1. The Judge (Revisions) has referred the following two questions for the opinion of this Court:

(1) Whether, on the facts and in the circumstances of the case, the canteen run by the Fertilizer Corporation of India Limited for the welfare of its employees under a statutory obligation was liable for sales tax under the U.P. Sales Tax Act on its sales ?

(2) Whether, on the facts and in the circumstances of the case, the running of canteen comes within the purview of the definition of 'carrying on business of buying and selling goods' ?

2. The assessee is a Government of India undertaking manufacturing fertilisers and was running a canteen for the welfare of its employees in order to discharge its statutory obligation under Section 46 of the Factories Act. Its canteen was running on a non-profit basis as required by Section 46 and Rule 68 of the Rules framed under the Factories Act. The sales turnover of the canteen in the assessment year in question was Rs. 1,10,961.12 and the Sales Tax Officer imposed a tax of Rs. 2,219.22 on these sales applying a rate of two per cent. The assessee appealed, its contention being that the turnover of sales at the canteen was not liable to tax. The contention failed. On a revision being filed, the revising authority following the decision of this Court in Swadeshi Cotton Mills Company Ltd. v. Sales Tax Officer [1964] 15 S.T.C. 505, held that canteen sales were liable to tax. The reference then came up before a learned single Judge of this Court. Attention of the court was invited to the decision of the Calcutta High Court in the case of Fort Gloster Industries Ltd. v. Member, Board of Revenue, West Bengal [1970] 26 S.T.C. 141, of the Karnataka High Court in the case of Motor Industries Co. Ltd. v. State of Mysore [1971] 27 S.T.C. 379 and of the Delhi High Court in the case of Delhi Cloth 6- General Mills Company Ltd. v. Union of India S.T.I. 1976 Delhi 1, wherein the view had been taken that the canteen sales were not liable to tax. On a consideration of these cases he took the view that the authority of the decision of this Court in Swadeshi Cotton Mills Co.'s case [1964] 15 S.T.C. 505 stood weakened by the decision of the Supreme Court in the case of Northern India Caterers (India) Ltd. v. Lt. Governor Of Delhi. 1979 U.P.T.C. 826 (S.C.), where the view had been taken that sales made in restaurants were not sales and, as such, could not be taxed under the Sales Tax Act. As a result, he referred the case to a larger Bench, and that is how the matter has come up before this Bench. Before referring to the various decisions it will be useful to refer to Section 3 of the Act, the definition of the word "business of buying or selling" contained in Section 2(aa) of the Act, and also the definition of the word "dealer" as defined in clause 2(c), as they stood in the assessment year 1968-69. In order to appreciate the controversy it will be necessary to take into account the various amendments in these provisions so that the provisions may be considered in their true perspective. Section 3 is the charging section, and under this provision every dealer is liable to pay sales tax on his turnover. The term "dealer" as originally defined by Section 2(c) was as under :

'Dealer' means any person or association of persons carrying on the business of buying or selling and supplying goods in Uttar Pradesh, whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association which sells or supplies goods to its members; but does not include any department of the Provincial Government or of the Indian Union (hereinafter called the Central Government).

3. The word "business of buying or selling goods" was not defined to begin with, and as a result this Court in the case of Kanpur Development Board v. Commissioner of Sales Tax, U.P. [1963] 14 S.T.C. 493, held that the word "business" had been used in the definition of the word "dealer" in the narrow or restricted sense, and not in the general or broad sense and it meant only an activity for making a profit. It took the view that the legislature did not use the word "business" merely to indicate continuous activity, but in the sense that the activity was such which was directed with a profit-motive. On 25th May, 1963, the U.P. Taxation Laws Amendment Act, 1963 (Act No. 14 of 1963), introduced Clause (aa) in Section 2, which was to the following effect:

Clause (aa). 'Business of buying or selling' includes such business carried on without the motive of making profit.

