TMI Blog2016 (6) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeal, by special leave, is directed against the judgment and order passed by the Division Bench of the High Court of Calcutta in W.P.T.T. No.652 of 2006, wherein it has affirmed the view expressed by the West Bengal Taxation Tribunal (for short, 'the tribunal') and disposed of the appeal preferred by the respondent along with other connected appeals holding, inter alia, that the assessee, the Calcutta Club Limited, was not liable for payment of sales tax under the West Bengal Sales Tax Act, 1994 (for brevity, 'the Act'). 2. The facts that are necessary to be stated are that the Assistant Commissioner of Commercial Taxes issued a notice to the respondent-Club assessee apprising it that it had failed to make payment of sales tax on sale of food and drinks to the permanent members during the quarter ending 30.6.2002. After the receipt of the notice, the respondent- Club submitted a representation and the assessing authority required the respondent-Club to appear before it on 18.10.2002. The notice and the communication sent for personal hearing was assailed by the respondent before the tribunal praying for a declaration that it is not a dealer within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash or otherwise, to make the same exigible to tax but in the case at hand, the drinks and beverages were purchased from the market by the club as agent of the members. The High Court further ruled that the members collectively was the real life and the club was a superstructure only and, therefore, mere fact of presentation of bills and non-payment thereof consequently, striking off membership of the club, did not bring the club within the net of sales tax. The High Court further opined that in the obtaining factual matrix the element of mutuality was not obliterated. The expression of the aforesaid view persuaded the High Court to lend concurrence to the opinion projected by the tribunal. 6. We have heard Mr. Kailash Vasdev, learned senior counsel along with Mr. Soumik Ghosal, learned counsel for the appellants and Mr. Rana Mukherjee, learned senior counsel along with Mr. Arijit Prasad, learned counsel for the respondent. 7. It is submitted Mr. Vasdev, learned senior counsel that the reasoning of the tribunal as well as the High Court is faulty as there has been erroneous appreciation and application of clause (29A) of Article 366 of the Constitution of India. It is urg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration, and such transfer, delivery, or supply of any goods shall be deemed to be a sale of those goods by the person or unincorporated association or body of persons making the transfer, delivery, or supply and a purchase of those goods by the person to whom such transfer, delivery, or supply is made, but does not include a mortgage, hypothecation, charge or pledge. Explanation: A sale shall be deemed to take place in West Bengal if the goods are within West Bengal In the case of specific or ascertained goods, at the time of the contract of sale is made; and In the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller, whether the assent of the buyer to such appropriation is prior or subsequent to the appropriation: PROVIDED that where there is a single contract of sale in respect of goods situated in West Bengal as well as in places outside West Bengal, provisions of this Explanation shall apply as if there were a separate contract of sale in respect of the goods situated in West B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt constitutes a sale of foodstuffs. Answering the said issue, the Court held:- It has already been noticed that in regard to hotels this Court has in Associated Hotels of India Ltd.[ State of Punjab v. Associated Hotels of India Ltd., (1972) 1 SCC 472 ] adopted the concept of the English law that there is no sale when food and drink are supplied to guests residing in the hotel. The Court pointed out that the supply of meals was essentially in the nature of a service provided to them and could not be identified as a transaction of sale. The Court declined to accept the proposition that the Revenue was entitled to split up the transaction into two parts, one of service and the other of sale of foodstuffs. If that be true in respect of hotels, a similar approach seems to be called for on principle in the case of restaurants. No reason has been shown to us for preferring any other. The classical legal view being that a number of services are concomitantly provided by way of hospitality, the supply of meals must be regarded as ministering to a bodily want or to the satisfaction of a human need . 14. Earlier the Constitution Bench decision in Joint Commercial Tax Officer v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no inquiry into the said relationship. We think it appropriate, therefore, that the matters should go back to the assessing authorities who will determine, on facts in regard to each appellant. What was the said relationship and, with that finding in mind, decide, whether or not the appellants are liable to sales tax in this behalf under the provisions of the Andhra Pradesh General Sales Tax Act, 1957. 16. In the case of Cosmopolitan Club (supra), the controversy related to liability of the club to pay sales tax under the Tamil Nadu General Sales Tax Act, 1959 for supply of food and drinks to its members. Relying on the earlier judgment, the Court remanded the matter by holding that:- . it may be further stated that the said show cause notice was challenged in 1993 by the Club by filing a Writ Petition in the High Court which came to be later transferred to the Tribunal. The Tribunal dismissed the matter on merits. That decision of the Tribunal has been confirmed by the impugned judgment. Suffice it to state that in this case there was no determination by the fact finding authorities regarding the relationship between the Club and its members in the matter of supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale or purchase of goods occurs. This definition changed the law declared in the ruling in Gannon Dunkerley Co. only with regard to those transactions of deemed sales. In other respects, law declared by this Court is not neutralised. Each one of the sub-clauses of Article 366(29-A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST[ 1963 Supp (2) SCR 459: (1963) 14 STC 316 ] and Vishnu Agencies (P) Ltd. v. CTO[ (1978) 1 SCC 520 ]. Sub-clause (b) is the result of Gannon Dunkerley Co. Sub-clause (c) is the result of K.L. Johar and Co. v. CTO[ AIR 1965 SC 1082 ]. Sub-clause (d) is consequent to A.V. Meiyappan v. CCT[ (1967) 20 STC 115 (Mad) ]. Sub-clause (e) is the result of CTO v. Young Men s Indian Assn. (Regd.)