn to Section 2(g) in so many terms dispensed with the requirement of the sale being in the course of business.

(28) In Ganesh Prasad Dixit v. Commissioner of Sales Tax, Madhya Pradesh, 24 STC 343, the Supreme Court referred to its decision in State of Andhra Pradesh v. M/s. Abdul Bakshi and Bros. (supra) and held that the assesseds in the case before it were registered dealers who consumed the materials otherwise than in the manufacture of goods for sale and for a profit motive, and that on the plain words of the section in the Madhya Pradesh General Sales Tax Act No. 2 of 1959,, the purchase price was taxable.

(29) In Fort Gloster Industries Ltd. v. Member, Board of Revenue, West Bengal. 26 STC 141, a Division Bench of the High Court of Calcutta (P.B. Mukharji, Actg. C.J. and T.K. Basu J) was dealing with Section 2(la) of the Bengal Finance ('Sales Tax) Act No. 6 of 1941 as amended by West Bengal Taxation Laws (Amendment) Act No. 26 of 1969, according to which the term 'business' would include business commission without a profit motive. The decision cannot, thereforee, be of assistance in the case before us.

(30) In Joint Commercial Tax Officer, Harbour Division Ii, Madras v. Young Men's Indian Association, Madras, 26 STC 241, the Supreme Court was not concerned with the question whether in the absence of a profit motive the transactions of sale can be regarded as 'business' for the purposes of the Madras General Sales Tax Act No. 1 of 1959. Indeed, such a question could not arise since, as stated earlier, the Explanationn I to the definition of 'dealer' in Section 2(g) of the Act which was added by amendment in 1964, made it clear that a person would be a dealer whether the buying or selling by him was 'in the course of business' or not.

(31) In the Indian Iron and Steel Co. Ltd. v. Member Board of Revenue, West Bengal, 27 STC 373, a Division Bench of the High Court of Calcutta (Sankar Prasad Mitra and K. L. Roy JJ.) reiterated that 'a person cannot be a 'dealer' under the Bengal Finance (Sales Tax) Act, 1941, unless he carries on the business of selling goods in a commercial sense', and that 'if an employer sells without any profit motive certain commodities of dailly use to the employees to provide them with social amenities it cannot be said that the employer is carrying on business with a commercial motive.'

(32) In Motor Industries Co. Ltd. v. The State of Mysore and others, 27 STC 379, a Division Bench of the High Court of Mysore (G. K. Govinda Bhat and K. Jagannatha Shetty JJ.) was concerned with the definition of 'business' in Section 2(i) (f.2) of the Mysore Sales Tax Act, 1957, as amended by Mysore Act No. 9 of 1964, according to which any trade or commerce with or without profit motive would be included in the expression 'business' for the purposes of the Act. This decision cannot, thereforee, be of assistance in the present case.

(33) In State of Tamil Nadu v. Thirumagal Mills Ltd., 29 STC 290, the Supreme Court, referring to the definition of 'business' in Section 2(d) of the Madras General Sales Tax Act (No. 1 of 1959) prior to its amendment by Amendment Act No. 9 of 1964 specifically excluding the requirement of profit motive, held that the value of the articles sold in the fair price shop and the canteen run exclusively for the benefit of the employees and without any profit motive in running the same was not liable to sales tax under the Act.

(34) In Hyderabad Asbestos Cement Products Limited and another v. The State of Andhra Pradesh and others, 30 STC 26, a Division Bench of the High Court of Andhra Pradesh (Chimnappa Reddy and Madhava Reddy JJ.) was concerned with the definition of 'business' in Section 2(bbb) introduced into the Andhra Pradesh General Sales Tax Act by Amendment Act of 1966, according to which profit motive was unnecessary to constitute 'business'. This decision also is, thereforee, not of assistance in the case before us.

(35) State of Tamil Nadu v. Burmah Shell Oil Storage and Distriouting Co. of India Ltd. and another, 31 STC 426, is again a case in ' which the Supreme Court of India held that under the Madras General Sales Tax Act, 1959, before its amendment in 1964, transactions in which there was no profit motive were not liable to tax, while canteen sales after 31st August, 1964, in view of the amendment of the definition of 'business' in 1964 in Section 2(d) of the said Act, were liable to sales tax.

(36) In Union of India v. The State of Punjab, 34 STC 394, a Division Bench of the High Court of Punjab and Haryana (D. K. Mahajan and Pritam Singh Pattar JJ.) held that the Union of India owning the Northern Railway Departmental Catering was selling food stuffs in the canteen on no-profit no-loss basis, and was not, thereforee, a 'dealer' within the meaning of Section 2(d) of the Punjab General Sales Tax Act No. 46 of 1948.

