TMI Blog1970 (4) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,426 under section 5(2)(a)(i) of the Act on the ground that this amount represented sales of cooked food. The Commercial Tax Officer assessed the dealer by his order dated the 20th March, 1958, and allowed only 50 per cent. of the claim under section 5(2)(a)(i) of the Act. The dealer appealed from that assessment to the Assistant Commissioner, Commercial Taxes. In that appeal before the Assistant Commissioner the dealer contended that the whole of the sum of Rs. 46.258 representing the canteen sales should be excluded from the admitted gross turnover and the taxable turnover. The argument was that the sales of foodstuff by the canteen were not effected by the petitioner as a dealer in the course of its business of selling goods which were jute; secondly, that there was no profit-motive in these transactions in the canteen sales. The Assistant Commissioner rejected the dealer's contention. But he allowed a further exemption of Rs. 7,713 under section 5(2)(a)(i) of the Act. From that order the dealer filed a revision petition before the Commissioner, Commercial Taxes. Before the Commissioner in the revision matter the dealer repeated its arguments made before the Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. show from the objects of the company as enumerated therein that the running of a canteen or selling of food was not one of the objects of the company and not only so, in fact the company was not authorised by its articles to carry on such business; (2) The canteen had to be run under the statutory obligation provided in section 46 of the Factories Act, 1948, and therefore was not a business in any sense of the term; (3) It was also argued that there was an award given by the Tribunal in the matter of industrial disputes in the jute textile industries, West Bengal, dated the 31st August, 1948, where the award directed that jute mills were required to run canteen for the benefit of the workers; and (4) The canteen was not being run as a part of the business of the company and as the food was being sold at or below cost price before charging the salaries of attendants etc., there was invariably a loss incurred by the canteen which was debited to the workmen and staff welfare expenses account. These arguments were developed to establish that having regard to the definitions of "dealer", "sale" and "business", the disputed amount was not liable to tax at all. For that pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultimate reference to this court dated the 27th July, 1967, this new law about business without profit was not on the statute book and was not considered by the sales tax authorities and the Board of Revenue. Now when the matter comes up on a reference in 1970 for disposal the statute book contains this change in the definition of "business" by the amendment stating that business includes business without profit. The first complexity that arises in this context is, which law is to be applied. Is it the law when the assessment proceedings for sales tax were going on and concluded and when the reference by the Board of Revenue was made to this court or is it the new law which has come since then and which neither the Board nor the taxing authorities in the Sales Tax Act had any occasion to consider? In Commissioner of Sales Tax, U.P. v. Bijli Cotton Mills, Hathras, U.P.[1964] 15 S.T.C. 656., the Supreme Court has laid down that "a tribunal called upon to decide a taxing dispute must apply the relevant law applicable to a particular transaction to which the problem relates, and that law normally is the law applicable as on the date on which the transaction in dispute has taken place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or proceedings taken, directions issued, jurisdictions exercised or even taxes levied or collected and was retrospective in operation. The amendments considered by the Supreme Court are set out at pages 660-61 of that report. They are of a very different nature from the amendments with which the present reference is concerned. The next two cases on this point as to what law is to be applied are to be found in Ramgopal Mills case[1961] 41 I.T.R. 280. and State of U.P. and Others v. Raja Syed Mohammad Saadat Ali Khan and Others[1961] 41 I.T.R. 737. The Supreme Court in the Commissioner of Income-tax, Hyderabad v. Dewan Bahadur Ramgopal Mills[1961] 41 I.T.R. 280. emphasized the principle that a change in the law validly made and applicable to a case pending in appeal must be considered and given effect to by the appellate court. In the other case of State of U.P. and Others v. Raja Syed Mohammad Saadat Ali Khan and Others[1961] 41 I.T.R. 737., it lays down the principle also that a court of appeal, in an appeal properly before it, must give effect to the law as it stands if the law has, at some stage anterior to the hearing of the appeal, been amended retrospectively with the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect should be clearly limited to the language used. This language, significantly enough in sharp contrast with the Bijli Cotton Mills case[1964] 15 S.T.C. 656., does not use the words "notwithstanding any decrees, orders, proceedings