1970 (9) TMI 95 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sale of food to students by a hostel is liable for sales tax assessment under the Mysore Sales Tax Act, 1957.

Analysis:
The case involved writ petitions questioning the assessment of sales tax on wardens of hostels providing boarding and lodging facilities to students. The petitioners contended that there was no sale of goods by the hostels to students, making the levy of sales tax illegal. They also challenged the constitutional validity of explanation (1) of section 2(1)(t) of the Act. The Deputy Commissioner set aside the assessment orders as arbitrary but refused to entertain the constitutional challenge. The court found that there was no sale of goods based on undisputed facts and did not delve into the constitutional validity of the explanation.

In the judgment, reference was made to a Supreme Court case involving a members' club and the liability for sales tax on food supplied to members. The court highlighted that if there is no transfer of property in the supply of goods, it does not fall within the definition of sale. Similarly, in the case of a students' hostel where students manage the hostel and share expenses, there is no sale of goods as there is no transfer of property involved in providing food. Consequently, the assessments made by the authorities on the hostels were deemed to be without jurisdiction. The court allowed the writ petitions, quashed the assessment orders, and directed the tax officer to refrain from making further assessments for the relevant year.

In conclusion, the court ruled in favor of the petitioners, emphasizing that the provision of food by hostels to students did not constitute a sale of goods, thereby rendering the sales tax assessment on the hostels invalid. The judgment highlighted the absence of a transfer of property in the hostel-student food arrangement, aligning with the legal principles established in a similar Supreme Court case regarding members' clubs and sales tax liability.