P. Ramakrishnan, J.
1. These two petitions are filed by the Union of India, represented by the General Manager, Southern Railway. The prayer in these Writ Petitions arises out of the demand by the State Government of sales tax from the Southern Railway on its turnover of sales of foodstuffs and refreshments in the several refreshment rooms which the Railway is maintaining. The period covers three years, 1959-60, 1960-61 and 1961-62. The petitioner alleges in the affidavit to the petition that the maintenance of refreshment rooms, though it forms part of the organisation of the Government, in running the railways, does not involve the carrying on of any business of buying or selling foodstuffs or refreshments, strictly so called, but it is merely on activity undertaken by way of providing amenities to the passengers who use the railways for travelling. It is also alleged that these refreshment rooms are run on a non-profit basis, and the prices charged are equivalent to the cost of production and administrative charges. This absence of a profit motive is also relied upon to show that the petitioner did not engage in any business of buying or selling. On these allegations, it is claimed the State Government of Madras, represented by the Joint Commercial Tax Officer, P.T., Madras was not justified in collecting sales tax from the petitioner for the aforesaid, three years. The prayer in W.P. No. 647 of 1964 as for the issue of a writ of mandamus against the respondent, the State Government, to forbear from enforcing the demand for the sales tax. The prayer in W.P. No. 648 of 1964 based on the same allegations is for a writ of prohibition against the respondent, State Government from enforcing the aforesaid demand for sales tax.
2. The State of Madras in their counter-affidavit allege that during 1959-60,. 1960-61 and 1961-62 the petitioner-Railway had turnovers exceeding Rs. 15 lakhs, Rs. 22 lakhs and Rs. 24 lakhs respectively, under the items of supply of refreshments in the refreshment rooms. It is urged that though the main business of the Railway was not selling food and refreshments, nevertheless the continuous course of conduct on the part of the Railway administration, in selling food and refreshment, constitutes 'business' within the definition of 'sales' in the Madras General Sales Tax Act. The fact that the sale was by way of an amenity to passengers and that there was no profit motive would not make any difference, for applying the definition of 'sale' in the course of business, to the transactions in question. There is a further plea that Section 9 of the Madras General Sales Tax Second Amendment, 1964 will in any event validate the impugned assessment and demand.
3. Before dealing with the question in controversy, a brief resume of the relevant provisions of the Madras General Sales Tax Act, as amended from time to time, will be necessary. The present assessments relate to a period covered by the Madras General Sales Tax Act of 1959, before the two crucial amendments which were made in 1962 and 1964. During the period covered by the present assessments, three provisions of the Sales Tax Act which are relevant for our present purpose may be referred to Section 2(d) defines 'business' as including any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern. 'Dealer' is defined is Section 2(g) as 'any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration,' and includes the Central Government, a State Government, a local authority, company or Hindu undivided family, which carries on such business. A co-operative society, a club, an association etc., whether they are engaged in buying, selling etc., in the course of business or not are specifically included within the definition of 'a dealer' by the Explanation to Section 2(g). 'A sale' by the definition is Section 2(n), means (within all its grammatical variations and cognate expressions) every transfer of the property in goods by one person to another in the course of business for cash or for deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge. Explanation (1) to Section 2(n) includes the transfer of property by a co-operative society, club, firm etc., to its members, so as to be in line with the definition of 'dealer' in Section 2(g).
4. To contribute an activity into business in the light of the above definitions, a profit motive was necessary, but it was immaterial whether profit accrued or not. That was the purport of several decisions arising out of the Madras General Sales Tax Act dealing with assessments, in the period before the amendments in 1962 and 1964. These decisions are very well known, and it is unnecessary to recapitulate them here. Section (2)(g) specifically brought the Central Government or the State Government within the definition of 'a dealer' provided they carried on 'such' business the word 'such' referring in turn to the definition of 'business' in Section 2(d). In other words, the Central Government or the State Government could be assessed to sales tax for transactions in this period only if (i) they were engaged in a business activity involving, the buying, selling, supplying or distributing goods etc., and (ii) the business activity was undertaken with a profit motive, whether profit accrued or not.
5. The Act was amended in 1962 when, in the main part of the definition of 'a dealer', in Section 2(g), the Central Government and the State Government were deleted, and they were brought in under Explanation II to Section 2(g) in the following manner:
The Central Government or any State Government which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purpose of this Act.