(37) In Tata Iron and Steel Co. Ltd. v. State of Orissa, 35 STC 195, a Division Bench of the High Court of Orissa (G. K. Misra, C. J. and B. K. Ray J.) held that the running of a canteen by the Tata Iron and Steel Co. Ltd. taken separately was not done with a view to earn profit and if it could be separately considered it would not have been a 'business' within the meaning of the definition of 'dealer' in Section 2(c) of the Orissa Sales Tax Act No. 14 of 1947, but that running the canteen could not, however. be dissociated from the assessce's business of running quarries, that it constituted an integral component part of mining business, and that whether the intention of the assessec in doing business was to earn profit was to be determined with reference to the entire business of running quarries.

(38) In Commissioner of Sales Tax v. Cutchi Daslia Oswul Mahajan Graha Udyog Committee, 36 STC 1. a Division Bench of the High Court of Bombay (D. P. Madon and M. H. Kania JJ.) held that in order that a person may come within the definition of the term 'dealer' in Section 2(11) of the Bombay Sales Tax Act. 1959, he must be carrying on the business of buying or selling goods in the State, that in order to be considered as a dealer the person concerned must not merely be buying or selling goods or both but doing so as a business, that to regard an activity as business there must be a course of dealings with a profit motive and not for sport and pleasure, that in the instant case eatables were got prepared and sold by the assessec not with the intention of carrying on business in the preparation and sale of those eatables, but in the carrying out of the main object of the trust, viz. to give employment to the destitute women of the community for whose benefit the trust was formed. that the sale transactions, which resulted in profits, must reasonably be regarded as incidental transactions and those transactions would not convert the activity of getting the eatables prepared and sold into a business activity, and that the assessec, thereforee, could not be regarded as a dealer within the meaning of that term in Section 2( 11 ) of the Act in connection with that activity.

(39) In Chief Commercial Superintendent, South Eastern Railw'ay v. Member, Board of Revenue, W. Bengal. 1974 TLR 1636, a Division Bench of the High Co'urt of Calcutta (Sabyasachi Mukharji and Hazra JJ.) held that the essential function of Railway is to carry passengers and goods, that the sales of unclaimed goods by the Railways is only incidental and ancillary and not as business of selling goods, and that when effecting sales of unclaimed goods under Section 56 of the Railways Act, a Railway is not a 'dealer' within the meaning of Section 2(c) of the Bengal Finance (Sales Tax) Act No. 6 of 1941.

(40) In the State of Andhra Pradesh v. M/s. Hotel Sri Lakshmi Bhavan, Visakhapatnam, 1974 TLR 1719. a Division Bench of the High Court of Andhra Pradesh (Kondaiah and Shriramulu JJ.) held that the definition of 'business' under section 2 (bbb) of the Andhra Pradesh General Sales Tax Act No. 6 of 1957, as amended in 1966, -whereby the element of profit motive or gain was made an unnecessary ingredient for a sale to be assessable to Sales Tax. being prospective, was not applicable to the facts of the case before them.

(41) In the State of Tamil Nadu v. Thiru Cauvery Spinning and Weaving Mills Ltd. Madras, 1974 TLR 2289. a Division Bench of the High Court of Madras (Ramanujain and V. Ramaswaini JJ.) following the decision of the Supreme Court in State of Tamil Nadu v. Burmah Shell Oil Storage (supra) (27) held that after the amendment of the definition of 'business' in Section 2(d) of the Tamil Nadu General Sales Tax Act I of 1959 in 1964, the transactions of sale which are incidental and ancillay to the asscssec's trade or commerce would be liable to sales tax even if there was no profit motive.

(42) In Messrs East India Hotels Ltd. (Oberoi Inter-Continental Hotels) v. The Additional Commissioner, Sales Tax New Delhi, Civil Writ Petition No. 242 of 1974, decided on 21st November, 1975(28), a single Judge of this High Court (Prakash Narain J.) held that the hotel cannot be said to be a 'dealer' within the meanting of the definition of that expression in Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, in respect of its cafeteria activity in as much as there was admittedly no profit motive in the sales effected in the cafeteria run by the hotel for the employees of the hotel on subsidised basis. Thus, courts have consistently held that 'business' for the purposes of sales tax should be understood in a commercial sense, i.e., as an organized activity carried on with a view to earn profit or gain, unless there is any provision in the Statute to the contrary. Rule 68(1) of the Delhi Factories Rules, 1950, specifically provides that food, drinks and other items served in the canteen shall be sold on a no-profit basis. The assessces in the cases before us are admittedly governed by the said rule. It, thereforee, follows that the asscssces in the cases before us, so far as the sales in their respective canteens are concerned, cannot be said to be 'carrying on the business of selling goods' within? the meaning of the definition of the term 'dealer' in section 2(c) of the Sales Tax Act as it stood at the relevant time. Consequently, they cannot be treated as 'dealers' within the meaning of the Sales Tax Act so far as the sales in the canteens are concerned, and the receipts in respect of the sales in the canteens are not liable to sales tax under the Act and cannot be included in the taxable turn over of the asses- sees.

