UNION OF INDIA Vs. STATE OF MADRAS

JUDGEMENT

(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 food-stuffs 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 involved the carrying on of any business of buying or selling food-stuffs or refreshments, strictly so-called, but it is merely an 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 that 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 is for the issue of a writ of mandamus against the respondent, the State Government, to forbear from enforcing the demand for 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 refreshments, constitutes "business" within the definition of "sale" 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) Act, 1964, will in any event validate the impugned assessment and demand. Before dealing with the questions 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 in 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, local authority, company or Hindu undivided family, which carries on such business. " *

(3.) 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.