JUDGMENT
P.C. Banerji (Technical Member)
1. This is an application under Article 226 of the Constitution of India filed in the High Court at Calcutta by the Automobile Association of Eastern India. In terms of Section 15 of the West Bengal Taxation Tribunal Act, 1987, it was transferred to this Tribunal for disposal.
2. In this application three notices dated 16th February, 1988, under section II and Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called “the Act”), issued by the Commercial Tax Officer, Bhawanipore Charge, in respect of separate yearwise assessments for three years from 1st January, 1982 to 31st December, 1984, have been challenged.
3. The case of the applicant may be briefly stated as follows : The Automobile Association of Eastern India is a company incorporated under the Indian Companies Act, 1913, as a non-profit earning institution. The said company is a club formed for various objects including promotion of the interests of motorists and providing means of social intercourse between them. The main objects of the company are to maintain and conduct a club for accommodation of its members and their friends, to provide a clubhouse and other conveniences and generally to afford to members and their friends all the usual privileges, advantages, convenience and accommodation of a club and to consider and discuss all questions affecting the interests of motorists and the alteration or administration of the law and all police and municipal rules and regulations relating to or anyway affecting them, to form and maintain a reading room and library of literature and to do all things that are incidental to or conducive to the attainment of the above objects or any of them. The income and property of the company are applied solely towards promotion of the said objects and, according to the memorandum of association, no proportion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to members.
4. To achieve these objects the association provides all facilities and service to the car owners, who are its members. The association maintains and conducts a club for accommodation of its members and also maintains an establishment for preparing and supplying refreshment to its members and their guests. The stores and consumable materials necessary for the aforesaid purpose are purchased by the club from the market and the preparation of food and refreshment is made within the premises of the club at the direction of a committee formed for the purpose. The food and/or refreshment prepared in its clubhouse are supplied to the members at such prices as are fixed by the said committee. The members are allowed to bring their guests with them but if any food or refreshment is consumed by the guests, then it is the member, who has to pay for the same along with the guest charge.
5. It is the case of the applicant that the objects for which the club is established would indicate that it is not carrying on any trade and/or business. In conducting the clubhouse the preparations and/or refreshments are supplied to the members without any profit-motive. The club does not carry on any business of supplying such preparations or refreshments to the public and accept any kind of invitation for preparation and supply of such food or refreshment outside the clubhouse. The food or the refreshment prepared in its kitchen cannot be said to be manufactured for trading purposes. It is a members’ club, which only provides service of refreshments to its members sitting in the clubhouse. While supplying goods to its members it is not selling them because the members themselves are the owners of the goods and the transfer from the owner to themselves does not constitute sale of those goods to its members by way of business. In other words, the applicant is not carrying on business of selling goods but is only supplying various preparations or refreshments to its principals. The club invests its own money for preparing food or refreshments for consumption of the principals and recoups itself for the expenses incurred. In the premises, no transaction of sale is involved in such supply by the applicant to its members and as such no sales tax is leviable under the Act.
6. The applicant claimed that it was never treated as a dealer under the said Act and no assessment was made in respect of payment of sales tax on the supply of the said refreshments to its members. Subsequently upon receiving the information from the respondent No. 2 as to the levy of sales tax on the supply of refreshments to its members the applicant made an application for registration as a dealer under Section 7 of the Act describing itself as manufacturer of the refreshments and/or preparations. On the said application it was granted a registration certificate dated 1st September, 1987, as manufacturer of cooked food with effect from 11th August, 1987. Thereafter on legal advice that no sales tax is leviable on the supply of refreshments and preparations to its members, the applicant requested the Commercial Tax Officer, Bhawanipore Charge, by a letter dated 18th April, 1988, to allow it to withdraw the said application for registration on the ground that it was made on a mistaken interpretation of law. The respondents did not take any action on the said letter. Meanwhile, the said Commercial Tax Officer, respondent No. 3, issued three notices dated 16th February, 1988, directing the applicant to produce books of accounts and other documents on 27th July, 1988, for the purpose of assessment for the impugned period. These notices have been challenged by the applicant on the ground that as the club was not a dealer and was not carrying on any business of selling goods, the Commercial Tax Officer had no authority or jurisdiction to levy sales tax and issue the said notices.