To correspond with this, Explanation I-A was added under the definition of sale in Section 2(n) in the following ways:
Every transfer of property in goods by the Central Government or any State Government for cash or for deferred payment or other valuable consideration, whether or not in the course of business, shall be deemed to be a sale for the purpose of this Act.
By this amendment activity involving buying or selling etc., of the Central Government or the State Governments were brought in for the purpose of levy of sales tax, and it was immaterial whether such buying or selling took place in the course of business or not.
6. In the meantime there were several decisions which relied upon the definition of 'business' in Section 2(d) of the Act, which continued to be the same as before, with the result that when any transaction was found to be in the course of business, and it was found that a profit motive was absent, the transactions were not made liable to payment of sales tax. These decisions held that the word 'accrues' in the definition of 'business' in Section 2(d) affected only the question of actual earning of a profit; nevertheless the activity in question must be one with a profit motive, because only such activity, could be considered as a commercial or trading activity which was a prime requirement for assessing persons engaged in such activity as dealers on their transactions. To get over the effect of these decision, the Act was amended in 1964 and Section 2(d) was recast thus:
(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern;
7. Section 9 of the 1964 Act contained a clause for validation of past levies and it runs thus:
Notwithstanding anything contained in any judgment, decree or order of any Court, no levy or collection of any tax under the provisions of the principal Act and of rules made thereunder in respect of sales in the course of business, whether or not it is carried on with a motive to make gain or profit shall be deemed to be invalid or ever to have been invalid on the ground only that such levy or collection was not in accordance With law and such tax levied or collected or purporting to have been levied or collected shall, for all purpose, be deemed to be and always to have been validly levied or collected...
The result of this amendment was that even if there was a sale in the course of business at any time before the amendment in 1964, whether it was by a Central Government or a State Government or any other private parties, it was immaterial whether it was carried on with a profit motive or not; if there was an assessment to sales tax, of such sales the assessment would be validated retrospectively.
8. Learned Counsel, Sri Thyagarajan, appearing for the petitioner, urges that in the case, of the Central Government in the Southern Railway, the main business activity no doubt a commercial one was the activity of transport of passengers. This activity had an element of profit. But the activity involved in the sale of foodstuffs and beverages in the Railway refreshment rooms was undertaken by the Railway, only for providing amenities to the passengers without a profit motive. It could not be construed as part of the main activity or the business of the Railway, which continued to be one of transport. From this aspect, the activity involved in the selling of foodstuffs and beverages, was not in the course of the business of the Railway, and therefore Section 9 of the Act of 1964 will not validate the present assessment which relates to the period before 1962.
9. On the other hand, the learned Government Pleader, appearing for the State of Madras, urges that the catering of food and beverages to passengers, was an activity integrated with the activity of transport. This could be inferred from the large volume of the turnover to which already reference has been made during the three years. The activity of catering had all the elements of continuity, frequency, regularity, and was similar to transactions engaged by private persons in the catering trade. Hence the catering activity of the Railways could be construed as a business. It was urged by the learned Government Pleader that it was immaterial that the main business of the Railway was transport; the activity of catering to passengers was also undertaken by the Railway as an integral part of the business of transport, though no doubt without a profit motive. For supporting this point of view the learned Government Pleader referred to the following decisions.
10. In K.C.P. Ltd. v. State of Madras (1965) 16 S.T.C. 156 , a Bench of this Court, of which I was a member, after a detailed reference to the decisions bearing on the subject gave its considered opinion for the tests to be applied to define normal business, activity in the following terms:
Judged by any test, test of frequency, volume, regularity and continuity or the existence of profit motive or test of reasonable connection with the normal business activity of the assessee, it is impossible to hold that an isolated sale of a capital asset as in the instant case would amount to a sale in the course of the business which the assessee carries on.
Again in S.R.E. Workshop Canteen v. D.C.T.O., Tiruchirapalli (1965) 16 S.T.C. 187, in a judgment in a case arising out of the assessment of a canteen run on a non-profit basis by the Southern Railway at its Golden Rock Workshop, I made the following observations at page 194 of the report:
The industry was expected to look for its profits to its principal activity, and the buying and selling that takes place in the canteens was treated as a subsidiary activity of an ameliorative character which should be conducted without an idea to make a profit thereby. As long as the sales thus conducted in the course of such ameliorative activity arc regular, continuous and do not in any way different from similar activity conducted by a private person, for example a tradesman or a merchant who makes living out of it, it will continue to be a trading activity, even though a profit motive is absent. Such an activity will be one in the nature of trade or commerce.
