LexSTATE OF WEST BENGAL & ORS. versus CALCUTTA CLUB LIMITED
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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STATE OF WEST BENGAL & ORS.
v.
CALCUTTA CLUB LIMITED
(Civil Appeal No.4184 of 2009)
OCTOBER 03, 2019
[R. F. NARIMAN, SURYA KANT AND
V. RAMASUBRAMANIAN, JJ.]
Doctrines/Principles – Doctrine of Mutuality – Applicability
of, after the 46th Amendment to Art.366(29-A) – In C.A. No.4184 of
2009, the assessee-respondent Club, registered u/s.25, 1956 Act
was issued notice informing that it had failed to make payment of
sales tax on sale of food and drinks to the permanent members –
Respondent contended that there could be no sale by it to its own
permanent members, for doctrine of mutuality would come into play
– West Bengal Taxation Tribunal held that the respondent is not
eligible to tax under the 1994 Act – Affirmed by the High Court –
Division Bench of the Supreme Court set out inter alia 3 questions to
be answered by larger Bench, viz.(i) Whether the doctrine of
mutuality is still applicable to incorporated clubs or any club after
the 46th Amendment to Art.366(29-A) of the Constitution of India?;
(ii) Whether the judgment of Supreme Court in Young Men’s Indian
Association case still holds the field even after the 46th Amendment?
and (iii) Whether the 46th Amendment, by deeming fiction provides
that provision of food and beverages by the incorporated clubs to
its permanent members constitute sale, thus liable to sales tax? – In
C.A. No.7497 of 2012 and connected matters, issue involves levying
of service tax by Finance Act, 1994 upon members’ clubs, majority
of them being registered as Companies u/s.25 of the 1956 Act, or as
co-operative societies under various State Acts – Held: Young Men’s
Indian Assn. made no distinction between a club in the corporate
form and a club by way of a registered society or incorporated by a
deed of trust – What is the essence of the judgment is that the holding
of property must be a holding for and on behalf of the members of
the club, there being no transfer of property from one person to
another – In members’ clubs there is a complete identity between
contributors and participators – Thus, in members’ clubs there is
[2019] 15 S.C.R. 865
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SUPREME COURT REPORTS
[2019] 15 S.C.R.
no sale by one person to another for consideration, as one cannot
sell something to oneself – What is of essence in applying the
doctrine of mutuality is that there is no sale transaction between
two persons, as one person cannot sell goods to itself – Ratio of
Young Men’s Indian Assn. has not been done away with by the limited
fiction introduced by Art.366(29-A)(e) – Questions answered (i)
Doctrine of mutuality continues to be applicable to incorporated
and unincorporated members’ clubs after the 46th Amendment adding
Art.366(29-A); (ii) Young Men’s Indian Assn. and other judgments
which applied this doctrine continue to hold the field even after the
46th Amendment; and (iii) Sub-clause (f) of Art.366(29-A) has no
application to members’ clubs – No interference called for in the
findings of fact or declaration of law in this case – Further, in C.A.
No.7497/12 and connected matters- Argument on behalf of the
respondents that incorporated clubs or associations prior to 1st July,
2012 were not included in the service tax net is accepted – What
has been stated in the present judgment so far as sales tax is
concerned applies on all fours to service tax– Explanation 3(a) to
s.65B(44) of the Finance Act, 1994 does not apply to members’
clubs which are incorporated – From 2005 onwards, the Finance
Act, 1994 does not purport to levy service tax on members’ clubs in
the incorporated form – Jharkhand High Court and the Gujarat
High Court correct in their view of the law in following Young Men’s
Indian Assn. Case – Thus, show-cause notices, demand notices and
other action taken to levy and collect service tax from incorporated
members’ clubs are void and of no effect in law – West Bengal Sales
Tax Act, 1994 – ss.2(5), (10), (30) & s.9 Constitution of India –
Art.366(29-A)(e)(f) – Companies Act, 1956 – s.25 – Constitution
(Forty-sixth Amendment) Act, 1982 – General Clauses Act – Income
Tax Act, 1961 – s.2(24)(vii), 2(31), 44, 45(2) – Finance Act, 1994 –
ss.64(3), 65(25a), (25aa), 65(105)(zze), 65(A), 65B(37), Explanation
3(a) to s.65B(44), 66B, 66D, 67, 68 – Finance Act, 2006 – Finance
Act, 2012 – Interpretation of Statutes – Central Sales Tax Act, 1956.
Constitution of India – 46th Amendment to Art.366(29-A) –
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