7. The application has been opposed by the respondents on the ground that the applicant as an incorporated club is a dealer as per Section 2(c) of the Act and is carrying on business within the meaning of Section 2(la) of the Act. The applicant not only sells goods to its members but also to others, i.e., non-members of any variety, who do not constitute the club at all. The nature of the transaction does not indicate that it is one between a principal and an agent. It has been averred by the respondents that a club is very much a dealer for the purpose of this Act and the person making the supply of food or any other article for human consumption or drink for some valuable consideration is deemed to be the seller and a person to whom such supply is made is deemed to be the purchaser. In view of this position, the applicant is liable to sales tax and the Commercial Tax Officer was acting within his jurisdiction while issuing the impugned notices of assessment.
8. The clear and distinct points which arise for adjudication in this case are : whether the activity of the club is in effect and substance business, and assuming that it is so, can it be held liable as a dealer undertaking transactions, which amount to sale. Here another question also arises. It has to be decided if the club was supplying refreshments to its members as an agent of the principal. The finding on this point is crucial for determination whether the impugned transactions of the club constitute sale.
9. The first point to be decided is whether the applicant has been carrying on business within the meaning of Section 2(la) of the Act. The learned Advocate for the applicant contended that the association has not been carrying on any business, which can be said to be trade, commerce or manufacture ; the object of conducting the club is to provide benefits to its members by rendering services in the matter of automobiles and the supply of refreshments to its members, while they are in the clubhouse, is incidental and ancillary to maintenance and conduct of the club as an association. It is further contended by him that such supply is not for making any profit and is not in the nature of a commercial activity.
10. It is necessary in this connection to refer to the definition of “business” in the Act. The definition of “business” was first introduced in the Act in 1967 and was subsequently amended with effect from 1st April, 1979, to include contracts also. The definition was further amended with effect from 1st April, 1984, by substituting “works contract” in place of “contract” making it more clear and explicit. The definition, as it stands now, is as follows :
“(la) ‘business’ includes–
(i) any trade, commerce or manufacture or execution of works contract or any adventure or concern in the nature of trade, commerce or manufacture or execution of works contract, whether or not such trade, commerce, manufacture, execution of works contract, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, execution of works contract, adventure or concern ; and
(ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, execution of works contract, adventure or concern.”
11. It is clear from the above definition that the question of any profit-motive or accrual of any profit is not relevant. According to the respondents, the applicant is carrying on business and is supplying food and refreshment in the course of such business ; it has considerable volume, frequency, continuity and regularity of transactions of sale in a certain class of goods, thereby fulfilling the essential requirements of business.
12. To establish that the club has not been carrying on any business the learned Advocate for the applicant cited a number of decisions. We shall now discuss these cases. In Mahabaleshwar Club v. State of Maharashtra [1968] 22 STC 123, it was held by the Bombay High Court that as the object of the Mahabaleshwar Club was to provide recreation for its members, the club, while supplying articles like food, refreshments, cigarettes, etc., to its members, was not effecting a sale of those articles to its members by way of business and, therefore, the club was not a dealer. As there was no definition of “business” in the Bombay Sales Tax Act, 1959, it was, therefore, decided by the learned Judge that the commercial character of the activity in question was essential to constitute business. Here the club in question had made losses in its catering activities, but even in the case of clubs, which keep some margin over the cost price in regard to their supplies to members, for the purpose of covering overhead charges and wastage it would not by itself lead to the conclusion that the activitiy of making such supplies is carried on by way of business. This decision is hardly applicable to the present case as in the present statute “business” has been defined and the commercial nature of the activity involving profit-motive or profit accrual is not relevant.
13. The next case relied on by the learned Advocate for the applicant is the Deputy Commissioner v. South India Textile Research Association [1978] 41 STC 197. It was held in that case by the Madras High Court that where an organisation is constituted solely and exclusively for the purpose of carrying on research, the purchase of products by that organisation for the purpose of carrying on its research and the sale of the resulting products by that organisation cannot be said to be in the nature of trade or commerce so as to bring it within the definition of the term “business” contained in the Tamil Nadu General Sales Tax Act, 1959, and, therefore, cannot be brought within the scope of the taxing provisions. According to the definition in the ‘said Act “business” includes any trade, commerce and manufacture or any adventure or concern in the nature of trade, commerce or manufacture. This case is clearly distinguishable as it is purely a research organisation having the remotest connection with any kind of business involving profit-motive or profit as contemplated in the relevant statute.