or tax collected or assessed" nor does this West Bengal amendment say that this clause-which "shall be and shall always be deemed to have been inserted "-should be taken to mean that it will be applicable in respect of orders, assessments, steps and actions taken and concluded. Therefore, there is scope for distinction between the Supreme Court decision in the case Bijli Cotton Mills(1) and this one. The general proposition certainly remains applicable that the amended law has to be applied if at the time of the relevant decision by the appropriate court, authority or tribunal, the amendment becomes applicable to its pronouncement or decision by the very terms of the retrospective amendment. But the terms of the retrospective legislation are decisive and significant in this respect. The question here is whether by reason of this deeming provision alone, saying that this amended definition of "business" shall always be deemed to have been there inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd competence of the State Legislature are concerned. In support of this argument for the dealer it is necessary to notice some of the decisions and authorities on the point. In Young Men's Indian Association v. Joint Commercial Tax Officer[1963] 14 S.T.C. 1030., it is laid down that the expression "sale of goods" occurring in entry 54 of List II of Schedule VII of the Constitution is a composite expression having a defined meaning involving the existence of all the elements required to constitute a valid sale and there can be no sale of goods unless all the component elements are present. It will not be open to the Legislature to make a transaction which is not a sale, a sale by statutory fiction and impose a tax thereon. There the main concern was with the element of transfer of property in a sale transaction. The Division Bench of the Madras High Court came to the conclusion that sections 2(g) and 2(n) of the Madras General Sales Tax Act, 1959, were ultra vires the powers of the State Legislature for the reason that they enabled the State Legislature to tax transactions which were not really sales and therefore fell outside the ambit of its legislative power under the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion 'sale of goods' in entry 48, List II, is used not in the popular but in the restricted sense of the Sale of Goods Act, 1930." This, therefore, is a clear authority for showing that the expression "sale of goods" must be understood in the sense of sale of goods under the Sale of Goods Act. In explaining this concept of sale of goods under the Sale of Goods Act, the Supreme Court at page 1212 of the report observed: "A contract of sale postulates exercise of volition on the part of the contracting parties." The test of volition, therefore, is integral to the concept of sale of goods within the meaning of that expression in entry 54 of State List II to Schedule VII of the Constitution. This judgment of the Supreme Court was delivered on 26th November, 1962. The next case cited is Bhopal Sugar Industries Ltd., M.P. v. D.P. Dube[1963] 14 S.T.C. 406; A.I.R. 1964 S.C. 1037. This was a case under the M.P. Sales of Motor Spirit and Lubricants Taxation Act of 1958. Shah, J., delivering the judgment for the Supreme Court in that case, at page 1039 of the report after citing Gannon Dunkerley Co.'s case[1958] 9 S.T.C. 353. made the following observations: "Consumption by an owner of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit by running a canteen the mills are bound to run a canteen on a 'no profit, no loss' basis by virtue of a statutory obligation imposed under section 46 of the Factories Act and Rules thereunder; Meenakshi Mills Ltd. v. State of Madras[1954] 5 S.T.C. 291; A.I.R. 1954 Mad. 1143. was a case wherein an identical question arose. There also the assessee mills were assessed to sales tax in respect of sales effected by them in canteens run by them for the benefit of their employees in conformity with the requirements of the Factories Act. The Madras High Court held that such sales could not be regarded as sales effected in the course of business and amenable to the levy of sales tax. We respectfully agree with the view." This authority sets out appropriately the Madras decisions on the point and is significant so far as the instant reference before us is concerned bearing the closest similarity. The only point of distinction is that this was before Mysore made the amendment in introducing the concept of business without profit. This leads us to the next case cited at the Bar, The Deputy Commissioner of Commercial Taxes, Coimbatore v. Sri Thirumagal Mills Ltd.[1967] 20 S.T.C. 287. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from trade or commerce. It is this aspect of the matter that was under consideration in Southern Railway Employees' Workshop Canteen v. Deputy Commercial Tax Officer, Tiruchirapalli[1965] 16 S.T.C. 187. It is there held that the definition as it occurs in Madras Act 15 of 1964 is within the competence of the State Legislature, as the expression 'sale of goods' in the relevant entry enabling the State to levy taxes on sales has been used in the sense defined in the Sale of Goods Act......... The primary requisite of 'business' as defined even under Madras Act 15 of 1964 is that it should be a trade or commerce or adventure or concern in the nature of trade or commerce. Presence or absence of profit will not matter. But the activity must be of a commercial character and in the course of trade or commerce. The second clause in the definition of 'business', as it appears to us, is still one invested with commercial character, for the reference is to any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. Unless the transaction is connected with trade, that is to say, it has something to do with trade or has the incide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he obligation to decide "the question of law raised thereby". The first question that arises in the instant reference is whether this question of the Bengal amendment could at all be said to be a "question of law arising out of" the Board's order. Obviously it is not because the Board had no occasion to decide any question relating to the Bengal amendment for the simple reason that the amendment had not come into force at that time when the Board was making its order. But this question may be answered by the argument that although the actual Bengal amendment was not a question arising out of the Board's order, yet the question as framed and set out above and which does not expressly mention the Bengal amendment, can be brought within the implicit purview of the question as framed and as a question arising out of the Board's order. This has already been indicated in some of the Supreme Court judgments to which reference has already been made. As the question has to be determined in the light of the law now existing, the question has to be disposed of according to the existing law after the amendment and in accordance with the terms of the amendment. It is at that stage that the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity in the matter of assessment and collection of tax would have the power to entertain an objection and to decide whether a provision of the Act which it is called upon to administer was ultra vires and hence unenforceable. The next case of the Supreme Court is reported in the same volume as Commissioner of Income-tax, Madhya Pradesh v. Straw Products Ltd.[1966] 60 I.T.R. 156. At page 163 of that report the Supreme Court made the following observations: "Mr. Desai then raises two questions in respect of the Order. First he says that it is the first time that the Order is being relied on in these proceedings and he is entitled to urge before us that the Order is bad. He has given a number of reasons in support of his plea that the Order is ultra vires, but in view of the decision of this court in K.S. Venkataraman Co. (P.) Ltd. v. State of Madras[1966] 17 S.T.C. 418; 60 I.T.R. 112., we refuse to allow him to develop these objections. We may mention that he seeks to distinguish Venkataraman's case(2) on the ground that the Supreme Court and the High Court are not creatures of the Order which he was impugning. He further says that the Appellate Tribunal would also have been enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from a decision of the Tribunals." Although that is the recent position of the Supreme Court decisions, we cannot but refer to the decision of the Supreme Court in Tikaram Sons Ltd. v. Commissioner of Sales Tax, U.P.[1968] 22 S.T.C. 308., delivered on 22nd March, 1968. At pages 316-17 of that report the Supreme Court noticed the argument in that case that in a number of cases in which the proceedings relating to taxation laws had reached the High Courts by way of reference, appeal or revision, the question of constitutional validity of the statute under which the authority functions was raised, entertained and decided. For instance, in Tata Iron Steel Co. Ltd. v. State of Bihar[1938] 9 S.T.C. 267., a reference was made by the Board of Revenue raising the question as to the validity of certain provisions of the Bihar Sales Tax Act and decided by the High Court and ultimately by the Supreme Court. Similarly, in Sardar Baldev Singh v. Commissioner of Income-tax, Delhi and Ajmer[1950] 40 I.T.R. 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. We accordingly reject the argument of the appellants on this aspect of the case." Apparently, Tikaram's case(1) as above, shows that the Supreme Court did notice that the question of vires of the statute had been decided in a number of cases in reference or revision petitions under the taxing statutes. The ground on which it rejected that contention in Tikaram's case(1) was that the parties had submitted to the jurisdiction and had not challenged this position. It is not for us to go into the question whether it is possible to create jurisdiction by consent or by submission or estoppel in a court with only a statutory jurisdiction. But we cannot help making a reference also to another decision of the Supreme Court given on 10th September, 1968, in Commissioner of Sales Tax v. Ganga Sugar Corporation[1970] 25 S.T.C. 155. This again was a sales tax case under the U.P. Sales Tax Act where Tikaram's case(1) was followed and the following observations were made at page 160: "It has now been laid down by this court