(43) We may mention here that the learned counsel turn both the parties stated before us that under the new legislation, viz., the Delhi Sales Tax Act, 1975, which came into force from 21st October, 1975, sales without profit motive would be liable to sales tax, but that the present cases before us are governed by the old law and not by the new Act.

(44) Mr. Wazir Singh, learned counsel for the Sales Tax authorities in some of the cases, sought to argue that even if profit motive is essential for business, the profit need not be in the activity or transactions of sale in the canteens, if there is profit in the main activity of running the factory, as they are all integrated activities. In support of his argument, the learned counsel referred us to the decision in Tata Iron and Steel Co. Ltd. v. State of Orissa (supra) (23). In that case, the assessec company was engaged in the business of mining limestone from a quarry. Under the Mines Rules, the company had to maintain a canteen for supplying articles of food to the employees engaged in the quarry. The food and drinks in the canteen were being sold only to the employees of the mine not only on no-profit basis but at a subsidised rate whereby the management incurred a loss in the relevant year. The question was whether the company was carrying on the business of selling food and drinks in the canteen, and the sales in the canteen were liable to sales tax. A Division Bench of the High Court of Orissa (G. K. Misra C. J. and B. K. Rav J.) held (1) that the running of the- canteen by the company taken separately was not done with a view to earn profit, and if it could be separately considered it would not have been a business; (2) that running the canteen could not, however, be dissociated from the petitioner's business of mining from inc quarry as it constituted an integral component part of the mining business; (3) that the intention of the company in doing business to earn profit has to be determined with reference to the entire business of mining from the quarry; and C4) that the company was, thereforee, liable to pay sales tax on the receints from the canteen.

(45) In taking the above view, the learned judges relied upon the decisions in The State of Andhra Pradesh v. H. Abdul Bakshi & Bros. (supra) (9A) and The State of Gujarat v. Raioir . (supra) (9). In the former case, the assessed was carrying on the business of tranning hides and skins and selling the tanned skins. For the purpose of the said business, the assessed purchased undressed hides and skins and also tanning bark and other materials required in its tannery. The question arose as to whether the amount representing the price paid for buying tanning bark required in the tannery should be included in the turn over for the purposes of levy of sales tax. The argument on behalf of the assessed was that tanning bark was bought for consumption in the tannery and not for sale and the assessed was not, thereforee, a dealer in tanning bark and, thereforee, the price paid for puying the tanning bark was not liable to tax under the Hyderabad General Sales Tax Act. In the Hyderabad General Sales Tax Act, ''dealer' was defined as meaning any person engaged in the business of buying, selling or supplying goods. The Supreme Court explained that the expression 'business' is used in taxing statutes in the sense of an occupation or provision which occupies the time, attention and labour of a person, normally with the object of making profit, that to be a dealer a person need not follow the activity of buying, selling and supplying the same commodity, that mere buying for personal consumption, i.e., without a profit motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or uses it in manufacturing another commodity for sale, would be regarded as a dealer, and that the legislature had not made sale of the very article bought by a person a condition for treating him as a dealer, but the definition merely required that the buying of the commodity must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The Supreme Court held that it could not be said in that case that tanning bark was bought by the assessed for the purpose unconnected with the business carried on by it vis. . (supra) (23) treated the above observations of the Supreme Court as laying down that 'an activity integrated with the business is to be treated as a component part of the business'. With due respect, we are unable to agree with that view as the observation of the Supreme Court was made in an entirely different context. The Supreme Court referred to the 'integrated activity of buying and disposal', and not to the buying of tanning bark being an activity integrated with the business of tanning and selling tanned skins. The Supreme Court only emphasised that since the tanning bark was bought for use with a view to make profit out of the integrated activity of buying hides and skins, tanning them, and selling tanned skins, the purchase price of the tanning bark was to be included in the turn over. On the other hand, the question of sale's in the canteens being liable to tax is different. In the case before the learned Judges, the main activity of the assessed was mining limestone from a quarry. The activity of running a canteen was not, by its very nature, 'integrated with the mining business' or a component part' of the mining business. It is true that the running of the canteens was obligatory under the Mines Rules. Merely because the said activity of running a canteen was made obligatory by the rules, it could not, in our opinion, be regarded as 'integrated' with the mining business or as 'a component part' of the mining business.

