ORDER
R. Jayasimha Babu, J.
1.The petitioner had imported wattle extract in bulk and after collecting the value thereof from such of it's members who had desired the import to be made, made over to them the wattle extract in the quantity desired by the member. The orders on the foreign buyer was placed by the petitioner, and all documentation concerning the import were in the name of the petitioner. The payment to the foreign supplier was made by the petitioner. The delivery made by it to it's members was made after collecting from them the consideration. The petitioner contends that the allotment and delivery so made by it to it's participating members for consideration does not result in a taxable sale.
2. Petitioner had contended before the Tribunal to which the writ petition that had been filed before this Court was transferred, that Section 2(n)(v) of the Tamil Nadu General Sales Tax Act which provides for levy of tax on supply of goods on unincorporated association to it's members for valuable consideration was unconstitutional. In this petition which challenges the order of the Tribunal dismissing the petition before it, question of alleged unconstitutionality was not argued. Petitioner now accepts the constitutionality of that provision.
3. Mr. M.L.Verma, learned senior counsel for the assessee submitted that the law declared by the apex Court in the decision rendered by a six member Bench of the apex Court in the case of Joint Commercial Tax Officer vs. Young Men's Indian Association, (1970) 26 STC 241, would squarely apply to the facts of this case, and that the law so declared is still good law, notwithstanding the subsequent amendment to Article 366 of the Constitution and the introduction of Clause 29-A therein, and the amendments thereafter made to the definition of `sale' in Section 2(n) of the Tamil Nadu General Sales Tax Act (the Act).
4. The question considered by the Court in that case was 'whether the supply of the various preparations by each club to it's members involved a transaction of sale within the meaning of the Sale of Goods Act,1930'. That question was answered in the negative in the light of the law, as it then stood, which law has also been set out in the judgment thus :-
'The State Legislature being competent to legislate only under Entry 54, List II of the Seventh Schedule of the Constitution, the expression 'Sale of Goods' bears the same meaning which it has in the aforesaid Act'.
In the light of that position of law, the Court held thus:-
'Thus inspite of the definition contained in Section 2(n) read with Explanation I of the Act, if there is no transfer of property from one to another there is no sale which would be exigible to tax'.
5. Subsequent to that judgment, the scope of the expression 'Sale of Goods' has been expanded by the amendment effected to Article 366 by the Constitution 46th Amendment Act, 1982, which introduced Clause 29-A therein. That clause, incorporated an expanded definition of the expression, `tax on the sale or purchase of goods'. Of the six sub-clauses therein, the last two sub-clauses (e) and (f) are relevant for the purpose of this case.
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(f) a tax on the supply by way of or as part of any service, or in any other manner whatsoever, of goods, being food, or any other article of human consumption or any drink (whether or not intoxicating) where such supply or service, is for cash, deferred payment, or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making transfer, delivery or supply, and a purchase of those goods by the persons to whom such transfer, delivery or supply is made.'
6. The law that existed prior to that amendment to the Constitution with regard to the essential ingredients of a sale, thus was radically altered by the introduction of Clause 29-A in Article 366 of the Constitution. Transfer of title to the goods, which was regarded as an essential ingredient of sale, prior to the constitutional amendment, was no longer, in certain circumstances, an essential ingredient of sale.
7. Sub-clause (f) of Article 366 Clause 29-A makes it abundantly clear that the supply, whether or not as part of service of food or any other articles of human consumption, or any drink, for valuable consideration would be regarded as a sale. That sub-clause had the effect of altering the law in relation to supply of such refreshments in Members' Club which was the issue considered by the Supreme Court in the case of Youngmen's Indian Association. We have also held in the case of Cosmopolitan Club vs. Tamil Nadu Taxation Tribunal in W.P.No.7694 of 1999 and connected matters dated 5.12.2001 that the supply of food and drink by Members' club to it's members is a sale and is taxable as such.
8. Counsel submitted that sub-clause (e) of Clause 29-A of Article 366 refers to the supply of goods by any unincorporated Association and, therefore, it is implicit in that clause that supply of goods by incorporated Associations, would not be covered by that clause. Counsel further submitted that supply by incorporated Associations would not be covered by any other clause of Article 29-A and, therefore, such supply by incorporated Associations to their members would not be taxable.