14. In Mehsana District Shanker-4 Seeds Produce and Sale Co-operative Society Ltd, v. State of Gujarat [1982] 51 STC 289, the Gujarat High Court was dealing with the case of a co-operative society, which was engaged in rendering certain services to its members in the course of the main activity of implementation of the Government scheme of betterment of the quality of cotton. According to the Gujarat Sales Tax Act, 1969, an activity in order to be business must be a commercial activity of buying and selling with or without motive to earn profit. If the commercial element is lacking in a given activity and if such activity is in the nature of mere service or profession it would be beyond the sweep of the term “business” as defined in the said Act and if in accordance with that activity there are transactions of buying and selling those transactions will not render the overall activity as that of business activity. On the facts of the case, the court had held that the object of the assessee was to act as extension service of the Government, pure and simple. If, therefore, in the course of the implementation of the Government scheme the society had undertaken certain activity of sale and recovery of charges to meet administrative and other incidental expenses, it could not be said that it was carrying on business and, therefore, liable as a dealer to pay tax. It is relevant to note that the definition of the term “business” in the Gujarat Act is more or less identical with that of the said term in the West Bengal Act, save and except to the extent of clear exclusion of any activity, which may be in the nature of mere service or profession. For the reasons given above this decision is not applicable to the present case.
15. Reliance was also placed on another case Deputy Commercial Tax Officer v. Cosmopolitan Club [1955] 6 STC 1, of the Madras High Court. The issue for decision before the Division Bench was whether the supply of refreshments by a non-proprietory incorporated club to its members amounts to a sale or not. One of the essential ingredients to constitute a sale within the meaning of the Madras General Sales Tax Act, 1939, was that the transfer of goods must be in the course of trade or business. It was observed by the court that the expression “in the course of trade or business” makes it plain that the transaction must be commercial in its nature, that is to say, the transaction must have its inception in a hope of profit, i.e., with a profit-motive. It is not necessary that any profit should actually be realised and the transaction may well end in a loss. None the less the transaction would be a sale provided it was put through as a part of or in pursuance of an enterprise which was set on foot in the hope of gain. This entire connotation of the word “sale” is carried into the definition of “dealer” in the Act. It was held that in the absence of profit-motive the supply of refreshments by a club to its members would not be “sale” as that word is defined in the relevant statute. In the West Bengal Act the definition of “sale” is different and the element of business is not necessary to constitute sale. Moreover, in the West Bengal Act “business” has been specifically defined with the result that one can carry on trade or business with or without profit motive. The decision in this case, therefore, is not going to help the applicant.
16. Another case cited on behalf of the applicant is Wainganga Club v. State of Madhya Pradesh [1979] 44 STC 268 decided by a Division Bench of the Madhya Pradesh High Court. According to the Madhya Pradesh General Sales Tax Act, 1958, before a person can be made liable to purchase tax he has to be a dealer and the goods purchased by him should be in the course of his business. The matter related to the interpretation of the word “business”, before the insertion of the definition of the said word in the statute. The court referred to the normal connotation of the word in taxing statutes and observed that this is to be understood in the sense of an occupation or profession, which occupies the time, attention and labour of a person, normally with the object of making profit and not for sport or pleasure. It was held that the petitioner, a members’ club, constituted mainly by its members for pleasure and which not being a legal entity, purchased liquor for supply to its members without profit-motive and not for sale to outsiders, was not a dealer.
17. In the case of State of Andhra Pradesh v. H. Abdul Bakshi & Bros. [1964] 15 STC 644, the three-Judge Bench of the Supreme Court construed the expression “business” occurring in the Hyderabad General Sales Tax Act, 1950. Here also the said expression had not been specifically defined in the statute. The court had observed that the expression “business”, though extensively used, is a word of indefinite import. “In taxing statutes it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings either actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure”. Mere buying for personal consumption, i.e., without a profit-motive will not make a person dealer within the meaning of the said Act, but a person who consumes a commodity bought by him in the course of his trade or use in manufacturing another commodity for sale, would be regarded as a dealer. The Legislature requires that the buying of the commodity must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. These decisions for obvious reasons are not applicable to the present case, as the element of profit is not essential to constitute business according to the West Bengal Act.
18. It is necessary to refer to the definition of “dealer” in the Act. The definition of “dealer” as obtaining before its substitution with retrospective effect by West Bengal Taxation Laws (Amendment) Act, 1987, was as follows :
“(c) ‘dealer’ means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal for execution of any works contract and includes the Government or any person making sale under Section 6D.
Explanation (1).–A co-operative society or a club or any association which sells goods to its members is a dealer.