(46) The other decision referred to by the learned Judges viz., the decision in the case of The State of Gujarat v. Rajpur ., (9) was also of a' similar nature. In that case, the Supreme Court held that where a company which was carrying on the business of manufacturing and selling cotton textiles, disposes of miscellaneous old and discarded items such as stores, machinery, iron scrap, cans, boxes, cotton ropes, rags, etc. it could not be said to carry on the business of selling those items of goods, as the fact that the sales of those items were frequent and their volume was large does not lead to the presumption that when those items were acquired there was an intention to carry on the business in those discarded items, and also because the discarded goods were not by-products or subsidiary products of or arising in the course of the manufacturing process. It was in that context that the Supreme Court observed as follows :'

'WHETHER a person carries on a business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression 'profit motive', it is not intended that profit must in fact be obtained nor does the expression cover a mere desire to make some monetary gain out of a transaction or even aseries of transactions. It predicates a motive which pervades the whole series of transactions affected by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions; in others it would have to be inferred from a review of the circumstances attendant upon the transaction......... but no test is decisive of the intention of carrying on the business; in the light of all the circumstances, an inference that a person desires to carry on the business of selling goods may be raised.'

The Division Bench in the case of Tata Iron & Steel Co. Ltd., (supra) (23), referred to the above observations and commented that 'apart from the emphasis given that the concept of business takes within its sweep a profit motive, the decision clearly lays down that the profit motive may pervade the whole series of transactions affected by the person in the course of his activity'. It has to be noted that the Supreme Court was emphasising the pervasion of the profit motive in the whole series of transactions effected by the assessce in the course of his activity for the purpose of finding out whether the main activity of the assessec was with a profit motive. The Supreme Court only pointed out that the existence of profit motive in the main activity of the assessce could be inferred from a review of all the circumstances attendant upon the said activity including other transactions effected by the assessec in the course of his activity. It was not necessary in that case to lay down, nor did the Supreme Court lay down in that decision, that all other transactions effected by the assessed in the course of its main activity, irrespective of their nature, were an integral or component part of the main activity of the assessce. In our opinion, the two decisions relied upon by the Division Bench do not lead to the conclusion arrived at by the Division Bench in respect of sales in the canteen run by the assessed company. We are, thereforee, unable to agree with the conclusion that the activity of sales in the canteen was an integral component part of the main activity of the assessce. The main activity of the assessed in the case before the learned Judges was mining limestone from a quarry. The other activity of maintaining a canteen, which was entirely different in nature from the main activity, was undertaken by the assessed only as an additional activity by reason of the statutory compulsion, and 'not as an activity which is an 'integral component part' of the main activity. In any case, as pointed out by the Supreme Court in the case of The State of Gujarat v. Rajpur . (supra) (9), no test is decisive of the intention of carrying on business, and it is in the light of all the circumstances in the, case that an inference that the assessed desires to carry on the business of selling goods in a given case has to be drawn. That being so, the conclusion of the Division Bench in the case of Tata Iron & Steel Co. Ltd. (supra) (23) that the running of the canteen was an integral component part of the mining business must be taken to have been based on the facts of that case, and not as a general proposition that in all cases the running of a canteen is an integral component part of the main activity of the assessed. The said decision cannot, thereforee, be of any assistance to the learned counsel.

(47) Mr. Chawla, learned counsel for the Sales Tax authorities in some of the cases, sought to argue that Section 4 of the Sales Tax Act is the charging section, that under that section 'all sales' are to be taxed, that the term 'business' does not occur in the section, and that all sales are, thereforee, liable to tax whether there is profit motive or not. The argument ignores that though the word ''business' does not occur in Section 4, the term 'dealer' occurs in it, and the term 'dealer' has been defined in the Act as one who carries on the 'business of selling goods'. The concept of 'business' is thus brought in by the use of the term 'dealer', and consequently the requirement of profit motive is attracted. There is thus no force in the argument.

(48) The second reason urged by the counsel for the assesseds in support of their contention that the assesseds are not 'dealer' within the meaning of the Sales Tax Act so far as the sales in the canteens are concerned, is that the said sales are not strictly 'sales' within the meaning of the Act, because the canteens are being run in order to fulfill the statutory obligation under Section 46 of the Factories Act, 1948, and Rule 68 of the Delhi Factories Rules, 1950. The argument is that it is one of the essential ingredients of a sale that the parties to the transaction of sale should have complete freedom to enter into the transaction, and that since the running of the canteen and the sales effected in it are entirely due to the aforesaid statutory compulsion and the assesseds have no choice in the matter, the transaction'. cannot be regarded as sales at all for the purposes of the Sales Tax Act.