9. Attention was invited by counsel in the case of Commissioner of Income-tax, Bombay vs . Provident Investment Co. Limited, : [1957]32ITR190(SC) , which has, inter alia, laid down that there can be no taxation by intendment. Learned counsel also relied on to the decision of the Apex Court in the case of McDowell & Company Ltd. vs . Commercial Tax Officer, Hyderabad, : [1977]1SCR914 , more particularly para 12 therein. The Court in that case reiterated the observation made by Bhagawati, J. in Fernandaz vs . State of Kerala, : [1957]1SCR837 , inter alia, that no tax can be imposed by inference or analogy, or by probing into the intentions of the legislature and by considering what was the substance of the matter.
10. The status of the petitioner Association which claims to be an incorporated body, has been challenged by the State. The learned Additional Advocate General submits that the petitioner is registered under the provisions of the Tamil Nadu Societies Registration Act, 1975, which is substantially similar to the Societies Registration Act of 1860, and that having regard to the law declared by the Constitution Bench in the case of Board of Trustees of Ayurvedic and Unani Tibbia College vs . State of Delhi, : AIR1962SC458 , a Society registered under the Societies Registration Act, 1860 is not an incorporated body, and the petitioner herein similarly cannot be regarded as an incorporated body, even though it is conferred with a legal personality by reason of the registration under the State's Societies Registration Act, 1975.
11. The Apex Court in that case at para 9 posed the question as to whether the petitioner before it was 'a Corporation in the legal sense of that word'. After referring to Halsbury's Laws of England, 3rd Edition Vol.9, the Court observed, 'there is authority of long-standing for saying that the essence of a Corporation consists in (1) lawful authority of incorporation; (2) the persons to be incorporated; (3) a name by which the persons are incorporated; (4) a place, and (5) words sufficient in law to show incorporation. No particular words are necessary for the creation of a Corporation; any expression showing an intention to incorporate will be sufficient'.
12. The Court thereafter considered the various provisions of the Societies Registration Act and held thus :-
'Now the question before us is - regard being had to the aforesaid provisions - was the Board a Corporation? Our conclusion is that it was not. The most important point to be noticed in this connection is that in the various provisions of the Societies Registration Act, 1860, there are no sufficient words to indicate an intention to incorporate; on the contrary, the provisions show that there was an absence of such intention. Section 2 no doubt provides for a name as also for the objects of the society. Section 5 however states that the property belonging to the Society, if not vested in the Trustees, shall be deemed, to be vested in the governing body of the Society and in all proceedings civil and criminal, the property will be described as the property of the governing body. The Section talks of property belonging to the society; but the property is vested in the Trustees or in the governing body for the time being. The expression 'property belonging to the Society' does not give the society a corporate status in the matter of holding or acquiring property; it merely describes the property which vests in the trustees or governing body for the time being. Section 6 gives the society the right to sue or be sued in the name of the President, Chairman, etc. and Section 7 provides that no suit or proceeding in a civil Court shall abate by reason of the death etc. of the person by or against whom the suit has been brought. Section 8 again says that any judgment obtained in a suit brought by or against the society shall be enforced against it'.
13. Reference was made by the Court thereafter to several English cases more particularly, the case of Taff Vale Railway Co. vs. Amalgamated Society of Railway Servants, 1901 AC 426, which held that a trade union registered under the English Trade Union Act, 1871 was not an incorporated body although the Union is registered under the Act and could acquire property. After so referring to the English cases, the Court held thus:
' It is clear from the aforesaid decision that provisions similar to the provisions of Sections 5, 6, 7 and 8 of the Societies Registration Act, 1860 were held not to show any intention to incorporate; on the contrary, the very resort to the machinery of Trustees or the governing body for the time being acquiring and holding the property showed that there was no intention to incorporate the society or union so as to give it a corporate capacity for the purpose of holding and acquiring property. It appears to us that the legal position is exactly the same with regard to the provisions in Sections 5, 6, 7 and 8 of the Societies Registration Act, 1860. They do not show any intention to incorporate though they confer certain privileges on a registered society, which would be wholly unnecessary if the registered society were a corporation. Sections 13 and 14 do not carry the matter any further in favour of the petitioners. Section 13 provides for dissolution of societies and adjustment of their affairs'.