4. Thus, as a result of this definition a person, who indulged in the business of buying or selling goods whether actuated by profit-motive or not came within the definition of the word "dealer". In view of this amendment it was held in Swadeshi Cotton Mills [1964] 15 S.T.C. 505, that even though the canteens were maintained under a statutory obligation and the goods sold without any profit-motive, the sales will be liable to tax. Oak, J., held that maintaining of canteen was a part of the general activity of a mill, and should be considered as a part of general business. Satish Chandra, J., as he then was, more or less took the same view, and held that the maintenance of canteen was a step-in-aid of the manufacturing business. In the assessment year 1968-69, the definition of the word "dealer" was further amended and read as under:

'Dealer' means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association, which sells goods to its members and also includes any department of the State Government or the Central Government which carries on such business and any undertaking engaged in the generation or distribution of electrical energy or any other form of power.

5. The word "business of buying and selling" as defined in the assessment year 1968-69 was:

(aa) 'business of buying or selling' includes such business carried on without the motive of making profit.

6. Subsequent to the assessment year 1968-69 the definition of the word "business of buying or selling goods" was further amended by the U. P. Sales Tax (Amendment and Validation) Act (No. 38 of 1975) with retrospective effect, and as a result of this amendment the term "business of buying and selling goods" was defined in the following terms :

(aa) 'Business', in relation to business of buying or selling goods, includes,-

(i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or by-products, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery, or any parts or accessories thereof or any waste or scrap or any of them, which is ancillary to or is connected with or is incidental to, or results from such trade, commerce, manufacture, adventure or concern ;

but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods.

7. Having noticed these amendments we now turn to the decision of the Calcutta High Court in the case of Fort Gloster Industries Ltd. v. Member, Board of Revenue, West Bengal [1970] 26 S.T.C. 141. The question there was similar to the one that arises in the present case, viz., whether canteen sales were liable to tax ? The articles of association of the company did not enumerate therein the running of a canteen or selling of food. The canteen was being run under the statutory obligations laid in Section 46 of the Factories Act as is here. The word "business" had been defined in Section 2(la) and (b) of the Sales Tax Act of the State as under:

In this Act, unless there is anything repugnant in the subject or context, business includes- ;

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern ; and

(ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, adventure or concern.

8. It will be noticed that the definition of the word "business" there was wider than the definition given to the word "business of buying and selling goods" by Section 2(aa) of the U.P. Act, because not only was profit-motive excluded, but it included also any transaction, which was ancillary or incidental to the trade, commerce, manufacture or adventure or concern of the assessee. The Calcutta High Court following the decision of the Madras High Court in the case of Deputy Commissioner of Commercial Taxes v. Sri Thirumagal Mills Ltd. [1967] 20 S.T.C. 287 held that even though the definition of the word "business" was couched in wide terms, it applied only to activities which were of a commercial nature, and as the running of the canteen was not the business of the dealer-company, its turnover would not be liable to tax. It was held that the running of a canteen was a social welfare activity, and not a business, the business being the manufacture of jute. The Karnataka High Court considered a similar question in the case of Motor Industries Co. Ltd. [1971] 27 S.T.C. 379. An amendment had been made in the Sales Tax Act of that State and the word "business" had been defined in Section 2(aa) (sic) in the following terms:

'Business' includes any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern ; and any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or by-products, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery, or any parts or accessories thereof or any waste or scrap or any of them, which is ancillary to or is connected with or is incidental to, or results from such trade, commerce, manufacture, adventure or concern.(sic)

