CHAIRMAN COMMITTEE OF MANAGEMENT INTEGRAL COACH FACTORY CANTEEN MADRAS Vs. DEPUTY COMMERCIAL TAX OFFICER PERAMBUR DIVISION

JUDGEMENT

(1.) THESE petitions under Article 226 of the Constitution turn upon a common point as to whether sales of food and drink effected by the Integral Coach Factory Canteen to the workmen of the factory are liable to sales tax under the provisions of the Madras General Sales Tax Act, 1959. For the year 1959-60 on the view that the sales are so liable, the Deputy Commercial Tax Officer, Perambur Division, who is the respondent, by his order dated 31st March, 1960, assessed the canteen provisionally on a turnover of Rs. 2, 00, 000, the tax levied being payable in 12 monthly instalments of Rs. 333 each. On the basis of the provisional assessment a demand in Form B was made upon the canteen for payment of the monthly tax. One of the petitions is to quash the provisional assessment and the other is for a mandamus forbidding the respondent from enforcing the demand. The petitioner, who is the Chairman of the Committee of Management, Integral Coach Factory Canteen, Madras, seeks the reliefs on the main ground that the canteen by supplying food and drink to the workers of the Integral Coach Factory is only discharging a statutory obligation and it is not a dealer carrying on the business of selling goods. Section 46 of the Factories Act, 1946, empowers the State Government to make rules requiring a factory, wherein more than 250 workers are ordinarily employed, to provide and maintain a canteen or canteens for the workers. The rules may make provision, among other things, for the food-stuffs to be served in the canteen and the charges which may be made thereof. In exercise of its powers, the State Government framed rules 65 to 71 of the Factories Rules, 1950, of which sub-rule (2) of rule 65 says that the occupier of every factory notified by the State Government shall provide in or near the factory a canteen according to the standards prescribed in the rules. The other sub-rules of rules 65 and 67 deal with matters relating to canteen buildings, dining halls, their size and equipment. Rule 68 regulates the price to be charged for the food and drink and other items served in the canteen and provides that, subject to any special or general directions issued by the State Government under the provisions of rule 71, food, drinks and other items served in the canteen shall be served on a non-profit basis and the prices charged shall be subject to the approval of the managing committee. The same rule also says that the list of charges for various articles of food or beverages should be conspicuously displayed in the canteen. Somewhat detailed provisions are made by rule 70 for the composition and powers of the managing committee of the canteen. Rule 71 says that the State Government may, by special or general directions, prescribe the proportion of the cost of running a canteen which shall be borne by the occupier. Pursuant to these rules, the Integral Coach Factory at Madras was obliged statutorily to open a canteen.The main features of these rules are that the service of food and beverage to workers at the canteen should be on a non-profit basis and the prices charged shall be subject to the approval of the canteen managing committee and that part of the cost of running a canteen fixed by the State Government should be paid by the occupier which is in this case the factory. In other words, there is, by virtue of the statutory rules, a complete absence of profit motive in the service by the canteen to its workers, of food and drink at controlled charges. And in fact, rule 71 suggests that to a certain extent such a service is subsidised or is to be subsidised by the factory.

(2.) THE question is whether in such circumstances the canteen is a "dealer" within the statutory definition of the term and whether the sales effected by the canteen to the workers are sales chargeable to sales tax. To determine the question, it is necessary to notice the relevant statutory provisions. Section 2(d) of the Madras General Sales Tax Act, 1959, does not define "business" but it says that it includes 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. A "dealer" is defined in section 2(g) to mean any person who carries on the business of buying, selling and supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration, or other valuable consideration. Section 2(n) defines "sale" as a transfer of property in goods by one person to another in the course of business for cash or for deferred payment, or other valuable consideration.