14. The conclusion reached by the Court was set out in para 14 of the judgment, wherein it was stated -
'We have, therefore, come to the conclusion that the provisions aforesaid do not establish the main essential characteristic of a corporation aggregate, namely, that of an intention to incorporate the society'.
The Court also observed that the scheme and provisions of the Societies Registration Act, 1860 are very similar to those of the Friendly Societies Act, 1896 of U.K. The Court quoted with approval what was stated by Dennis Lloyd in the book `Law relating to Unincorporated Associations' (1938 Edition) at page 59 that registration does not result in incorporation but merely entitles the Society so registered to enjoy the privileges conferred by the Act.
15. The fact of being registered under the Societies Registration Act, whether under the Central Act or the State Act, therefore, does not necessarily result in the society becoming incorporated.
16. Learned counsel for the petitioner submitted that since the petitioner is registered under the Tamil Nadu Societies Registration Act 1975, the law laid down by the Apex Court regarding the effect of registration under the Societies Registration Act, 1860 would not apply to the petitioner society. This submission does not fully bring out the true status of the society. The petitioner society was first registered in the year 1971. That registration was under the Societies Registration Act, 1860 and it is deemed to be registered under the State Act only by virtue of sub-section (2) of Section 4 of the State Act. Counsel took us through the various provisions of the State Act, and submitted that despite the absence of a specific provision in the Act providing for the incorporation of a society which is registered under the Act, it should nevertheless be held that the society registered under the State Act is an incorporated body.
17. The preamble to the State Act states that this is an Act to provide for the registration of literary, scientific, religious, charitable and other societies in the State of Tamil Nadu. The Act, therefore, is not aimed at conferring the status of being incorporated on the bodies which are registered under the Act. The Act is meant to provide for registration and nothing more. The several provisions of the Act are meant to provide for registration and the consequences of such registration. Section 3 of the Act deals with the Societies which may be registered. Section 4 provides for compulsory registration of certain societies. Section 5 provides for optional registration. Section 6 requires the memorandum and bye-laws to be filed with the Registrar. Section 9 requires that the society shall be registered with a name which in the opinion of the Registrar is not undesirable. Section 10 provides for the issue of certificate of registration. The certificate issued thereunder is conclusive evidence that the society is duly registered.
18. Chapter III of the Act deals with the Management and Administration. Section 15 of the Act requires that every registered society shall have a committee, of not less than three members to manage it's affairs. Section 18 deals with the property of registered society and provides that all property movable and immovable belonging to a registered society, whether acquired before or after registration, if not vested in Trustees, shall vest in the committee; and any such property may in any legal proceeding, be referred to as the property of the committee. Section 20 deals with legal proceedings by or against registered societies and provides that the committee or any officer of the registered society authorized in this behalf by its bye-laws may bring or defend or cause to be brought or defended any action or other legal proceeding touching or concerning any property, right or claim of the registered society may sue or be sued in respect any such property, right or claim. It also provides that such legal proceedings shall not abate or be discontinued by reason of death, resignation or removal from office of any officer of the registered society. Section 21 provides for the enforcement of the judgments against the society and provides that it shall be enforced against the property of the society. Section 23 provides that members are liable to be sued as strangers. Section 30 provides for amalgamation and division of the registered societies. Section 34-A deals with supersession of the committee. Section 37 deals with cancellation of registration; Section 39 deals with the effect of such cancellation, and provides that when the registration of a society is cancelled, the society shall forthwith cease to carry on its business, except so far as may be required for the beneficial winding up thereof. Section 40 provides for winding up of the society. Section 41 deals with dissolution of the registered societies and the adjustment of their affairs on dissolution. Section 42 provides that on dissolution no member is to receive profit.