Explanation (2).–…………………”
In its place the following was substituted and shall be deemed always to have been so substituted :
“(c) ‘dealer’ means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under Section 6D and includes–
the Central or a State Government, a local authority, a statutory body, a trust or other body corporate which, or a liquidator or receiver appointed by a court in respect of a person defined as a dealer under this clause who, whether or not in the course of business sells, supplies or distributes directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration.
Explanation 1.–A co-operative society or a club or any association which sells goods to its members is a dealer.
Explanation 2.–…………………”
19. It appears from the memorandum and articles of association of the Automobile Association of Eastern India that the main object of the company is to establish, maintain and conduct a club for its members and their friends in order to promote the interests of motorists and to provide means of social intercourse between them. The supply of refreshments to the members and their guests in the club is an activity akin to business and also amounts to sale. The fact that it is sale will appear from what we shall presently discuss. A club supplying refreshments to its members for a price is certainly undertaking an activity of the nature of adventure or concern in the nature of trade or commerce, even if the activity is not actuated by profit-motive. In otherwords, it is carrying on the business of selling. The facts of the case are analogous to the facts of Enfield India Ltd. Co-operative Canteen Ltd. [1968] 21 STC 317. In that case the Supreme Court decided that a co-operative society formed with the object of providing a canteen for supplying refreshments to the employees of a company, who are its members without a profit-motive was carrying on business. It is evident that the applicant has been carrying on business within the meaning of Section 2(1a) of the Act. Now the applicant can only be held to be a dealer provided the activity that it is carrying on is sale.
20. The next crucial point for decision is whether the supply of refreshments by the club could be treated as sale as defined in the Act.
21. The applicant’s case is that it was never a dealer as it did not carry on the business of selling goods. According to it, there was no element of sale in its transactions. It was only after the Forty-sixth Amendment of the Constitution when the definition of “sale” was expanded that the supply of refreshments, etc., to the public or to the customers was deemed to be sale of those goods by the person making such supply to the person to whom such supply is made. The learned Advocate for the applicant contended that even the amended definition of “sale” does not include the supply of refreshments by the agent to the principal, where no business is carried on with any object of making profit. He further contended that no provisions were inserted in the Act to the effect that sales tax is leviable on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. The last point is not relevant so far as this case is concerned as the applicant is an incorporated company.
22. The applicant claims that it is purely a member’s club, which makes purchases of raw materials through a committee or secretary or manager and distributes refreshments to the members at a fixed price ; it is actually not undertaking any sale but only distribution of assets to its members. The essential elements of sale are, therefore, considered to be absent.
23. The learned Advocate for the applicant argued that a dealer is a person, who carries on the business of selling goods and according to the explanation to the definition of “dealer”, a club, which sells goods to its members is a dealer. It is contended that the function of explanation is not to effect a fundamental change in the character of the transaction and hence the club while selling goods to its members must do it in the course of business to become liable as a dealer. He further contended that the club is not carrying on any business and the service rendered to the members by way of supplying refreshments cannot partake of the character of sale in the course of business and, therefore, it is not a dealer.
24. The learned Advocate for the applicant relied on a decision of the Supreme Court in Joint Commercial Tax Officer v. Young Men’s Indian Association [1970] 26 STC 241 ; AIR 1970 SC 1212, as authority for the proposition that the supply of refreshments by a club to its members does not constitute sale as it is “analogous to that of an agent or mandatory investing his own money for preparing things for consumption of the principal and later recouping himself for the expenses incurred”. Reliance was also placed on a decision of the Division Bench of the Calcutta High Court in Moni Prosad Singh v. State of West Bengal [1977] 39 STC 131, It was decided in the said case that to constitute a sale under the Bengal Finance (Sales Tax) Act, 1941, there must be two different persons in the ordinary sense and meaning of the term “person”. Therefore, when two partnerships have transferred goods from one to the other and the partners of two firms are identical, it would really be a case of one person transferring goods to himself. There cannot be a sale between them. Another case State of Tamil Nadu v. Indian Officers’ Association [1979] 44 STC 264, decided by the Madras High Court was also referred to. In that case it was decided that the organisation of a mess by students themselves and dividing the expenditure amongst themselves was purely in the nature of mutual service and amenity provided by a group of persons for themselves and there was no element of sale in such a case.