(49) The aforesaid argument has been considered in a number of cases. In Sree Meenakshi Mills Ltd. v. State of Madras (supra) (2), the learned Judges referred to the circumstance that under Section 46 of the Factories Act the assesseds in the case before them were' under a duty to maintain canteens for the benefit of their employees, but did not go into the question as to whether the transactions in the canteens were 'sales' or not by reason of the said provision in the- Factories Act. They only held, following their earlier decision in Cannon Dunkericy & Co. (Madras) Ltd. v. State of Madras (supra) (1) that to constitute business there should be the motive to make profits, and as the assesseds before them were making the sales in the canteens without profit motive they were not 'dealers' within the meaning of the Madras General Sales Tax Act.

(50) In Devangere Cotton Mills Lt. v. State of Mysore(4) (supra) the learned Judges referred to the decision in the case of Sre& Meenakshi Mills Ltd. (1) and merely observed that the Madras High Court held that such sales could not be regarded as sales effected in the course of business and amenable to the levy of sales tax. In this decision also, the learned Judges did not go into the question as to whether the transactions in the canteens would not be sales by reason of the fact that the canteens were being run in fulfillment of the statutory obligation.

(51) In Swadesh Cotton Mills Company Ltd. v. Sales Tax Officer (supra) (8), the learned Judges referred to the fact that the asscssce before them was obliged to establish and maintain a canteen by reason of the provisions in Section 46 of the Factories Act and Rule 68 of the U.P. Factories Rules, 1950, and held that the transactions in the canteen were not 'transactions of sale' as understood in the Sale of Goods Act, and hence not liable to sales tax. The learned Judges pointed out that in Gannon Dunkerley & Co. (Madras) Ltd. v. State of Madras (supra) (1). the Supreme Court held that the power conferred by Entry No. 48 of List Ii was restricted to enacting legislation imposing tax liability in respect of sale of goods as understood in the Sale of Goods Act, 1930, and that the provincial legislature under the Government of India Act, 1935, had no power to tax the transaction which was not a sale of goods as understood in the Sale of Goods Act. They also pointed out that in New India Sugar Mills Ltd. v. Commissioner of Sales Tax. Bihar 14(29) STC 316, the Supreme Court reiterated the above view and also held that 'as observed by Benjamin in the 8th Edititon of his work on 'sale', 'to constitute a valid sale there must be a concurrence of the following elements, viz.(i) the parties competent to contract; (ii) mutual assent; (iii) a thing the absolute or general property in which i:, transferred from the seller to the buyer: and (iv) a price in money paid or promised'. The learned Judge'- then observed that the contention before them was that the second necessary elemen', namely, mutual assent was lacking in the case before them, that the statute forces the asscssec to run a canteen, that under the Factory- Rules the a.ssessec had no choice in the conduct of the canteen or in fixing the prices or the persons who can be served in the canteen, and that in view of the decision of the Supreme Court in New India Sugar Mills' case (supra) (29) the transactions in the canteens could not be regarded as sales as mutual assent was lacking- The learned Judges negatived that contention by pointing out that in the case of New India Sugar Mills (supra) (29), the course of dealing was that the Governments of various States used to intimate to the Sugar Controller of India their requirements of sugar from time to time. that similarly, the factory owners used to send to the Sugar Controller a statement of .stocks of sugar held by them, that the Sugar Controller used to make allotments directing the sugar companies to supply sugar to the State Governments in question specified quantities of sugar, that in pursuance of the allotment orders, sugar used to be supplied on payment of price, that the Supreme Court held that before a transaction can in law be a sale, it must be based on a contract of sale for which mutual assent of the contracting parties is essential, that is to say. there ought to be a voluntary offer and acceptance of the offer. that the Supreme Court also held that when a Provincial Government gave intimation of its requirement to the Sugar Controller it did not make any offer to purchase to the Controller because the Controller was not the manufacturer of sugar or its agent, and the communication of the allotment order to the sugar mill was not of any offer made by the purchasing State which it was open to the assessce to accept or decline, and that the Supreme Court further held thaaat. mere compliance of the dispatch instructions of the Controller, which in law the sugar mill could not decline to carry on. did not amount to acceptance of an offer, and there being no offer or acceptance, the eparties never came in contact as contracting parlies and the dispatch of sugar did not result in any sale of goods. The learned Judges observed that while it was manifest in the case before the Supreme Court that individual transactions themselves were controlled and the parties had no volition or choice in making the transactions themselves, in the case before them, at the point of time when the transactions take place, namely, when a particular refreshment or drink is supplied in the canteen, there was no control by an) outsider. The learned Judges further observed that the asscssee company displayed the goods in the canteen for the use of its workmen and thereby invited offers from the workmen, that the workmen were free to visit or not the canteen and when they visit the canteen and took the goods, they voluntarily made an offer, that the canteen then accepted the offer and made the supply on payment of the price on the happening of which a contract resulted and the property in the goods passed, that at the point of' time when the transactions take place, the parties came into contact and did enter into a contract to sale voluntarily, and that in their opinion the transactions in the canteen were thereforee, 'sales' within the meaning of the Sales of Good-Act. 1930. The learned Judges went on to observe that the condition in the Factories Act and the Rules made there under that the assessce must maintain a canteen for the benefit of his workmen was not an absolute restriction, that it was open to a person not to carry on any business by employing more than 250 workmen, but if he did so. he impliedly consented to make contracts in respect of refreshments. etc. in a canteen established by him, that the fact that the price was controlled by the Managing Committee of the Canteen was not material. as the provision for the Managing Committee was ostensibly to ensure ellicient management and a fair deal to the workers, that it was not intended to control the offer or acceptance at the time when the transactions took place, that it could not be said that the assessce was a servant or agent carrying out the legislative mandate of the Factories Act and the Rules, as he was dealing not with any property or attending merely to a master's interests and the canteen was the property of the asscssec in which he made specific bargains, that the relationship between the assessce and the workmen was that of vendor and purchaser, and that the transactions carried on at the canteen. thereforee, did in law answer the connotation of 'sales'. We may say with respect that we arc in complete agreement with the above reasoning and conclusion of the learned Judges.

