A supply of food and drink by a members' club to its members is not a taxable sale if the club acts as an agent for the members, as no transfer of property occurs. This relationship must be determined by assessing authorities based on facts.

ORDER

The appellants are members' clubs. They are in appeal by special leave against the judgment and order of a Division Bench of the High Court of Andhra Pradesh ([1992] 87 STC 227 (AP)), and subsequent orders ([1992] 87 STC 341 (AP)) following the same, whereby it was held that the appellants are liable to pay sales tax under the Andhra Pradesh General Sales Tax Act, 1957 on the supplies of food and drink to their members.

A principle contention on behalf of the appellants is that when a members' club supplies food or drink to its members, there is no sale because a members' club only acts as the agent of the member. Reliance is placed in this behalf upon the judgments of this court in Secretary, the Madras Gymkhana Club Employees Union v. Management of the Gymkhana Club [1968] 1 SCR 742 and Joint Commercial Taxes Officer, Harbour Division - II, Madras v. Young Men's Indian Association [1970] 1 SCC 462 ([1970] 26 STC 241 (SC)). In the former case it was held that a club belongs to the members for the time being on its list of members. Thus, members can deal with the club as they like. A club is identified with its members at a given point of time, so that it cannot be said that a club has an existence apart from its members. Even more relevant to the issue is the decision in the case of Young Men's Indian Association [1970] 1 SCC 462 ([1970] 26 STC 241 (SC)) which dealt with the very question, namely, "Whether the supply of various preparations by each club to its members involves a transaction of sale ?" It was held, based upon the definition of "sale" in the Sale of Goods Act, 1930, that there was no sale exigible to tax "if there is no transfer of property from one to another. ... If the club, even though a distinct legal entity, is only acting as an agent for its members in matter of supply of various preparations to them, no sale would be involved as the element of transfer would be completely absent".

In some of the present matters the appellants filed writ petitions against notices seeking to assess them to sales tax on the supply of food and beverages to their members. There was, therefore, no determination by the fact-finding authorities of the relationship between the appellants and their members in the matter of supply by the former to the latter of food and drink and such like; that is to say, was the club acting as the agent of the members or did the property in the food and drink pass from the club to the members ? In the other matters the High Court was approached after orders of assessment had been made and appeals filed but there was no inquiry into the said relationship. We think it appropriate, therefore, that the matters should go back to the assessing authorities who will determine, on facts in regard to each appellant. What was the said relationship and, with that finding in mind, decide, whether or not the appellants are liable to sales tax in this behalf under the provisions of the Andhra Pradesh General Sales Tax Act, 1957. All contentions that are available both to the appellants and the sales tax authorities are left open and may be raised. The decisions shall be reached without reference to the judgment of the High Court that is under appeal.

The appeals are allowed. The judgment and orders under appeal are set aside, as also the aforementioned orders of assessment and orders in appeal therefrom.

No order as to costs.