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1970 Supreme(AP) 101
Andhra Pradesh High Court
Judges : K.MADHAVA REDDY
Hyderabad Asbestos Cement Products Ltd., Sanatnagar, Hyd. - Appellant
Versus
State OF A.P. - Respondent
Decided On : 04-09-70
The absence of a profit motive and the presence of commercial activity are key factors in determining sales tax liability under the Sales Tax Act.
Headnote:
Sales Tax - Canteen - Factories Act - 46 of the Factories Act of 1948 - Andhra Pradesh General Sales Tax Act - Sections 2 (bbb), 2 (n), and 5-A - The court discussed the interpretation of the term 'business' in the context of sales tax liability for food and drink sales at a canteen maintained under the Factories Act. The court examined various judicial precedents and legislative amendments to define 'business' and 'dealer' under the Sales Tax Act, emphasizing the absence of a profit motive and the presence of commercial activity as key factors in determining sales tax liability.
Fact of the Case:
The petitioner, a company, maintained a canteen for its workers in compliance with Section 46 of the Factories Act. The Commercial Tax Officer proposed to include canteen sales in the petitioner's turnover for provisional assessment under the Andhra Pradesh General Sales Tax Act. The petitioner contended that the canteen sales were not part of its business as they were made to comply with statutory requirements.
Finding of the Court:
The court held that the transactions of supplying food and drink to the workers at the canteen constituted sales and business for the purposes of the Sales Tax Act, rejecting the petitioner's argument that the absence of a profit motive and compulsion to comply with the law exempted the sales from tax liability.
Issues: The key issues were whether the canteen sales constituted business under the Sales Tax Act and whether the absence of a profit motive and compulsion to comply with the law exempted the sales from tax liability.
Ratio Decidendi: The court's decision was based on the interpretation of the term 'business' in the context of sales tax liability, emphasizing the absence of a profit motive and the presence of commercial activity as key factors in determining sales tax liability.
Final Decision: The writ petitions were dismissed, and the petitioner was ordered to pay costs.
( 1 ) THESE two Writ petitions raise common questions and may be disposed of by one Judgment It is sufficient if the facts in W, P. No, 1608/67 are mentioned. The petitioner in W, P. No. 1608 is the hyderabad Allyn Metal Works Ltd- In compliance with Section 46 of the Factories Act oi 1948 and the Kules made thereunder the petitioner provides and maintains a canteen for the use of the workers the petitioner-company submitted a provision return to the Commercial tax Officer, First Circle, Hyderabad in Form A. 2 under the andhra Pradesh General Sales Tax Act, The Commereral Tax officer, noticing that the turnover relating to the Sales at the canteen had not been included in the return, issued a notice on 25-10-66 proposing to include the sales of food and drir. k at the canteen in the turnover of the petitioner for the purpose of provisional assessment.
( 2 ) THE petitioner was asked whether it bad any objection to the same. The petitioner submitted objections on 30th November, 1966 stating that the sales at the canteen could not be included in the turnover of the petitioner is they were not made in the course of its business, but were made in order to comply with the requirements of statute. The commercial Tax Officer, however, did not agree with the objections of the petitioner and included the sales at the canteen in the turnover. The petitioner prefered an appeal to the Asst. Commissioner of Commercial Taxes, but his appeal was rejected on 18-2-1967, The petitioner preferred an appeal to the Sales Tax appellate Tribunal raising the question of vires of Sections 2 (bbb), 2 (n) and 5-A of the A P. General Sales Tax Act. On the ground that it may not be competent for the petitioner to question the vires of the provisions of the Statute before the Tribunal, the petitioner has filed the present application for the issue of a writ of Certiorari to have the order of the Asst. Commissioner of Comml. Taxes dt. 18-2-1967 confirming the order of the Commercial lax officer, quashed.
( 3 ) HAVING regard to certain recent judgments of the Supreme court, the vires of Sections 2 (bbb ). 2 (n) and 5-A was not questioned before us at the bearing The principal submission of Sri D. Venkatappayya Sastry, learned counsel for the petitioner was that the petitioner was compelled by Statute to provide and maintain a canteen for the use of the workers, that the canteen was not run with a profit motive but was merely intended to provide amenities to workers and therefore it could not be said that there were any sales when food and drink were supplied to workers at the canteen. According to the learned counsel, the petitioner never carried on business and never intended to carry on any business in food and drink.
( 4 ) IT is necessary to trace the course of Legislation as well as judicial precedent in order to appreciate the submission made by the learned Counsel for the petitioner. Under the Madras General Sales tax Act of 1939 which was in force in the Aedhra area of the State of Andhra Pradesh till 1957 and under the Hyderabad General Sales tax Act oi 1950 which was in force in the Telangana area of the State of Andhra Pradesh till 1957 the word business was not defined, but sale was defined in so far as it is relevant to mean, with all grammatical variations and cognate expressio is, every transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration. A dealer was defined as meaning any person carrying on the business of buying, selling, supplying or distributing goods directly or otherwise. Neither the definition of sale nor the definition of dealer indicated that a profit motive was not necessary. business was not originally defined in the A. P. General Sales Tax Act of 1957 but it came to be defined by an amending Act of 1966 to which we shall refer later. In Gannon Dunkerley and Co. Vs. The State of Madras (1) a question ar