25. The decision of the Supreme Court in Young Men’s Association case [1970] 26 STC 241 ; AIR 1970 SC 1212, was based on the finding of the High Court that the members’ clubs in question were merely acting for and on behalf of the members in the manner of an agency arrangement and that there was no sale involved. From the facts of the case it appears that all the clubs were purely members’ clubs where no non-member was entitled to any club amenities including supply of refreshments ; all expenses on account of such supply were just recouped leaving no surplus or profit. The facts of the present case are different and distinguishable as indicated in the following paragraph. The principle enunciated by the Supreme Court is that “if the club even though a distinct legal entity is only acting as an agent for its members in the matter of supply of various preparations to them no sale would be involved as the element of transfer would be completely absent”. Shah, J., while delivering a separate judgment in this case, added the following observations :
“If an incorporated members’ club supplies its property to its members at a fixed tariff, the transaction would readily be deemed to be one for sale……Where, however, the club is merely acting on behalf of the members to make available to them refreshments, beverages and other articles, the transaction will not be regarded as a sale, for the club is the agency through which the members have arranged that the refreshments, beverages, and other articles should be made available. The test in each case is whether the club transfers property belonging to it for a price or the club acts as an agent for making available property belonging to its members.”
26. The question that arises for decision here is whether the transactions by the club in this case partake of the nature of those between the principal and the agent and hence could not constitute sale. It is necessary to examine the club rules, bye-laws and the facts disclosed in the affidavits to ascertain the actual nature of the transactions to determine if these relate to an agency arrangement or sale. It appears from the club rules and the bye-laws that not only members and their guests but also vehicular tourists from foreign countries are allowed certain facilities. Besides the use of retiring room, “chota-hazri” may be arranged on payment of charges thereof. It is not, therefore, a case of the club supplying refreshments to its members only, but in a restricted way to certain non-members also. Moreover, the refreshments are supplied at a fixed tariff, being decided by the committee formed in accordance with rules. It is also admitted by the applicant that a small profit factually resulted from such transactions and the “excess charges” are made with the object to build up a fund to provide other amenities. These facts inevitably lead to the conclusion that it is not just a case of recoupment of the investment made in such transactions as in the case of Young Men’s Association [1970] 26 STC 241 (SC) ; AIR 1970 SC 1212. There is no material to support the view that the club is acting merely as an agent of the members and other non-members getting club facilities and that the transaction is one between the agent and the principal. It is the case of an incorporated club being a distinct legal entity, selling its goods at fixed tariff to members and others. Here the club as a person is different in form and substance from the members comprising it. The club buys materials out of its own funds, prepares refreshments and supplies those properties belonging to it to others for a price. It cannot be assumed that the property in refreshments which it holds is property of which the club members and others are owners. The decisions referred to in the foregoing paragraph do not, therefore, help the applicant. Actually the ratio of the Supreme Court decision in the case of Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd. [1968] 21 STC 317 is squarely applicable to this case.
27. An analysis of the definition of “dealer” quoted earlier shows that it is in three parts. In the first part a substantive definition of “dealer” has been given as any person, who carries on the business of selling and purchasing goods. In the second part, an inclusive definition has been given to enlarge the substantive meaning of the expression. Here Central and State Governments, local authority, statutory body, trust, body corporate, etc., even without the element of business have been included. Then there is the third part in the form of explanation, which states that a co-operative society or a club or any association, which sells goods to its members is a dealer. Sometimes an explanation may be added to include something within, or to exclude something from the ambit of the main enactment or the connotation of some word occurring in it. However, an explanation, normally has to be read as to harmonise with, and clear up any ambiguity in the main section. Actually it is a sort of an extension of the inclusive definition. It is pertinent to note that explanation 1 specifically excludes any reference to business. It is thus the intention of the Legislature to clearly state that a club, a co-operative society or any association, which sells goods to its members is a dealer, even though the transactions may not be in the course of business.
28. We have alrealy decided in the facts and circumstances of this particular case that the applicant has been carrying on business of selling. Even if it had been selling not in the course of business, there was no bar to its being a dealer in case it was otherwise so.
