P.G. Agarwal, J.
1. This application under Article 226 of the Constitution of India has been filed by the Bongaigaon Refinery & Petrochemicals Limited Canteen Co-Operative Society, hereinafter referred as the Society, whereby the order of assessment of Sales Tax for the year 1995-96 along with the subsequent orders of appeal and revision passed by the competent authorities have been challenged.
2. We have heard Mr. J. Bora, learned counsel for the petitioner and Mr. K. H. Choudhury, learned counsel for the respondents.
3. The facts : The Bongaigaon Refinery & Petrochemicals Limited, for short 'the BRPL' is a Government Undertaking and they are providing a canteen, as required under Section 46 of the Factories Act, 1948. The work order for the catering services of the BRPL Canteen for the year 1995-96 was awarded to the Society and accordingly the services were provided. The Society was registered under the Assam General Sales Tax Act as a 'dealer'. The work order was for a period of two years with effect from 1.1.1995. The case of the petitioner is that they are required to provide meals, snacks etc. not only to the employees of the BRPL, who are all members of the society, but also to the members of the Industrial Security Staff. So far the meals supplied to the Industrial Security Staff is concerned, the Society own their liability to pay sales tax. However, so far the other supplies are concerned, according to the petitioner, this is a mere service only and although they are registered as 'dealer' but they are not liable to pay sales tax. However, the concerned authority, i.e., the Senior Superintendent of Taxes, Bongaigaon assessed the sales tax liability of the petitioner society for the year 1995-96 vide order dated 26.2.1997 and an appeal was preferred before the Deputy Commissioner of Taxes (Appeals), Guwahati but the said appeal was rejected vide order dated 4.12.1998. Thereafter a revision was preferred by the society before the Commissioner of Taxes and the said revision was dismissed vide the order dated 12.7.1999. Hence, the present writ petition.
4. The respondent State has filed an affidavit in opposition stating, inter alia, that the petitioner Society was rightly held to be a dealer under the Assam General Sales Tax, for short the 'the Act', and under the contract agreement entered into between the petitioner's society and BRPL, the society used to sale goods, i.e., coked food, snacks etc. for which payments were made to them and, as such, the society is liable to pay sales tax under the Act.
5. The issues raised by the petitioner's society are - (1) that the petitioner's Society is providing service only and there is no question of holding the petitioner's society as a dealer; (2) that the transactions are not in the nature of business and they do not amount to sale of goods.
6. Mr. J. Bora, learned counsel for the petitioner has submitted that in view of the provisions of Section 48 of the Factories Act, the BRPL was statutorily bound to provide canteen services to its employees and the said canteen was managed by the society, which consist of employees of BRPL only. Accordingly, a well-equipped canteen was provided by the BRPL and the Society was required to provide the catering services. The Society used to purchase necessary grocery items, prepare the meals and snacks, which were supplied to the employees on production of coupons. It may be mentioned here that for the meals, tea or snacks etc. coupons are used to be issued to each of the employees by the employer BRPL and on production of these coupons by the Society, along with their bills, payments were released by the BRPL, to the society. In support of his above plea, the petitioner has relied on a full Bench decision of the Madhya Pradesh High Court in the case of Commissioner of Sales Tax, Madhya Pradesh v. Hukumchand Mills Ltd., reported in 101 STC 141, wherein the Court held:
'Where the occupier of a factory, in compliance with Section 46 of the Factories Act, 1948, provides canteen facilities for its workers, the question whether it would be taxable under the Madhya Pradesh General Sales Tax Act, 1958, in respect of the canteen sales would depend on several factors. Section 2(d) of the Act defines 'dealer' as meaning any person who carries on business of buying, selling supplying or distributing goods. Section 2(bb) defines 'business' as including any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Section 2(r) defining 'taxable turnover' speaks of the dealer's turnover. If sale is not intended and the dominant object is to render service in compliance with the legal mandate, the occupier would not be a dealer indulging in such a business. If the intention is not of sale of food, the transaction would not be liable to be called trade, commerce, manufacture or any adventure or concern of that nature and thus would not be business within the
meaning of Section 2(bb) of the Act. The occupier would then not be a dealer and the canteen sales cannot be called the dealer's turnover. In each case the taxability or otherwise shall inevitably depend on appreciation of facts.'