[ (1970) 1 SCC 462 ]. Sub-clause (f) is the result of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi (supra) and State of Punjab v. Associated Hotels of India Ltd. (supra). 18. In addition to the aforesaid paragraphs, learned senior counsel appearing for the appellant has also heavily relied on paragraphs 106 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsity or contra opinion which can relate to issues like complete identity between the contributors and participators or whether such doctrine would equally apply to incorporate company which is a juristic entity, and if so, under what circumstances. The principle of mutuality was examined by this Court in CIT v. Royal Western India Turf Club Ltd.[ AIR 1954 SC 85] and then in CIT v. Bankipur Club Ltd.[ (1997) 5 SCC 394], followed by Chelmsford Club v. CIT[(2000) 3 SCC 214]. In Bankipur Club Ltd. (supra), it has been observed as under:- ... The gist of the various English decisions has been succinctly summarised in the textbooks which we have adverted to hereinabove (Halsbury s Laws of England, Simon s Taxes, Wheatcroft etc.). Particular stress was laid on the decisions of the Supreme Court in CIT v. Royal Western India Turf Club Ltd. (supra), CIT v. Kumbakonam Mutual Benefit Fund Ltd.[ 1964 SCR 204 : AIR 1965 SC 96 ], Fletcher v. CIT[ (1971) 3 ALL ER 1185 : (1972) 2 WLR 14 (PC) ]. We do not think it necessary to deal at length with the above decisions except to state the principle discernible from them. We understand these decisions to lay down the broad proposition - that, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods by an unincorporated association or body of persons. The question would be whether the expression body of persons would include any incorporated company, society, association, etc. The second issue is what would be included and can be classified as transactions relating to supply of goods by an unincorporated association or body of persons to its members by way of cash, deferred payment or valuable consideration. Such transactions are treated and regarded as sales. The decisions of the Court in Fateh Maidan Club (supra) and Cosmopolitan Club (supra) in that context have drawn a distinction when a club acts as an agent of its members and when the property in the goods is sold, i.e., the property in food and drinks is passed to the members. The said distinction, it is apparent to us, has been accepted by the two Benches. However, the decisions do not elucidate and clearly expound, when the club is stated and could be held as acting as an agent of the members and, therefore, would not be construed as a party which had sold the goods. The agency precept necessarily and possibly refers to a third party from whom the goods, i.e., the food and drinks had been sourced and provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior counsel for the State would contend that the objects and reasons throw immense light how clause (29A) was added and what it intends to cover. It is argued by him that the club has an independent entity and it supplies food and beverages to the permanent members and invoices are raised. Money goes to the club and, therefore, there is supply or service for value. Mr. Mukherjee would submit that the controversy is covered by the decisions in Young Men s Indian Association (supra) and the concept of mutuality applies, because neither clause (e) or (f) to clause (29A) of Article 366 of the Constitution has removed the concept of mutuality or agency. It is urged by him that the club merely acts as an agent for supply of goods and agent does not sell the goods to the principal. It only acts as a conduit to pass on the goods and the money whether it is in cash deferred payment or by way of security. 25. Mr. Vasdev has submitted that whether mutuality exists or not is a question of fact, for the contention of the State is assuming the mutuality clause applies then also the respondent assessee is liable to pay tax , for its supply or sale to a member by the club which is a dealer. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court had observed that the authorities below had not recorded any finding with regard to exact relationship or the mutuality facet. The argument before us is that even if the principle of mutuality or agency is in existence or established, still it would be a sale on the basis of clause (29A)(e) or (29A)(f). Thus, the initial suggestion by the learned senior counsel for the parties was not pursued and we are disposed to think, rightly. 27. In our considered opinion, the controversy that has arisen in this case has to be authoritatively decided by a larger Bench in view of the law laid down in Cosmopolitan Club (supra) and Fateh Maidan Club (supra). We are disposed to think so as none of the judgments really lay down that doctrine of mutuality would apply or not but proceed on the said principle relying on the earlier judgments. It is desirable that the position should be clear. For the aforesaid purpose, the matter should be referred to a larger Bench and for the said purpose, we frame following three questions. i. Whether the doctrine of mutuality is still applicable to incorporated clubs or any club after the 46th amendment to Article 366 (29A) of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
