TMI Blog1970 (2) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... espondenty in C.A. Nos. 1724, 1725 and 1727 of 1967. M.C. Chagla, Senior Advocate (A.V. Rangam, Advocate, with him), for the appellant. -------------------------------------------------- The judgment of HIDAYATULLAH, C.J., HEGDE, GROVER, RAY and DUA, JJ., was delivered by GROVER, J. SHAH, J., delivered a separate judgment.] GROVER, J.- These appeals by certificate are directed against a common judgment of the Madras High Court in petitions filed under article 226 of the Constitution by the Cosmopolitan Club, Madras, the Young Men's Indian Association, Madras, and the Lawley Institute, Ootaca-mund, challenging the proceedings relating to their assessments to sales tax under the Madras General Sales Tax Act, 1959, hereinafter called the "Act", for supplying food, snacks, beverages and other articles to their members or their guests. It was held by the High Court that each of these clubs could not be regarded as a "dealer" within the meaning of section 2(g) read with Explanation I of the Act nor was any sale involved in the aforesaid activity of the club within the meaning of section 2(n) read with Explanation I of the Act. The Cosmopolitan Club, Madras, is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is intended to serve its members only, and no person other than a member is entitled to participate in the amenities provided by the Institute. The supplying of refreshments and meals to members constitute one of such amenities. These facts are altogether uncontroverted. It appears that in the State of Madras levy of sales tax was first made in 1939. The statute as it stood then contained the definition of "dealer" in section 2(b). A dealer was defined as "any person who carried on any business of buying, or selling goods" with the following 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." The Cosmopolitan Club, Madras, which has been paying tax since 1939 filed a petition under article 226 of the Constitution which was disposed of by Mack, J., in Cosmopolitan Club, Madras v. Deputy Commercial Tax Officer, Triplicane [1952] 3 S.T.C. 77; (1952) 1 M.L.J. 401. According to the learned Judge the supply of refreshments in a members' club purchased out of the club funds and composed of members' subscription was not a transfer of property from the club as such to a member nor d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the club to its members. If there is no transfer of property involved in the supply or distribution of goods by a club it would not fall within Explanation I contained in the definition of sale in section 2(n) nor can the club be regarded as a dealer within section 2(g) read with Explanation I. The law in England has always been that members' clubs to which category the clubs in the present case belong cannot be made subject to the provisions of the Licensing Acts concerning sale because the members are joint owners of all the club property including the excisable liquor. The supply of liquor to a member at a fixed price by the club cannot be regarded to be a sale. If, however, liquor is supplied to and paid for by a person who is not a bona fide member of the club or his duly authorised agent there would be a sale. With regard to incorporated clubs a distinction has been drawn. Where such a club has all the characteristics of a members' club consistent with its incorporation, that is to say, where every member is a shareholder and every shareholder is a member, no licence need be taken out if liquor is supplied only to the members. If some of the shareholders are not members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of property from the club as such to a member and the club was not liable to sales tax under the C.P. and Berar Sales Tax Act, 1947, in respect of such supplies of refreshments. The principle adverted to in Trebanog Working Men's Club [1940] 1 All E.R. 454. was adopted and it was said that if the agent or a trustee supplied goods to the members such supplies would not amount to a transaction of sale. The Mysore Court expressed the same view that a purely members' club which makes purchases through a secretary or manager and supplies the requirements to members at a fixed rate did not in law sell those goods to the members. On behalf of the appellant reliance has been placed on a decision of this court in Deputy Commercial Tax Officer and Another v. Enfield India Ltd. [1968] 21 S.T.C. 317; [1968] 2 S.C.R. 421. In that case the Explanation to section 2(g) was found to be intra vires and within the competence of the State Legislature. The judgment proceeded on the footing that when a co-operative society supplied refreshments to its members for a price the following four constituent elements of sale were present: (1) parties competent to contract; (2) mutual consent; (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to each club was reached it was unnecessary for the High Court to have expressed any view with regard to the vires of the Explanation to section 2(g) and 2(n) of the Act. As no transaction of sale was involved there could be no levy of tax under the provisions of the Act on the supply of refreshments and preparations by each one of the clubs to its members. The appeals must fail and are dismissed but there will be no order as to costs. SHAH, J.- Where general property in goods belonging to a person is under a contract transferred to another for a price paid or promised, the transaction is a sale. The State Legislature has under the Constitution power to legislate under entry 54, List II, in respect of taxes on sale or purchase of goods and the expression "sale" has the same meaning it bears in the Sale of Goods Act, 1930: see State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 S.T.C. 353; [1959] S.C.R. 379. A transaction which is not of the nature of sale within the meaning of the Sale of Goods Act cannot, therefore, be subjected to tax under a law enacted in exercise of power under entry 54, List II. Whether refreshments, beverages and other articles supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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