19. The provisions of the State Act nowhere provide that the society when registered shall be an incorporated body. The society is required to have a committee and action is to be brought by a person authorised under the bye-laws. While the fact of being registered confers certain rights on the society, such registration does not, ipso facto, result in it being incorporated. What has been said by the Apex Court in relation to the Societies Registration Act of 1860 would thus apply with respect to a society registered under the Tamil Nadu Societies Registration Act. Moreover, as stated earlier, the petitioner society was in fact registered under the Societies Registration Act of 1860 and the Law which the Apex Court had laid down in the case of Board of Trustees of Ayurvedic and Unani Tibbia College, squarely applies to the case of the petitioner.
20. The petitioner being an unincorporated body, it clearly falls within the expression 'unincorporated Association' referred to in sub-clause (e) of Article 366 Clause 29-A. It is not in dispute that Section 2(n)(v) of the State Act treats the supply of goods by an unincorporated Association, to it's members for cash, deferred payment, or other valuable consideration, as a sale.
21. Even if one were to assume that the petitioner is an incorporated body, that would not make any difference to the taxability of the transaction under consideration here. The statement of objects and reasons which preceded the passing of the Constitution 46th Amendment Bill, sets out, inter alia, that 'while sale by a registered club or other association of persons (the club or association of persons having corporate status) to it's members is taxable, sales by an unincorporated club or association of persons to it's members is not taxable, as such club or association, in law has no separate existence from that of the members'. The law, before as well as after the 46th amendment with regard to the taxability of goods sold for valuable consideration by an incorporated body to it's members is that such sales are taxable.
22. It has never been the law that an incorporated body cannot be subjected to sales tax when it sells goods to it's members. A shareholder or member of a Company or other incorporated entity, can be as much a buyer as any third party can be, when goods are purchased from the incorporated body. The commercial activities in any country are now carried on to a substantial extent by incorporated bodies. The sales by incorporated bodies, as rightly stated in the statement of objects and reasons, to their members, are sales which are exigible to tax.
23. Reliance was placed by learned counsel on the decision of the Apex Court in the case of Youngmen's Indian Association, referred supra, for the proposition that when a group of persons obtain goods for valuable consideration from the incorporated entity of which they are members, and the goods are not made available to any non-member, such supply would not amount to a sale, as the incorporated entity would only be an agent of the members. The question that was considered in that case has already been set out. That case dealt with the limited question regarding the taxability of refreshment supplied to members in Members' clubs; that question was answered in the light of the law which then prevailed, namely that in law there could be no sale without transfer of title to the goods.
24. We have, in the case of Cosmopolitan Club considered the effect of the amendment to Article 366 in Clause 29-A and of the corresponding provision in the State Act, and held that sales of refreshments in members clubs, whether or not incorporated are taxable. While so holding it was observed that, 'The doctrine of mutuality, in the field of sales tax, has been done away with after the introduction of Clause 29A in Article 366. That doctrine was applied initially to unincorporated bodies members of which collectively obtained goods and thereafter released their rights in favour of each other in the goods supplied to each member. That doctrine was later expanded to cases where in reality the transaction was mutual, but through a corporate entity which was owned and controlled only by the members as in the case of Members' clubs. Article 366(29A) in sub-clause (e) treats the supply of goods for valuable consideration to members by unincorporated association as sale. Sub-clause (e) of Article 366(29A) having thus struck at the root of the doctrine of mutuality, that doctrine can no longer be invoked by any one or any entity whether or not incorporated in so far as levy of sales tax is concerned in cases where appropriate legislation has been enacted.'
25. Learned counsel also submitted that the state Government has meted out discriminatory treatment to the petitioner, as the State has, in relation to a Corporation owned by it regarded an arrangement similar to that of the petitioner, as not being exigible to sales tax. In this context, reference was made to a letter issued by the Secretary to the Government dated 6.12.1989 and addressed to the Tamil Nadu Leather Development Corporation Limited, a Corporation owned by the State, wherein it is stated that 'the wattle extract or powder purchased from the Corporation by the member Tanneries imported on open general license will not attract tax at the last purchase, as the Association is doing only service to its members'.