7. Following the above Full Bench decision the Hon'ble Madhya Pradesh High Court in the case of Shri Dayabhai v. State of Madhya Pradesh 116 STC 500, held :
'On facts as unfolded, the attempt to distinguish the above quoted authority on the fulcrum of 'association' and 'individual' under contract is thus manifestly infirm and is an exercise which deserves to be greeted with futility. In essence, it is the 'nature' of the activity, rather than the status of actors, which should answer the question. That course is pre-eminently legal and logical.'
8. The Hon'ble Supreme Court had the occasion to examine the matter in hand in the case of State of Tamil Nadu & Anr. v. Board of Trustees of the Port of Madras 114 STC 520. The Apex Court held :
'Now the definition of'business' in Section 2(d) and in most of the sales tax statutes is an inclusive definition and includes 'trade or business or manufacture, etc.' This itself shows that the Legislature has recognized that the word 'business;' is wider than the words 'trade, commerce or manufacture, etc.'The word 'business' though extensively used is a word of indefinite import, in taxing statutes, it is normally used in the sense of an occupation, a profession - which occupies time, attention and labour of a person, normally with a profit motive and there must be a course or 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. Abdul Bakshi and Bros. (1964) 15 STC 644 (SC); AIR 1965 SC 531). Even if such profit-motive is statutorily excluded from the definition of 'business' yet the person could be doing 'business'.
The word 'carrying on business' requires something more than merely selling or buying etc. Whether a person 'carries on business' in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive (Board of Revenue v. A. M. Ansari (1976) 38 STC 577 (SC); (1976) 3 SCC 512), Such profit-motive may, however, be statutorily excluded from the definition of 'business' but still the person may be 'carrying on business'.
In our view, if the main activity was not 'business', then the connected, incidental or ancillary activities of sales would not
normally amount to 'business' unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the Revenue. It will then be necessary to find out whether the transactions, which are connected, incidental or ancillary are only an infinitesimal or small part of the main activities. In other words, the presumption will be that these connected, incidental or ancillary activities of sales are not 'business' and the onus of an independent intention to do 'business' in connected, incidental and ancillary sales will rest on the department. If, for example, these connected, incidental or ancillary transactions are so large as to render the main activity infinitesimal or very small, then of course the case would fall under the first category referred to earlier.'
9. Learned counsel appearing for the State of Assam, on the other hand, relied on a decision of the Apex Court in the case of Deputy Commercial Tax Officer, Saldaped v. Enfield India Ltd. AIR 1968 SC 838. The Apex Court considering the expression 'sale of goods' and the Madras General Sales Tax Act held :
'We are not dealing in this case with liability criminal or quasi-criminal. The question is one of liability under a taxing statute and the Court In determining the liability of the Society to pay tax cannot ignore the form and look at what is called the 'substance of the transaction'. Ex facie, the transaction is one in which the legal owner of property transfers it to another pursuant to a contract for a price, and that transaction must be regarded as a sale. Whether by appropriate provisions in the Articles of Association or Rules, a scheme may be devised under which the goods supplied may be treated as belonging to the members of the Society, and the Society merely acts as an agent in supplying the food to its members, need not be considered in the present case. It will suffice to state that it cannot be urged as a proposition of law that when a Cooperative Society supplies to its members refreshments for a price under a scheme for distribution or supply of refreshments the transaction can in no event be regarded as a sale of the refreshments supplied for a price.'
10. In view of the above, let us examine the factual matrix of the present case. The petitioner is a co-operative society, registered under the Assam Co-operative Societies Act. They are running a canteen as per the work order placed by the BRPL. The petitioner has nowhere claimed that it is a non-profit making organization. They are purchasing a lot of raw materials and selling the finished products at the rates fixed by the BRPL. It is not the case of the petitioner's
society that they are selling the goods to their members only at cost to cost. Further, as stated in the writ petition itself, we find that besides the employees of the BRPL, who are members of the society, the society is also supplying the meals, tea, snacks etc. to the Industrial Security staff posted there. As per the work order the Society is also bound to supply meals etc. to the guest of the BRPL and the payment is made by BRPL on production of coupons. The society is also registered under the Assam General Sales Tax Act and as seen from the assessment/appeal/revision orders passed by the sales tax authorities and they used to submit returns. The Society also admits that in respect of the sale made to the other person, they are liable to pay sales tax. We find no justifiable ground to distinguish the sale made to its own members or to the other staff of the Industrial security staff. The Society is not transferring its property in goods to its members, they are selling the same to the BRPL against payment and the delivery is made to the coupon holders. It is the regular/ dominant object of establishing the society and the society is to engage in the business of canteen management and thereby earn profit for its members. If the canteen would have been allowed to run by other hotel or catering company, the profit would have gone to them but the co-operative society has been established to shift that much money to its members.