In Swedeshi Cotton Mills Co., Ltd. v. Sales Tax Officer (1964) 15 S.T.C. 505, the Allahabad High Court had to consider a retrospective provision, which brought persons buying and selling even without a profit motive, within the ambit of the Sales Tax Act. Following the Supreme Court's view in Mazagaon Dock Ltd. v. Commissioner of Income-tax and Excess Profits Tax : 26ITR765(SC) , that the word 'business in fiscal statutes must be construed in a broad rather than a restricted sense, the Allahabad Bench observed as follows at page 513:
The petitioner-Company in running the canteen is undoubtedly carrying on a substantial and: systematic activity with a set purpose. Its purpose may not be to make profit or gain but may only be to fulfil its statutory obligations or to provide for the welfare of its workmen; but the nature of the purpose is no longer of any consequence In order to do its main profit-making business of manufacture and sale the petitioner engages in the activity of running the canteen. The canteen is a step-in-aid of the petitioner's business. From this view-point, an ultimate profit motive is visible. In any view, the petitioner-Company is a dealer within the meaning of the term in the Sales Tax Act.
Another case arising out of a canteen run by the Southern Railway, Dy. Commissioner, Commercial Taxes v. Carriage Works Canteen (1963)2 M.L.J. 218 : (1963) 14 S.T.C. 654, was also referred to by the learned Government Pleader. There the Bench declined to assess the Railway on its turnover in the canteen and the assessment was set aside solely on the ground that the business did not involve a profit motive. That judgment was given on 25th March, 1963 before the amendment in 1964 and therefore there was no occasion to apply the retrospective provision of Section 9 of Act XV of 1964.
11. Learned Counsel, Sri Thyagarajan, appearing for the petitioner urges that fiscal statutes must be construed strictly, and has referred to a number of decisions on this question; Innamuri Gopalan v. State of Andhra Pradesh (1963) 14 S.T.C. 742, Commissioner of Sales Tax, Uttar Pradesh v. Modi Sugar Mills, Ltd. (1963) 1 S.C.J. 657 : (1961) 12 S.T.C. 182, and A.V. Fernandes v. State of Kerala (1957) S.C.J. 689 : (1957) 2 M.L.J. 129 : (1957) 2 An. W.R. 129 : (1957) 8 S.T.C. 561 but what we are concerned in the present case is not so much a question regarding the strict interpretation of a fiscal statutes, but a different question, as to whether the activity of the Railway in undertaking catering for its passengers on a large and systematic scale must be considered an activity in the nature of a business though it did not have a profit motive. The argument on behalf of the Railway, amounts to saying that since the principal activity of the Railway is one of transport, catering must be regarded as something unconnected with it and should be excluded for the purpose of sales tax assessment. But there is no basis for disconnecting in the manner suggested, the transport activity from catering activity. The catering activity is confined only to meet the needs of passengers of the Railway. In many cases the passengers are long distance passengers, and obviously they look to the Railway for providing them with adequate food and refreshments, whether in refreshment stalls at the Railway Station, or in the dining carriages attached to the railway carriages themselves, so that even when the train is in motion, the requirements of passengers by way of food and drink might be met. There was a time when such catering business was entrusted by the Railway to private contractors like Spencer & Go. But later on, for reasons which need not be enquired into here, the Railways took over this catering business, and made it part of their transport activity. No doubt the rules insist that no profit should be earned on this aspect of their activity. But that did not make the activity anytheless an integral part of the transport activity. The raison d'etre of this integration, is that transport especially, long distance transport involves not merely the carrying of people from one place to another, but also an obligation to ensure that the necessary requirements of the persons transported in the form of food and beverages are met by the transporting agencies like Shipping Companies which make the payment for food and drink part of the fare itself, with no option to the passenger to dissociate the cost of transport from the cost of food. But in the case of Railways such a distinction is made, and the cost of transport is charged separately, and the cost of food and refreshments is charged to the passengers only when they take the food and refreshments. But the principle thus stated, shows that there is nothing unreasonable in integrating a well organised catering activity with transport activity. From the above point of view, I am of the opinion that the transactions in question formed part of the business of the Railway during the relevant period. Therefore, even though at that time they could not be assessed to sales tax due to the absence of the profit motive, Section 9 of Act XV of 1964 will validate the levy.
12. In view of the above, the petitions are dismissed. No order as to costs.