WAINGANGA CLUB Vs. STATE OF MADHYA PRADESH

JUDGEMENT

(1.) THE petitioner is a members' club. The petitioner was assessed to purchase tax on purchases of liquor for the following periods: from 1st April, 1959, to 31st March, 1960, from 1st April, 1960, to 31st March, 1961, from 1st April, 1961, to 31st March, 1962, and from 1st April, 1962, to 31st March, 1963. The assessment orders were finally passed by the Assistant Sales Tax Officer on 31st July, 1972. These orders are annexures I-1 to I-4. The petitioner preferred revisions against these orders to the Deputy Commissioner of Sales Tax. The revisions were dismissed by orders passed on 10th April, 1973. These orders are annexures J-l to J-4. By this petition under Article 226 of the Constitution, the petitioner prays for quashing of these orders.

(2.) THE short point raised by the Learned Counsel for the petitioner is that a members' club is not a dealer, which can be assessed to purchase tax under Section 7 of the Madhya Pradesh General Sales Tax Act, 1958. The imposition of purchase tax by Section 7 of the Act is on every dealer, who, in the course of his business, purchases any taxable goods from a registered dealer in circumstances in which no tax under Section 6 is payable on the sale price of such goods or from any other person and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or disposes of such goods under compulsory levy in pursuance of the provision of any Central or State law for the time being in force or any order, rule or notification made thereunder. Before a person can be subjected to purchase tax, he has to be a dealer. The word "dealer" is defined in Section 2 (d) of the Act to mean 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. The definition also includes a society (including a co-operative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to, its members. The word "business" is defined by Section 2 (bb) of the Act which was inserted by Madhya Pradesh Amending Act No. 13 of 1965. The definition of "business" is not of assistance to us, because the period with which we are concerned is prior to the date when the amending Act came into force. We have earlier stated that a person has to be a dealer before he can be made liable for purchase tax under Section 7. The second requirement of Section 7 is that the goods purchased should be in the course of the business of the dealer. As there was no definition of "business" before 1965, the word "business" as used in Section 7 has to be given its normal connotation. The normal connotation of this word in taxing statutes is in the sense of an occupation or profession, which occupies the time, attention and labour of a 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": State of Andhra Pradesh v. H. A. Bakshi A. I. R. 1965 S. C. 531.

(3.) THE question before us, which has been argued, is whether the petitioner satisfies the requirement under Section 7 of the Act that the purchases taxed were made in the course of its business. The petitioner is a members' club. It makes purchases of liquor which is supplied to its members; the liquor is not sold to outsiders. The club is not a legal entity. The members constitute the club. In purchasing liquor, the club acts as an agent of the members. The legal position, therefore, is that the members purchase liquor and distribute amongst themselves. There is no profit-motive in the activity of the club. The club is mainly for pleasure. In these circumstances, it is difficult to hold that the club purchased liquor, on which it has been taxed, in the course of its business. One of the necessary ingredients of Section 7 is, therefore, not satisfied. The petitioner, therefore, could not have been made liable to pay purchase tax.