29. To establish that the applicant is a dealer, the learned Stale Representative cited as authority a decision of the Supreme Court in Member, Board of Revenue v. Controller of Stores, Eastern Railway [1989] 74 STC 5. It was held in that case that the South Eastern Railway was a carrier of goods and its activity of selling goods unclaimed was adjunctive to its principal activity of carriage of goods and hence it was a dealer for the purpose of the Bengal Finance (Sales Tax) Act, 1941. Similarly, it was also held that the Controller of Stores, Eastern Railway, was a dealer engaged in the business of selling scrap and unserviceable materials. In another case, District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423, it was held by the Supreme Court that the Railway since it is concerned in the activity of transportation is engaged in commerce within the meaning of the definition of “business” and that the sale of unserviceable materials and scrap iron, etc., is transaction in connection with or ancillary to such commerce within that definition. It was pointed out by the learned Advocate for the applicant that these decisions were rendered in the context of the main activity of the Railways, namely, carriage of goods/transportation, which is a commercial activity and hence an activity incidental and ancillary to such activity constituted business. We agree with such submissions and do not consider these decisions applicable to the instant case to establish the fact that the applicant was a dealer.
30. It was argued by the learned Advocate for the applicant that by the Forty-sixth Amendment of the Constitution, Clause (29A) was inserted in Article 466 to expand the definition of “tax on the sale or purchase of goods” to include items specified in Sub-clauses (a) to (f). Sub-clause (e) of Clause (29A) of Article 466 includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. Sub-clause (f) of the Clause (29A) of the said article includes a tax on the supply by way of or as part of any service or any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration. It was further argued that the definition of “sale” in Section 2(g) was expanded on 1st October, 1983, with retrospective effect by the State Legislature after being so empowered in terms of Sub-clause (f) of Clause (29A) of Article 466 ; but there has been no such legislation by the State in respect of Sub-clause (e) of Clause (29A) of Article 466, the result being that there is no enabling provision to levy tax on supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. The learned State Representative, however, submitted that there was already a provision in the Act in 1979 or even earlier, for treating a club or an association, incorporated or unincorporated, or body of persons selling goods to its members as a dealer but since the supply of such goods could not be treated as deemed sale before the Forty-sixth Amendment of the Constitution and the consequent amendment of the definition of “sale” on 1st October, 1983, with retrospective effect, the said provision remained dormant or in a state of suspended animation. He, therefore, refuted the contention of the learned Advocate for the applicant that a new legislative provision with regard to a club, unincorporated association or body of persons was necessary.
31. It is clear, however, that the Forty-sixth Amendment of the Constitution only validated the law, which was passed before the commencement of the said amendment, which authorised the imposition of a tax on food and drinks supplied in a restaurant or eating house or others. It was only the lack of legislative competence which the constitutional amendment sought to cure. But if there was no such law, the Constitutional amendment did not bring in the law. The amendment only expanded the legislative entry and competence. This did not have the effect of altering the definition of “sale” and other expressions in the State Act. The result was that if any State law had included any transactions of the nature indicated in Clause (29A) of Article 466 in the definitions of “sale” and “dealer”, then such a provision, though it lacked legislative competence at the time when it was enacted, stood validated by the Constitution amendment. See Sree Annapoorna v. State of Tamil Nadu [1986] 63 STC 18 (Mad.), Amba Bhavani v. Government of Andhra Pradesh [1986] 63 STC 40 (AP).
32. There does not appear to be any dispute with regard to the fact that an incorporated club is a dealer while supplying refreshments to its members as per the definition of “sale” and “dealer” in the Act, provided the said transaction does not assume the character of one between the principal and the agent. There is no question of a lack of legislative provision in this regard. We are, however, not commenting on the contention of the learned Advocate for the applicant that there is no specific enactment of State Legislature for levying tax on the supply of goods by an unincorporated association or body of persons to a member thereof in pursuance of the enabling provision of the Forty-sixth Amendment of the Constitution in this regard. We are concerned here with an incorporated club or a body corporate. We have already held that the said transactions are not between an agent and the principal but actually constitute sale. We, therefore, hold that the said club is a dealer within the meaning of Section 2(c) of the Act.
33. In the circumstances, we consider that the notices issued by the Commercial Tax Officer for assessment of tax in respect of the applicant were valid and that the Commercial Tax Officer was competent to assess such tax. In making the assessment the appropriate authority, however, shall take into consideration the provisions of Section 26A(2) of the Act. The applicant may claim exemption under the section for supplies made before 1st October, 1983, provided tax has not been collected on the ground that no such tax could have been levied or collected at that time. It is clear that the case falls within Clause (b) of Sub-section (2) of Section 26A of the Act subject to the applicant discharging the onus in terms of the proviso to that section.
34. In the premises, the application is liable to be dismissed and is dismissed. Interim orders are vacated. There will be no order for costs.
B.C. Chakrabari (Chairman)
I agree
L.N. Ray (Judicial Member)
I agree