DEPUTY COMMERCIAL TAX OFFICER, SAIDAPET & ANR. versus ENFIELD INDIA LTD., CO-OPERATIVE CANTEEN LTD.

Citation: [1968] 2 S.C.R. 421 · Decided: 23-11-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
DEPUTY COMMERCIAL TAX OFFICER, SAIDAl'ET & 
ANR. 
B 
c 
D 
E 
F 
G 
H 
v. 
ENFIELD INDIA LTD., CO-OPERATIVE CANTEEN LTD. 
November :t.J, 1967 
(J. C. SHAH, V. RAMASWAM! AND V. BHARGAVA, JJ.} 
Madri1s Gener(l[ Sales Tax Act 1 of 
1959-G'o-op_erait\·e 
Society 
,,11pp[ying goods to ;.!s nientbers wliethe1• 'dealer'-Sttpply 
of govds Iv 
111e111bers whether 'sale'-Explanation to s. 2(g) c.·nd Explanation 
( 1-) 
to 
.\. 2(n) whether ultra \·ires. 
The respondent was a registered 
Co-operative 
Society 
under 
the 
~ladras Co-operative Societies Act 6 of 1932. 
Its object was to provide 
a· canteen for fhe employees of a company. The Society \\'as asses~ed hy 
the Deputy Commercial Tax Officer to pay sales tax for the years 1959'-60 
and 1960-61 On 
it~ turnover of refreshments supl?lied to it~ membe'rs. 
It 
challenged the assessments in a writ petition 
under Art. 
226 of 
the 
Constitution contending that supply of goods to its members diJ not 
amount to sale and therefore the EJ}planation to s. 2(g) treating _it as 
n 'deale.r' and Explanation ( l) to s.- .2(n) 
treating its 
transactions as 
·saJe,s' were ultra vires. 
The High Court held in favoqr
1 of the Society. 
The Revenue appealed. 
HELD : (i) A cooperative society registered under the Madras Co-
operative Soci·~ties Act. 1932 is by virtue of s. 20 of that Act a body 
corporate with perpetual succession and con1mon seal. and with pov.rcr 
to hold property, to enter into con:racts. to institute and defend suits an<l 
other le,gal proceedings and to do all things necessary for the purposes 
fo.r which it was constituted. 
Such a cooperative Society which carries 
on the business of supplying goods to its members for cash or deferred 
payment falls within the definition of 'dealer' in s. 2(g). The Explana-
tion to s. 2(g) was not-intended to overstep the limits of legislative power. 
By the Explanation the State Legislature has merely clarified that a tax-
able entity will be regarded as a dealer within the meaning of the Act 
even though it buys, sells, supplies or distributes goods from or 10 its 
n1en1bers. whether in the course of business or not ·: 
it is not intended 
hy the Explanation to declare all transactions of the taxable cntily \vith 
its members to be transactions of sale or purchase. 
The explanation is 
.a part of the definition of 'dealer' and not of 'sale'. For the purpose of 
levying sales tax it was open to the legislature to devise a definition of 
the word 'dealer' and further to provide that certain bodies 
shall 
be 
deemed to be dealers within the meaning of the Act. 
The High Court 
therefore wrongly held the Explanation to s. 2(g) to be ultra vircs the 
State Legislature. [445 H-426 DJ 
(ii) It cannot be·urged as a proposition of law that when a coopera· 
tive society supplies' to its members refreshments for a price under a 
scheme ·for distribution and •supply of refreshnients. the transaction can 
in no event be 
regarded as a sale of the refreshments ' supplied at a 
pric-.. [429 H! 
. 
The question was' one of libility under a taxing statu•e and the cour_t 
in. ~etermining tQe liability of the respondent society Could not ignore 
the form and· look at what is called the 'substance of the· transaction'. 
Th-:! Society being incorporated was a person. 
It would not be .assumed 
422 
SUPREME COURT REPORTS 
[1968] 2 S.C.R. 
ihat the property which it held was property of which its members were 
the owners. 
It was not an agent of the members or a trustee of the 
property on their behalf. 
The property in the 
refreshments which it 
supplied to the members Yested in the Society and when refreshments 
v.'erc supplied for a price paid or promised transfer of property in the 
:refreshments resulted. Ex. facie, the transaction was one in which the 
legal o\vner of property transferred it to another pursuant to a contract 
for a price. 
The transaction must be regarded as a 'sale' within the 
·substantive ·part of the definition of. that expression and no 
assistance 
from the Explanation (!) to s. 2(n) was necessary. 
The question re-
~arding the validoity of the said Explanation did not therefore fall to be 
det·zrmined in the present case. [429 F-430 Bl 
Young Mens' Indian Association (Regd.) Madras & 
Anr. 
v. 
Joint 
Commercial-Tax Officer, Harbour Division II, Madras, 14 S.T.C. 1030. 
State of Madrc.s v. Gannon Dunkerley & Co. Ltd., [1959] S.C.R. 
379, 
New Indian Sugar Mills v. Commissioner of Sales Tax, [1963] 
Supp. 2 
S.C.R. 4

Excerpt shown. Read the full judgment & AI analysis in Lexace.