The supply of refreshments by a members' Club to its members does not constitute a sale in law and is therefore not subject to sales tax.

In these two petitions, the Cosmopolitan Club, Madras, represented by its Honorary Secretary seeks to challenge the legality of the levy of sales tax on the supply of refreshments to the Club members. The 1st respondent impleaded is the Deputy Commercial Tax Officer of the Triplicane Division and the second respondent the State of Madras.

2. The prayer in C.M.P. No. 3414 of 1951 is for the issue of a writ of certiorari or other appropriate writ or order to quash G.O. Ms. No. 2472 d/21-9-1949 of the Revenue Department, Government of Madras, which declined to grant exemption from such sales tax on a letter dated the 22nd of August, 1949, addressed to the Honourable Minister for Finance of the Government of Madras. In that letter it was represented that there were about 1, 200 members on the rolls of the Club, which afforded amenities in sports, indoor games and in various directions to its members, and that refreshments were supplied to members as an amenity and not on any commercial basis. The letter was an appeal for exemption in the circumstances from the payment of sales tax. On this, the Government passed the G.O. sought to be quashed on the ground that they did not see sufficient justification for exempting the sale of refreshments by the Cosmopolitan Club, Madras, from liability to pay sales tax. In the original letter of the Cosmopolitan Club Ex. R-2 produced by Government, there was no specific objection to the levy of this tax as illegal under the Sales Tax Act. This allegation however appears in the common affidavit filed in support of these two petitions, C.M.P. No. 3415 of 1951 seeks for a writ by way of mandamus to direct the respondents to forbear from levying and collecting such sales tax in future.

These two petitions were admitted by Raghava Rao and Viswanatha Sastri, JJ., sitting as a Bench on the 9th of March this year. Mr. Jayarama Ayyar, who appears for the Cosmopolitan Club, says that he had to argue at some length before he persuaded them to admit them. There is no order of course giving any reasons for admission. The Government Pleader has, as may be expected, raised strenuous objections to maintainability, which I shall first consider.

3. The levy of sales tax was first made in 1939. The fiscally operative section is Section 3(a) of the Madras Sales Tax Act under which, subject to the provisions of the Act, every dealer shall pay for each year a tax on his total turnover for such year. Section 2(b) defines a "dealer" as "any person who carries on the business of buying or selling goods", with the following very important explanation, "A Co-operative Society, a Club, a firm or any association, which sells goods to its members is a dealer within the meaning of this clause."

4. The Cosmopolitan Club has been paying sales tax since 1939, which grew from a comparatively insignificant levy of a few rupees a year to a considerable sum. The first objection by the Government Pleader is that the Club has raised no objection to the legality of the tax before the Deputy Commercial Tax Officer and has not explored the machinery of relief by way of appeal and revision provided by the Act itself. Under Section 11, an assessee objecting to an assessment has a right of appeal within 30 days to the appellate authority, which is admittedly the Commercial Tax Officer. Section 12 specifically provides for a revision by the Board of Revenue. He also urges that the right of suit is also not barred as under Section 18 no suit shall be instituted against the State in respect of any act done unless it is initiated within 6 months from the date of the act complained of. This section also clearly leaves open the ordinary right of suit subject to a restricted time limitation as has been held in Province of Madras v. Satyanarayanamurthy by Govinda Menon and Basheer Ahmed Sayeed, JJ., It is also pointed out that under the Madras Amending Act VI of 1951 an appeal also lies to the newly constituted Sales TAx Appellate Tribunal