SPORTS CLUB OF GUJARAT LTD Vs. COMMISSIONER OF SALES TAX GUJARAT AHMEDABAD

JUDGEMENT

(1.) THE Tribunal has posed the following question : " Whether, on the facts and in the circumstances of the case, the club is a dealer within the meaning of section 2 (11) of the Bombay Sales Tax Act, 1959, in respect of its activity of catering to invitees of the members other than the ordinary guests allowed under bye-law 24 at special parties, lunches, dinners, etc. , booked and paid by the individual members. "

(2.) THE short facts which have given rise to this reference are as under : THE petitioner, Sports Club of Gujarat, is a company registered under the Indian Companies Act and the liability of its members is limited. It was registered as a dealer under the Bombay Sales Tax Act, 1959, hereinafter referred to as the "act". Its object was to provide facilities for promotion of various sports. THE club was open only to its members and it deals only with members. THE members were about 3,120 in number. Under the relevant bye-laws, guests not exceeding four were allowed subject to various restrictions. In the catering department, the club serves not only members and their guests but the club allowed these facilities to be availed of by any member for a dinner party. THE members were to book such parties for lunches or dinners for any number of invitees of such members and they were allowed a month's credit for the payment of the bills. For such dinner parties other conditions were applicable for advance payment, etc. THE petitioner-club made an application under section 52 of the Act for the decision of the question whether it was a dealer under section 2 (11) of the Act. THE Deputy Commissioner held that in its catering activity the club must be held to be a dealer. THE Tribunal, however, in appeal found that so far as the clue was giving catering facilities to its members or to the restricted number of guests as per its bye-laws, it was not carrying on any business with any outsider. THErefore, considering the settled legal position, it held that considering the main object of this club which was of promoting sports, such catering facility of supplies to the members and their families and guests was only incidental to the main object of advancement of sports. THE Tribunal, however, made a distinction so far as special dinner parties were concerned. THE Tribunal found that such parties by individual members to their invitees in excess of four guests allowed to a member were for their individual purposes. In the month of April, May, June and July, 1969, 47, 34, 42 and 39 members gave parties to their invitees costing Rs. 7,008, Rs. 11,725, Rs. 22,682 and Rs. 17,307 respectively, and the largest party during the period was by a single member to 600 persons costing Rs. 6,352. THE Tribunal found that according to the special bye-laws for the special dinner parties for the individual purposes of the members, the catering activity in this special case could not be considered to be incidental to the main objects of the club. Looking to the purpose, the manner in which such orders were allowed and executed, they bore all the characteristics of a business, viz. , the motive of profit and, therefore, to the extent to which the club catered for special dinner parties, the club was held to be a dealer within the meaning of section 2 (11) of the Act. THErefore, the petitioner-club has got this reference made to us.

(3.) MR. Desai, however, sought to make a distinction from this settled legal position on the ground that the club on its applying for registration had become a registered dealer before it raised this question under section 52. This point was rightly not raised at any stage because as per the settled legal position there could be no estoppel against a statute, merely because the petitioner-club wronly assumed that it was a dealer when it got itself registered as a dealer. In Kalidas v. State of Bombay (A. I. R. 1955 S. C. 62 at 65), their Lordships pointed that even where an establishment had wrongly assumed itself to be a factory or a workshop and had applied for being registered under the Bombay Shops and Establishments Act, 1948, such an admission in its application for registration could not create any estoppel. The admission may even raise some inference of fact against the appellant, had nothing else been known, but when the facts were fully set out and admitted, the appellant's opinion about the legal effect of those facts was of no consequence in construing the section. Therefore, that would be a thoroughly irrelevant consideration for answering the meaning of the statutory language in section 2 (11) in the definition of dealer. The learned Government Pleader next argued that the definition of "dealer" in section 2 (11) was an inclusive definition which included such a club which sold goods to its members. He particularly relied on the extended definition of "sale" in section 2 (28) which included a supply by a club to its members on payment of a price and the expression used that the words "sell", "buy" and "purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly. Even though supply of such catering facilities by the club to its members, which ordinarily would be under a contract of service, would be deemed to be a sale, as all doubt on that score is set at rest because of this inclusive definition of section 2 (28), but in order to satisfy the definition of a dealer the club must be proved to have undertaken business of such sale of goods or such supply of catering facilities to the members which must involve the element of transferring from one to another. If the club was only an agent or convenient instrument which merely arranged for the supplies and if the property in the goods continued always to remain in the members, there was no element of transfer of property from one to the other in such self-serving members' club, and there would be no taint of any commerciality so as to satisfy the conventional Lord Campbell's definition of business or commerce or even the wider definition of an industrial undertaking. Such a sporting club would continue to retain its non-profit making character for promotion of sports, even though incidentally it may supply such privileges to its members by catering to their needs and to the needs of their families and guests or for such larger dinner parties at the instance of the members and which would be paid for by the members. The Tribunal had so far as the members and the guests were concerned refused to hold that the dealer's definition was fulfilled in this case. It, however, made a wrong distinction in the case of such dinner parties by assuming that the character of the members' club changed in the transaction, even though it was a transaction between the members inter se and the privilege was not one which could be bought or purchased but was available by and through the members alone. The learned Government Pleader next relied upon the decision in Enfield India Ltd. ([1968] 21 S. T. C. 317 (S. C.)), which was distinguished by the larger Constitution Bench in the Young Men's Indian Association (Cosmopolitan Club) decision ([1970] 26 S. T. C. 241 at 246 (S. C.)) aforesaid. This decision rests on its special definition of "dealer" in section 2 (g) in the Madras General Sales Tax Act, Where explanation I had been held to be intra vires and which includes clubs, which whether or not in the course of business sell, supply or distribute goods from or to its members in cash or for deferred payment or other valuable consideration. Their Lordships also pointed out in Young Men's Indian Association's case ([1970] 26 S. T. C. 241 at 246 (S. C.)), while distinguishing Enfield India Ltd. decision ([1968] 21 S. T. C. 317 (S. C.)), that it rested on this wider definition and because that case was of a co-operative society where it can be said that the society was holding its absolute property including in the refreshment prepared for supply to the members and it transferred that property to the members. In such a registered co-operative society with a power to hold property and capable of entering into contract, it could not be assumed that the property which it held was the property of which the members were the owners. The property in law was the property of the society. The society was a distinct legal entity and the property in the refreshment supplied to the members, which was vested in the society, could be transferred to the members and, therefore, all the ingredients of a sale were found to be present in the decision. That decision, therefore, could not apply to such a case of a pure members' club, which, as held by their Lordships in Bombay Cricket Club case (A. I. R. 1969 S. C. 276) stands on a totally different footing. That is why in the Cosmopolitan Club, Madras, case of Young Men's Indian Association ([1970] 26 S. T. C. 241 at 246 (S. C.)), their Lordships had rightly distinguished this Enfield India Ltd. decision ([1968] 21 S. T. C. 317 (S. C.)), and the learned Government Pleader could draw no inspiration from that decision.