Decided on July 08,2009

Indian Airlines Staff Canteen Appellant


J. Shyam Sundar Rao, Chairman - (1.) THIS is an appeal filed against Revisional Orders of Additional Commissioner (CT) (Legal), O/o the Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad in CCTs Ref No. L. III(2)/1997/99 -II, dated 3 -1 -2003. The appellant is M/s. Indian Airlines Staff Canteen, Begumpet, Hyderabad. It is on the rolls of Commercial Tax Officer, Begumpet Circle, Hyderabad. The Commercial Tax Officer passed revised assessment orders under the provisions of APGST Act for the assessment year 1993 -94. The Commercial Tax Officer treated Indian Airlines Canteen as a dealer conducting business and levied tax on the sale of food items. Aggrieved by the said order, appeal was preferred before the Appellate Deputy Commissioner (CT), Punjagutta Division, Hyderabad. The Appellate Authority by order dated 9 -1 -1999, allowed the appeal.
(2.) THE Additional Commissioner (Legal) by virtue of powers under Section 20(2) having observed that the order passed by the Appellate Deputy Commissioner is prejudicial to the interests of revenue issued pre -revision show cause notice to the Indian Airlines Staff Canteen, Begumpet, calling it to file its objections, proposing to restore the order passed by the Commercial Tax Officer. The assessee sent a reply stating that the canteen is not a dealer within the meaning of Section 2(e) of the APGST Act and it is not doing any business while supplying the food products to its employees. It is contended in the reply that Indian Airlines has been running the canteen as required under Section 46 of Factories Act. It is also stated that the employees are not allowed to go outside and that the staff canteen is located in the prohibited area. The canteen has been provided in order to meet the requirements of the employees for the meals and snacks. The Indian Airlines is discharging its statutory obligations under section 47 of the Factories Act. Indian Airlines is not carrying on business in its staff canteen. It is not a dealer in terms of Section 2(e) of the APGST Act. However, the Additional Commissioner rejected the contentions and confirmed the proposed revision by restoring the order passed by the Commercial Tax Officer. Aggrieved by the same, the present appeal is preferred. In the appeal grounds it has been contended as follows: The Parliament enacted the Air Corporations Act, 1953 (Act No. 27 of 1953) for providing the establishment of Air Corporations, to facilitate the acquisition by the Air Corporations of undertakings and generally to make further and better provisions for the operation of air transport services. The Indian Airlines is an organization under the administrative control of the Ministry of Civil Aviation and its activities are carried out continuously. So, to comply with the statutory provisions and to facilitate the employees to work smoothly, canteen facilities are provided. The said canteen is maintained as a statutory requirement under the Factories Act. The Indian Airlines is not engaged in any business or trade, selling its products like hotels, restaurants, commercial canteen and eating -houses. When there is no element of sale, the question of levying sales tax under the APGST Act does not arise. It is a welfare measure provided as per the provisions of the Factories Act to the employees and the food is supplied at the subsidized rates. The main function of the company is to provide transportation of passengers and cargo. When the assessing authority levied sales tax on the appellant for the assessment years 1989 -90 to 1991 -92 treating it is dealer, the appeals filed before the Appellate Deputy Commissioner were allowed as the main activity of the appellant is neither trade nor commerce in nature and the incidental activity of running the canteen for the benefit of the workers, cannot be taxed. Though the Joint Commissioner issued revision show cause notice, the Learned Joint Commissioner dropped the revision proceedings. At the time of hearing of the appeal, it has been contended by the counsel for the appellant that the appellant cannot be construed as a dealer within the meaning of Section 2(e) of the APGST Act and that the main activity of Indian Airlines is transportation of passengers and cargo and that the Canteen, which is being run by the staff is meant only for catering to the needs of the staff during lunch hour. It is contended that snacks and meals are being supplied to the staff of Indian Airlines at subsidized rates. No profit motive is involved. Reliance had been placed by the counsel on the following decisions. 1) Visakhapatnam Port Trust vs. Commercial Tax Officer & Others reported in, 127 STC 393; 2) State of Tamil Nadu vs. Board of Trustees of the Port of Madras reported in : 114 STC 520; 3) Board of Trustees of the Visakhapatnam Port Trust vs. Commercial Tax Officer, Visakhapatnam reported in : (1979) 43 STC 36: 4) SHAR Canteen, Sriharikota vs. State of Andhra Pradesh reported in, (1993) 16 APSTJ 181; 5) Fateh Maidan Club vs. Commercial Tax Officer, Hyderabad reported in, (2008) 12 VST 598.
(3.) THE Learned State Representative on the other hand contends that in view of the amendment to Section 2(e) of the Act, even the Club or a Cooperative Society shall be construed as a dealer though the activity of the club or cooperative society is not based on profit motive. It is contended that though food items are being supplied to its members or staff at subsidized rates, as the appellant had been purchasing food items, meals etc., and selling the same to its members and outsiders, it is nothing but sale. State Representative placed reliance on the following decisions: 1) Andhra Prabha Private Limited vs. State of Andhra Pradesh reported in : (1989) 73 STC 260; 2) Jubilee International Centre Vs. Commercial Tax Officer reported in, (1992) 87 STC 227; 3) Roads & Buildings Staff Canteen, O/o the Chief Engineer, R & B, Irrum Manzil, Hyderabad vs. State of Andhra Pradesh reported in : (1994) 18 APSTJ 238; 4) The Union of India vs. State of Andhra Pradesh reported in, (1996) 23 APSTJ 84.;

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