The fundamental requirement for tax liability under the Mysore Sales Tax Act, 1957 is the commercial character of the activity, irrespective of the presence of a profit motive.

( 1 ) THESE are two writ petitions preferred under Art. 226 of the Constitution of India by the Motor Industries Co. , Bangalore and are directed against the assessment orders made by the Commercial Tax Officer, 8th circle, Bangalore (Respondent-2) for the years 1964-65 and 1965-66 under the Mysore Sales Tax Act, 1957, hereinafter called 'the Act'. The common question that arises for decision in these writ petitions is whether the proceeds of the sales made through the canteen run by the petitioner- company for the benefit of its employees are exigible to tax under the act.

( 2 ) THE petitioner-Company nas its factory in Bangalore, wherein it employs more than 4,000 workers. The business of the petitioner-Company is the manufacture and sale of automobile parts. Its Memorandum and Articles of Association do not empower it to carry on any business in food and drinks. Under S. 46 of the Factories Act, 1948, a statutory obligation is imposed on the petitioner-Company to run a canteen for its employees as a labour welfare measure. The petitioner-Company has been running such a canteen where food and drinks are served only to its employees on a subsidised basis.

( 3 ) IN Davanagere Cotton Mills Ltd. v. State of Mysore, 8 STC. 793. this Court held that the Mysore Sales Tax Act, 1948 does not seek to levy sales tax on all sale transactions but only on such transactions as are effected in the course of business and that where the assessee Mills maintained a canteen on a no profit and no loss basis for the benefit of its employees in conformity with the requirements of the Factories Act, 1948, the turnover relating to sales effected in the canteen was not liable to be taxed under the Mysore Sales Tax Act, 1948. In assessments made under the act, which came into force on 1-10-1957, the canteen sales were not assessed following the decision in Davanagere Cotton Mills Case (1 ). The Act was amended by Mysore Act 9 of 1964 with effect from 1-4-1964, by which the definition of the word 'business' in Section 2 (1) (f-2) was amended to include 'any trade, commerce or any adventure or concern in the nature of trade, or commerce, with or without profit motive in such trade, commerce, adventure or concern'. The said amendment, in the opinion of the Commercial Tax Department brought about a fundamental change in the concept of 'business' so as to render the canteen sale proceeds of the petitioner-Company and similar concerns exieible to tax.

( 4 ) THEREFORE, while making the assessment on the petitioner-Company for the year 1965-66, the 2nd respondent who is the Assessing Authority, included in the taxable turnover, its canteen sales amounting to rs. 1,70,759-02 on which a sum Rs. 3,415-18 was levied as sales tax by the assessment order dt. 30-9-1969. Against the said order of assessment and notice of demand, the petitioner-Company has preferred WP. 6677 of 1969 on 22-11-1969. When the said writ petition was pending, the second respondent made another assessment order on 3-12-1969 for the year 1964-65. Under the said assessment order, the canteen sale proceeds of the petitioner-Company was determined at Rs. 1,54,410-67 on which a sum of rs. 3088-21 was levied, as tax. On the basis of the said assessment order, the second respondent issued a demand notice dt. 19-1-1970. Against the said order of assessment and notice of demand, the petitioner-Company preferred WP. 691 of 1970 on 13-2-1970.

( 5 ) THE undisputed facts are: That the petitioner-Company is running a canteen attached to its factory for the exclusive benefit of its employees where free lunch is supplied, and that in addition, food and drinks are sold at concessional rates; that its Memorandum and Articles of Association do not empower it to carry on business in food and drinks and its business is the manufacture and sale of automobile parts; that the canteen sales were not exigible to tax before 1-4-1964; that with effect from 1-1-66 the State Government has exempted the