2008 (12) TMI 709 - HC - VAT and Sales Tax

Whether the Sales Tax Appellate Tribunal is justified in holding that the Notification No. II(1)/CTRE/206/77 dated September 7 1977 issued under section 17 of the TNGST Act 1959 exempting tax payable under the said Act on the sales by canteens run by a Managing Committee or Co-operative Society of State or Central Government servants on a no-profit no-loss basis for the benefit of the said State or Central Government employees is not applicable to Corporation staff in spite of G.O.Ms. No. 600 declaring them as Government servants? Held that - The Tribunal was justified in negativing the plea raised by the petitioner that the staff of the Madras Corporation are also Government servants and as such they are entitled to the exemption granted by the Government to the servants of the Union as well as State. Accordingly substantial question of law is answered against the petitioner.

Summary

Issues:
Interpretation of Government orders for exemption of sales tax on canteen sales by Corporation staff.

Analysis:
The case involved a co-operative society of Madras Corporation staff claiming exemption from sales tax on canteen sales based on Government orders exempting sales to Government servants. The dispute arose when the assessing authority rejected the exemption claim, contending that Corporation staff are not Government servants. The Appellate Assistant Commissioner upheld this decision due to the absence of a specific exemption order. The Sales Tax Appellate Tribunal also rejected the claim, ruling that the exemption applied only to canteens run by Government servants for their benefit. The petitioner argued that Corporation staff should be considered Government servants based on control and a Government order. However, the Special Government Pleader contended that Corporation staff are not Government servants as they operate under separate regulations.

The Court analyzed the legal status of Municipal Corporations, stating that they are distinct entities under the law, even though they may have some Government control. The Court cited precedents to explain that mere regulatory control by the Government does not make an entity part of the Government. The Court highlighted that specific provisions may include Corporation staff as Government servants for limited purposes, but this does not extend to all situations. Referring to a Division Bench decision, the Court emphasized that Municipalities, despite some Government oversight, remain separate entities with their own identity and staff cannot be automatically considered Government servants.

Ultimately, the Court upheld the Tribunal's decision, ruling that Corporation staff are not Government servants entitled to the exemption granted to Government employees. The Court emphasized that the exemption was specific to canteens run by Government servants for their benefit and did not extend to Corporation staff. The judgment dismissed the tax case, stating that the Corporation staff cannot claim the exemption, as they do not fall under the definition of Government servants for the purpose of the exemption order.