in M/s. Tikaram Sons Ltd. v. Commissioner of Sales Tax, U.P. [1968] 22 S.T.C. 308., decided on 22nd March, 1968, that when the jurisdiction of the High Court is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advice and may be useless and nugatory in its effect for the simple reason that in giving the advice it proceeds on the assumption that the vires of the Act is good but which, in a different proceeding in a suit or under article 226 of the Constitution, can be challenged and decided that the legislation is ultra vires in which event the advice given by the reference court becomes a ritualistic ceremony for the advice is illegal and based on a wrong assumption of an Act or amendment which is void and unenforceable. Such advice promotes not justice according to law but injustice according to non-law. The expression "decide the question of law" requires serious consideration whether it should not include lawlessness of the basic decision of the Tribunal. This advisory jurisdiction on reference under the taxing statutes has a responsibility of its own. It is not like an ordinary decision in a private litigation determining some specific issues. It is expressing an opinion on a question of law on the basis of which the taxing authorities concerned have to act. The advice should, therefore, be comprehensive and basically sound in the sense that if the law on the faith of which the advic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. We shall now discuss and decide the question on the merits. The question is whether the sale proceeds in the canteen run by the dealer for the benefit of the employees in the facts and circumstances of this case form any part of the dealer's turnover which can be taxed under the Bengal Finance (Sales Tax) Act. The view expressed by the Additional Commissioner on 20th May, 1960, and set out elsewhere in the judgment put an interpretation that sales in the Bengal Act were not limited to sales in the case of trade or business anticipating the present Bengal Amendment Act. That view, in our opinion, is incorrect and not justified in law. Before giving our reasons for holding this opinion, we shall only repeat, what we have said before, that the authority in favour of our view is Deputy Commissioner of Commercial Taxes, Coimbatore v. Sri Thirumagal Mills Ltd.[1967] 20 S.T.C. 287. In our view, that decision is directly on the point raised by this reference before us. Apart from the authority. we now proceed to give our reasons for the view we are taking on Bengal amendment which is already quoted elsewhere in the judgment. The amended definition of business under section 2(1a) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling goods in West Bengal" clearly indicates that the dealer must be one who carries on the business of selling goods. Now this dealer's business in this case is not the business of running canteens. It cannot be its business under its charter of incorporation. What then is the meaning of the word "business" in such a context? Obviously, plainly and indisputably the business of this dealer-company is the business of manufacturing and selling jute. In that context the running of a canteen by the dealer has to be understood in the light of the statutory obligations contained in section 46 of the Factories Act. But for section 46 of the Factories Act, 1948, this adventure of this dealer-company to run a canteen would have been illegal under its charter of incorporation. The canteen had to be run by the dealer-company under the Factories Act or else it would have been penalized under that statute. The running of this canteen therefore was not a part of the business of this dealer-company at all. Section 46 of the Factories Act provides, "the State Government may make rules requiring that in any specified factory wherein more than 250 workers are ordinarily employed, a canteen or can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, trade, commerce, manufacture or adventure or concern must be understood in a commercial sense, carrying a commercial meaning and the dealer according to section 2(c) of that Act must be a person who carries on the "business" of selling goods. The whole context is that of a business in the commercial sense. All that the amendment has succeeded in doing, and what it intended to do, is that once there is a business then whether it has profit-motive or not or whether it actually makes a profit or not becomes immaterial. This interpretation we adopt all the more readily because such an interpretation, in our view, makes the Act intra vires and does not throw it open to the challenge of ultra vires. A statute, in our view, should be construed in such a manner as to make it intra vires and not ultra vires. In our opinion, it must never be lost sight of in this connection that sales tax is based on the dealer's gross turnover exceeding the taxable quantum on all sales as provided in section 4 of that Act. The taxable quantum, as defined in section 4(5) of the Bengal Finance (Sales Tax) Act, inter alia, means goods for sale producing Rs. 10,000 in the case of a dealer who imports for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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