Judgment

GROVER, J. (on behalf of M. Hidayatullah C.J.I. ; K. S. Hegde J., himself, A. N. Ray and I. D. Dua, JJ.): These appeals by certificate are directed against a common judgment of the Madras High Court in petitions filed under Article 226 of the Constitution by the Cosmopolitan Club, Madras, the Young Men s Indian Association, Madras and the Lawley Institute. Ootacamund challenging the proceedings relating to their assessment to sales tax under the Madras General Sales Tax Act, 1959, hereinafter called the "Act", for supplying food, snacks, beverages and other articles to their members or their guests. It was held by the High Court that each of these clubs could not be regarded as a "dealer" within the meaning of Section 2 (g) read with Explanation I of the Act nor was any sale involved in the aforesaid activity of the club within the meaning of Section 2 (n) read with Explanation I of the Act.

2. The Cosmopolitan Club, Madras, is a social recreation club which was started originally in the year 1873 as an unincorporated association. In 1934 it was registered under Section 26 of the Indian Companies Act 1913 as a non-profit earning institution. Its objects, as disclosed in the memorandum of association, are mainly to promote and facilitate social intercourse, discussion amongst its members etc. The articles of association provide that the members for the time being only constitute the club. It maintains an establishment for preparing and supplying refreshments to its members. It has been found by the High Court and has not been disputed that the articles necessary for the aforesaid purpose are purchased by the club in the market and the preparations are made within its premises at the direction of a committee. The preparations are supplied to the members at such prices as are fixed by the committee. A member is allowed to bring guests with him but if any article of food is consumed by the guest it is the member who has to pay for the same.

3. The Young Men s Indian Association is a society registered under the Societies Registration Act 1860. It has, for its objects, the improvement of the moral and physical standards etc. of the students. The association provides certain facilities in the shape of a library with a reading room apart from residential and recreational facilities. There is a mess together with a canteen serving the needs of the members. Any member can bring a guest but the duration of his stay in the hostel or of enjoying the benefit of the preparations or beverages is limited and restricted by the rules. It is the member who has to pay the charges for any articles consumed by his guest. The employees of the association purchase the various articles required for supplying the refreshments etc. and the cost and the expenses incurred therefor inclusive of the salaries of cooks, servers and others are totalled up and divided among the members participating in the mess. No profit is made by the association in providing these amenities to its members. These facts as found in the judgment of the High Court are not disputed.

4. The Lawley Institute came into existence by a deed of trust dated September 15, 1911 entered into between the Maharaja of Bibbli and the Collector of Nilgiris and others. The management of the Institute vests absolutely in the board of trustees. It is intended to serve its members only and no person other than a member is entitled to participate in the amenities provided by the Institute. The supplying of refreshments and meals to members constitute one of such amenities. These facts are altogether uncontroverted.

5. It appears that in the State of Madras levy of sales tax was first made in 1939. The statute as it stood then contained the definition of "dealer" in Section 2 (b). A dealer was defined as "any person who carried on any business of buying, or selling goods" with the following Explanation:

"a co-operative society, a club, a firm or any association which sells goods to its members