(52) In the Indian Steel and Wire Products Limited v. The State of Madras, 21 STC 138, the appellant supplied steel products to various persons in the State of Madras during a certain period throughout which the sale or purchase of iron and steel products was controlled by the Iron and Steel (Control of Production and Distribution) Order, 1941, issued under the defense of India Act, 1939. and which was administered by the Iron and Steel Controller in Calcutta. The procedure followed was as follows : The purchaser placed the order for materials according to the specifications given by him- through the Iron & Steel Controller, agreeing that the indent was placed subject to the provisions of the sale price schedule regarding prices, etc. and the terms and conditions of business (including payment) of the registered producer on whom the order would be placed by the Iron and Steel Controller. The Controller forwarded the indent to the producer for delivery of the material in accordance with any general or special directions of the Iron and Steel Controller. But, in that instant case, there was no evidence regarding any general or special order issued by the Controller excepting that fixing the base price. The works order issued by the producer provided that all orders booked were subject to the producer's terms of business and general understanding in force at the time of booking the orders and dispatch of goods. It was left to producer to supply the goods ordered at its convenience and the producer was willing to change by mutual agreement even the specifications of the goods to be supplied. It was also open to the producer to fix the time and mode of payment of the price of the goods supplied. The Supreme Court pointed out that as laid down by it in State of Madras v. Gannon Dunkerley & Co. (Madras), 9 STC 353 (supra), to constitute a valid sale there has to be concurrence of the following elements viz-, (i) parties competent to contract, (ii) mutual assent, (iii) a thing the absolute or general property in which was transferred from the seller to the buyer; and (iv) a price in money paid or promised, that out of these, three elements were established in the case before them, viz., the parties were competent to contract, the property in the goods was transferred from the producer to the buyer and the price in money was paid, that as regards the) fourth element, there were several matters which the parties could decide by mutual consent, that the Controller only fixed the base price of the steel products and determined the buyers; but in other respects the parties were free to decide their own terms by consent, and that it would be incorrect to say that because law imposes some restrictions on freedom to contract, there was no contract at all, and that so long as mutual assent was not completely excluded in any dealing, in law it was a contract.

(53) In the Andhra Sugars Ltd. and another v. State of Andhra Pradesh and others, 21 STC 212. the Supreme Court distinguished their earlier decision in M/s. New India Sugar Mills Ltd. v. Commercial Sales Tax Officer, Bihar (supra) (29) and held in the case before them that under Andhra Pradesh Sugar Cane (Regulation of Supply and Purchase) Act 45 of 1961, a cane grower made an offer to the occupier of the factory directly and the latter accepted the offer, that the parties then made and signed an agreement in writing, that there was thus a direct privity of contract between the parties, that the contract was a contract of sale and purchase of cane, though the buyer was obliged to give his assent under compulsion of a statute, and that the State legislature was, thereforee, competent to tax purchases of canes made under such a contract.