11. With due respect to the Hon'ble Madhya Pradesh High Court, I am unable to appreciate the dictum of law laid down in the Daya Bhai (supra). So far the requirement under Section 48 of the Factories Act is concerned, it would have been a different question if the canteen is managed by the owner or occupier of the factory in compliance with the requirement of law, i.e., Section 48 of the Factories Act. In that case, considering the dominant object for which the factory has been established, it may be held that there was no sale. However, when the factory owner has given the contract to a third party and pursuant to the said contract such third party supplies goods to the factory owner/to its employees on payment of price, it would amount to 'sale' by such third party to the factory owner. The liability to pay tax under the Act is on the dealer. We all know that the airlines do provide food to its commuters and in certain exigencies they are to provide retiring facilities also in suitable hotels etc. If the analogy taken in Shri Dayabhai (supra) is accepted, the hotel accommodation and meal etc. provided by the hotels will not be exigible to tax. So far the hotel is concerned, they were selling the rooms or food to the airlines concerned and there cannot be any reason to differentiate such sale only on the ground that the airlines was duty bound or statutorily bound to make such purchases.
12. We may have a look at the work order dated 30.10.1995 issued by the BRPL in favour of the society. A bare reading of the work order allotted to the society against the tender submitted by them will goes to show that there were other tenderers, who were vying for the contract but failed. The floating offender itself shows the commercial nature of the transaction. The authority BRPL were also conscious of the fact that the purchase of food articles from the Society will attract sales tax liability. Hence, there was a specific clause to that effect in the work order. The Clause 4.4, reads as follows :
'The rates quoted by the contractor for meals, other eatables and drinks will be inclusive of Sales Tax and other levies if payable and will be fixed and no variation of the rates shall be allowed at any time during the period of contract.'
13. From the above we find that the sales tax in question was realised by the Society from the purchaser, as it was inclusive in the price, and hence it cannot be said that the Society is not liable to pay tax on such sale.
14. The provision of Section 2(5) of the Act are specific, which reads as follows :
'2(5) Business' includes -
(1) any trade, commerce, 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 the motive to make gain or profit and whether or not any gain or profit accrues therefrom ;
(2) the execution of any works contract or transfer of the right to use any goods for any purpose under a lease ; and
(3) any transaction including the rendering ,of any service in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure, concern, works-contract or lease, or to the setting up of any such business.'
15. In view of what has been stated above, we find that the Society was engaged in the business of preparing and supplying meals against the order placed by BRPL. The prices for meal was fixed and after the meals are supplied to the concerned persons as per the order of the BRPL, the payment used to be released by the BRPL. BRPL may have statutory obligation to provide meals or canteen facilities to its employees but so far the society is concerned, it had no such responsibility or liability and it was merely engaged in business activity In supplying the meals to the BRPL on payment. The purpose for which the meals were procured is irrelevant for the
purpose of interpreting the taxing statute. The property in the goods, i.e., the meals, snacks etc. were transferred to BRPL. Once they are supplied against the coupon the said transaction will amount to sale as it was also for consideration. If a company, manufacturing blankets, donates certain percentage of blankets for charity or any other social cause without payment, the giving of such things may not amount to sale but if a third party purchases such goods from the manufacture in order to give in charity, can the said third person claim that he is not liable to pay tax on such purchases or the manufacturer can claim that such sale is not exigible to tax The dominant purpose for purchase is immaterial.
16. In the result, we find no merit in the writ petition and the writ petition is accordingly dismissed. Interim order, if any, stands vacated. Writ petitioner is given six week's time to make the payment against the demand of tax along with the interest as per law.