26. We directed the learned Additional Advocate General to ascertain the facts in relation to that letter and that State Corporation. He submitted before us after obtaining instructions that such a letter had been issued but the legal position set out therein is erroneous, and the State is initiating action against that corporation for the recovery of tax. The learned Additional Advocate General, in this context, submitted that the error made by the State, which is apparent would not entitle any other to insist that the State continue to commit the same error, and extend a benefit which the law does not permit. In this context, he referred to the decision of the Supreme Court in the case of Chandigarh Administration vs . Jagjit Singh, : [1995]1SCR126 , wherein the Court observed that --
'Generally speaking, the mere fact that the respondent-authority has passed a particular order in the case of another person similarly situated can never be the ground for issuing a writ in favour of the petitioner on the plea of discrimination. The order in favour of the other person might be legal and valid or it might not be. That has to be investigated first before it can be directed to be followed in the case of the petitioner. If the order in favour of the other person is found to be contrary to law or not warranted, in the facts and circumstances of his case, it is obvious that such an illegal or unwarranted order cannot be made the basis of issuing a writ compelling the respondent authority to repeat the illegality or to pass another unwarranted order.'
27. In the case of Gursharan Singh vs . New Delhi Municipal Committee, : [1996]1SCR1154 , it was held that 'the guarantee of equality before law is a positive concept and it cannot be enforced by a citizen or court in a negative manner' and that 'if an illegality or irregularity has been committed in favour of any individual or a group of individuals, the others cannot invoke the jurisdiction of the High Court or of the Supreme Court, that the same irregularity or illegality be committed by the State or an authority which can be held to be a State within the meaning of Article 12 of the Constitution, so far such petitioners are concerned, on the reasoning that they have been denied the benefits which have been extended to others although in an irregular or illegal manner. Such petitioners can question the validity of orders which are said to have been passed in favour of persons who were not entitled to the same, but they cannot claim orders which are not sanctioned by law in their favour on principle of equality before law. Neither Article 14 of the Constitution conceives within the equality clause this concept nor Article 226 empowers the High Court to enforce such claim of equality before law. If such claims are enforced, it shall amount to directing to continuance and perpetuate an illegal procedure or an illegal order for extending similar benefits to others'.
28. The same principle was reiterated by a three Judges Bench of the apex Court in the case of M/s. Faridabad CT.Scan Centre vs . D.G. Health Services, : 1997ECR801(SC) . It was observed in that case thus:-
'We fail to see how Article 14 can be attracted in cases where wrong orders are issued in favour of others. Wrong orders cannot be perpetuated with the help of Article 14 on the basis that such wrong orders were earlier passed in favour of some other persons and, therefore, there will be discrimination against others if correct orders are passed against them. Having regard to the enunciation of the law by the Supreme Court, it is clear that Article 14 cannot be enforced by the petitioner to perpetuate an illegality on the ground that a benefit not permitted by law had been extended to another. What can be done by the petitioner who complains of discrimination is to require the state to take action against those who have been extended the benefit improperly so that the law is enforced against those others as well'.
29. The Officer, who issued the letter is not an authority under the Act empowered to decide on the taxability or otherwise of the transaction. The statement made therein is clearly contrary to the true legal position. The fact that the State had not enforced the law in relation to the transactions to which the State Corporation was a party, would not entitle the petitioner to claim that the State must refrain from enforcing the law as against the petitioner. Counsel for the state rightly submitted before us that the State is initiating action against the State owned Corporation for the recovery of tax on transactions to which it was a party, and which transactions are similar to those to which the petitioner before us is a party.
30. The argument that there could be no tax by intendment, in the absence of express words providing for the levy of tax while being correct, does not have any relevance to the facts of the present case. The provisions for levy of tax on the supplies effected as in this case, is clearly to be found in section 2(n)(v) of the Tamil Nadu General Sales Tax Act, which is in conformity with Article 366 Clause 29-A(e) of the Constitution.
31. We therefore, do not find any justification for interfering with the impugned order of the Tribunal. The writ petition is dismissed.