(54) In State of Rajasthan and another v. Karam Chand Thappar and Bros., 23 STC 210, the Supreme Court exiited out the distinction between the principle laid down in M/s. few India Sugar Mills Ltd.'s case (supra) (29) and the principle laid own in M/s. Indian Steel Wire Products v. State of Madras supra) (30) and Andhra Sugars Ltd. v. State of Andhra Pradesh id others (supi-a)(31), the Supreme Court explained that in the case { New India Sugar Mills Ltd. (29) it was held on the facts that iere was no contractual relation between the State Government and ie factory owncf. as tht Sugar Controller directed the manufacturer ' sugar to supply sugar to the State Government and the factory OTier complied with the direction, and that, on the other hand, in ie cases of the Indian Steel and Wire Products Ltd. and Andhra agars Ltd. (30), it was held that when goods, supply of which is >ntroUed by statutory orders, are delivered pursuant to contract of lie, the principle of the case in New India Sugar Mills Ltd. (30) is no application. As regards the case before them, the Supreme ourt held that there was an agreement of sale between the parties )mpetent to contract, in pursuance of, the agreement of sale, property the goods supplied passes! to the purchaser for the price agreed be paid, and that ihe transaction was, thereforee, one sale of goods within the meaning of the Rajasthan Sales Tax Act.

(55) In Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P. 33 STC 344, under clause 3 of the U.P. Wheat payment of price at the contolled rate, and the licensed dealer acqioesced with them, the transaction of supply of wheat pursuant to clasue 3 of the roder and acceptance thereof did not result in a contract of sale, and thereforee, the supplies of wheat made by teh appellant under the Order were not sales within the meaning of definition in Section 2(h) of the U. P. Sales Tax Act, 1948, and the appellants were not liable to pay sales tax thereon. The Supreme Court pointed out that a sale predicates a contract of sale of goods between per- sons competent to contract for a price paid or promised, that a tran- saction in which an obligation to supply goods is imposed, and which docs not involve an obligation to enter into a contract, cannot be called a 'sale' even if the person supplying goods is declared en- titled to the value of goods which is determined or determinable in the manner prescribed, and that if there be a contract, the restrictions imposed by statute would vitiate the consent, but the contract cannot be assumed.

(56) In Salar Jang Sugar v. Slate of Mysore and others, 29 STC 246, the assessed-companics, which manufactured sugar in their factories, purchased sugar-cane from grower'. The sale and purchase of sugar-cane was controlled by the Sugar-cane Control Orders. Under the said orders, a minimum price of sugar-canc was fixed, areas where sugar-eanc was grown were reserved for the fac- tories of the assessed, the annual quantity of sugar-cane required for the factories was determined, and the factories were to secure the quantity of sugar-cane so determined from the areas respectively re- served for them. The sugar-cane growers in the reserved areas were to supply 95% of the sugar-cane grown by them to the respective factories. The sugar-cane grower and the factories were to enter^an an agreement for supply and purchase or sugar-cane .neral the said agreement, the factory agreed to buy and t? not arise agreed to sell, the quantity to be paid and sold was eulof 'dealer' be cultivated by the grower, delivery was to be at the.iient in 1964, such lots, on such dates and at such times as shall the grower could ask for advance payments, the not. accepted after inspection required the parties to enter into agreements and the agreements contained intrinsic evidence that the growers agreed to sell and the fac- tories agreed to buy, that there was offer, inspection, and appropriation of goods of the contract, that the mutual consent was not merely im- plicit but was explicit, and that the transactions in these cases con- stituted 'sales' within the meaning of Section 2(t) of the Mysore Sales Tax Act, 1957. In The Hyderabad Asbestos Cement Products Limited and another v. The State of Andhra Pradesh and others, (supra) (20), the learned Judges, after referring to the various decisions of the Supreme Court mentioned above, observed that it was clear from the said decisions that the mere fact that goods are supplied pursuant to statutory direction does not make the supplies not 'sales' within the meaning of the Sale of Goods Act and for the purpose of the Sales Tax Act, and that in order that a transaction may not be a sale. it seemed to be the opinion of the Supreme Court that the whole of the transaction must be controlled by statute. The learned Judges then held that in the case before them, though the company was under an obligation to provide and maintain a canteen for the use of the workers, and though the running of the canteen was to be subject to the rules made under the Factories Act, the transactions were not regulated solely by statute, and there was a large amount of freedom left to the parties. The learned Judges pointed out that Section 46 of the Indian Factories Act merely obliges a factory to provide and maintain a canteen for the use of the workers, and that it also provides for the making of rules regarding the food-stuffs to be served in the canteens and the charges which may be charged thereforee, and also for the constitution of a managing committee and representation of the workers in the management of the canteen. They also pointed out that Rules 68 of the Rules made under Section 46 of the Factories Act provides that food drink and other items served in the canteen shall be served at a non-profit basis, and that the prices charged shall be subject to the approval of the canteen's managing committee, and that if the committee did not approve the price list, the price list was to be sent to the Chief Inspector of Factories for approval. The learned Judges further pointed out that Rule 70 provides for the constitution of a managing committee, that the committee was to be a consultative committee in the matter of quality and quantity of food-stuffs to be served in the canteen, the arrangement of menus, the times of meals in the canteen, and any other matters as may be directed by the Committee. The learned Judges observed that it could thus be seen from the Act and the Rules that while the occupier of a factory is obliged to maintain a canteen and serve food and drink on a non-profit basis, there was a large amount of discretion in all other matters such as the choice of food and drink to be served, the prices at which they may be served, the time when they may be served, etc., that in those matters, the voice of the managing committee was of an advisor only. and that having regard to those circumstances they were of the opinion that transactions of supply of food and drink to workmen in the can- teen maintained by the company in pursuance of the Indian Factories Act and the Rules were 'sales' for the purposes of the Andhra Pradesh General Sales Tax Act.

