Union of India (UOI) vs The State of Punjab and Others

D.K. Mahajan, J.—This order will dispose of General Sales Tax References Nos. 21 to 28 of 1972. In all these references, the following two questions of law have been referred by the Tribunal for our opinion:

(1) Whether the petitioner is a ''dealer'' within the meaning of Section 2(d) of the Punjab General Sales Tax Act, 1948, and is liable to pay sales tax on its sales turnover?

(2) Whether, in the circumstances and on the facts of the case, no sales tax can be levied in view of the provisions of Article 285 of the Constitution?

There is no dispute that the Union of India is the owner of the Northern Railway Departmental Catering, Railway Station, Pathankot. They hold the registration certificate since the year 1955. They purchase provisions and goods on the strength of the registration certificate and sell foodstuffs at the canteen. This venture was sought to be taxed under the Punjab General Sales Tax Act (hereinafter referred to as the Act) on the plea that the railway canteen was carrying on the business of sale of foodstuffs. Penalties were also imposed u/s 10(6) of the Act on their failure to file the return. The railway authorities raised the contention that no tax could be levied in view of the provisions of Article 285(1) of the Constitution, and that they were not engaged in the business of sale of foodstuffs because what the railway was doing was providing these amenities on no profit no loss basis. It is on these facts that the questions of law referred to above have been referred to us.

So far as the second question is concerned, it presents no difficulty. Article 285(1) of the Constitution is in the following terms:

The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.

The goods are purchased by the railway and are sold by the railway. The tax is imposed on the sale of goods. At the time of the sale, the goods belong to the railway, and the tax has to be paid by the railway. Therefore, in view of the provisions of Article 285(1) of the Constitution, the sales by the Government are immune from taxation under any State law. In this view of the matter, the second question referred to us must, be answered in the affirmative, that is, in favour of the assessee and against the department.

As regards the first question, St is concluded by a decision of this court in Atlas Cycle Industries Limited, Sonepat v. State of Haryana (1972) 74 P.L.R. 601, wherein it was held that the supply of goods to its employees by the assessee-company on hire-purchase basis without profit-motive is not liable to sales tax under the Act. A similar case with regard to the sale of foodstuffs in a canteen arose in Tamil Nadu and the High Court took the same view, and that view was affirmed by the Supreme Court in State of Tamil Nadu Vs. Thirumagal Mills Ltd., etc., , and in State of Andhra Pradesh Vs. Abdul Bakhi and Bros., , wherein it was held:

The expression ''business'', though extensively used, is a word of indefinite import. In taxing statutes it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive, and not for sport or pleasure.

It is, therefore, not necessary to elaborate on this matter.

For the reasons recorded above, we answer the first question also in the affirmative, that is, in favour of the assessee and against the department. However, there will be no order as to costs.

Pritam Singh Pattar, J.

I agree.