(57) In Food Corporation of India Cochin v. State of Kerala 34 STC 189, A Division Bench of the High Court of Kerala (P. Govinda Nair C. J. and V. Bala Krishna Eradi L) held that under the Fertiliser (Control) Order, 1957, the procedure followed for the distribution of the fertilisers was that indents would be placed by the State Governments with the Food Corporation of India specifying their requirements, that against those indents supplies would be made by the Food Corporation to the State Governments or their nominees and the cost was to be recovered from the State Governments; through 'Central Adjustment Accounts' that the Control Order contained provisions regarding the fixation of prices, licensing of dealers and imposition of restrictions on the manufacture or sale of fertilisers, that there was no statutory compulsion in the matter of sale or purchase of fertilisers and parties were left free to enter into sensual, contractual agreement in the exercise of their volition subject only to the restrictions regarding the price fixation, compliance with the quality requirements in respect of mixtures, the obtaining of licenses by dealers and other minor provisions of a purely regulatory character, that the indents placed by the State Governments with the Food Corporation were clearly in the nature of offers made by them for the purchase of fertilisers, and it was as a consequence of the acceptance of those offers by the Food Corporation that the supplies were made by the Food Corporation to the State Governments, and that all the elements of a sensual contractual agreement were thus present in the case and the transaction was clearly a sale exigible to sales tax under Kerala General Sales Tax Act No. 15 of 1963.

(58) In Tata Iron and Steel Company Ltd. v. State of Orissa (supra)(23), the learned Judges held that despite the compulsion of law under the Mines Rules that the assessed was to run a canteen and supply food to workers on non-profit basis, the assessed did not discontinue its business in mining operation, that freedom of contratt in setting up a canteen was not wholly excluded, and that in such a case the transactions of selling food to the workers would constitute sales.

(59) Thus, it is clear from the various decisions mentioned above, particularly the decisions of the Supreme Court, that although one of the ingredients for a transaction to be a contract of sale is mutual consent between the parties to the transaction, it would be sufficient if the issued to them, and that if the sales in the canteens are held to be not 'sales' for the purposes of sales tax under the Act, then the purchase turn over relating to the goods so purchased will have to be included in their taxable turn over by reason of the provision in the second proviso to Section 5(2)(a)(ii). This contention does not arise for consideration in the present writ petitions and references before us, as we are concerned only with the question as to whether the sales turn over in respect of the sales in the canteens is to be included in the taxable turn over of the assesseds, and not with the inclusion of their purchase turn over.

(60) As we have held that the assesseds cannot be said to be carrying on 'business' within the meaning of the Sales Tax Act so far as the transactions in the canteens are concerned, the references are answered accordingly and the Civil Writ Petitions Nos. 214 of 1968, 251 of 1971, 350 of 1972, and 278 of 1975 are allowed. The notice, dated 4th March, 1968, from the Commissioner of Sales Tax under Section 20(3) of the Sales Tax Act impugned in Civil Writ Petition No. 214 of 1968, is quashed. The assessment orders impugned in Civil Writ Petitions Nos. 251 of 1971, 350 of 1972 and 278 of 1975 in so far as they levied sales tax on the proceeds of the transactions in the canteens in question are also quashed. In the circumstances, we direct the parties to bear their own costs in all the matters.


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