9. The Karnataka High Court after referring to the decision of the Madras High Court in Deputy Commissioner of Commercial Taxes v. Sri Thirumagal Mills Ltd. [1967] 20 S.T.C. 287 and the Calcutta High Court in the case of Fort Gloster Industries Ltd. [1970] 26 S T.C. 141 and also the decision of our Court in the case of Swadeshi Cotton Mills Company Ltd. [1964] 15 S.T.C. 505 took the view that the amendment did not do away with the requirement that the activity in question must be a commercial activity, and that it should involve trade or commerce. It was held that although the legislature had done away with the requirement of a profit-motive, it did not dispense with the requirement that the activity must be a trade, commerce, or any other adventure or concern in the nature of trade or commerce. It was accordingly held that as the running of the canteen was not a commercial activity, the turnover of sales effected in the canteen could not be brought to tax. It is necessary at this stage to refer to a decision of our own Court in the case of Managing Committee, Temple Sri Bankey Behari Ji, Virindaban, Mathura v. Commissioner, Sales Tax, Lucknow [1972] 29 S.T.C. 685, where a view similar to that expressed by the Calcutta and the Karnataka High Courts has been taken, but in a different set of circumstances. In that case, the managing committee of the temple Sri Bankey Behari Ji, Virindaban, Mathura, used to provide bhog to devotees out of the bhog bhandar of the temple and the devotees were required to donate such amounts as they desired to the temple, which, however, had no relation to the amount of bhog issued. The taxing authorities had held that the transaction amounted to a sale, and further that the managing committee was a dealer as defined in the Act as it stood in the assessment years 1957-58 to 1965-66. It was held that there was no sale of the bhog, as neither the devotees nor the person in-charge of the bhog bhandar negotiated or concluded a bargain, because there was no settlement of the quantity of bhog which was supplied to the devotees in consideration of the cash received from them. It was also held that "business" as denned in Section 2(aa) of the Act contemplated a commercial activity.

10. Sri V. D. Singh, the standing counsel, drew our attention to two decisions, one of the Andhra Pradesh High Court, and the other of the Supreme Court, both relating to canteen. The Andhra Pradesh case is Hyderabad Asbestos Cement Products Limited v. State of Andhra Pradesh [1972] 30 S.T.C. 26 at 31. The Andhra Pradesh General Sales Tax Act, 1957, by an amendment in 1966 had defined the word "business" in the following terms :

'Business' includes-

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern ; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade/'commerce, manufacture, adventure or concern.

11. The turnover of canteen sales had been taxed. It was contended that as no commercial activity was involved in running a canteen, and all that the companies were doing was a social welfare activity in compliance of their statutory obligation under Section 46 of the Factories Act, the turnover was not liable to tax. Reliance for this contention was placed on the Madras decision in the case of Deputy Commissioner of Commercial Taxes v. Sri Thirumagal Mills Ltd. [1967] 20 S.T.C. 287. Their Lordships of the Andhra Pradesh High Court disagreed with the Madras High Court. They observed on page 31 as under:

We find ourselves unable to agree with the learned Judges. We think that the learned Judges have not paid sufficient attention to the word 'such' occurring in the second part of the definition. 'Such trade, commerce, manufacture, adventure or concern' must obviously refer to the 'trade, commerce, manufacture, adventure or concern' mentioned in the first part of the definition, that is to say, 'trade, commerce, manufacture, adventure or concern' of which a motive to make gain or profit is not an essential requisite. We do not think that it is permissible to hold that there was no 'business' in the commercial sense of 'business' with a motive to make profit, when such motive has been expressly declared unnecessary by the legislature. We think that under both parts of the definition, profit-motive is now immaterial and the concept of 'business' in the commercial sense put forward and accepted in the earlier cases must now be abandoned. We, therefore, hold that in the present cases too, in view of the definition of 'business' introduced into the Andhra Pradesh Act by the Amendment Act of 1966, proof of profit-motive is unnecessary to constitute business.

12. It also repelled the contention that the activity of the assessee was not a business, and no sales were, effected as it was being done under a compulsion, as in case the canteen was not run as required by the Factories Act penal consequence would result. The Supreme Court considered the taxability of canteen sales under the Madras General Sales Tax Act (1 of 1959) in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 S.T.C. 426(S.C.) Section 2(d) defined the word "business" in the following terms :

Section 2. (d) 'business' includes-

(i) any trade, commerce or manufacture or v any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern.

13. It also defined the word "dealer" in Section 2(g) in the following terms :

2. (g) 'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes-

(i) ...

(ii) a casual trader.

14. The definitions that we have extracted had been incorporated in the Sales Tax Act after certain amendments made in 1961 and 1964. The question that arose before the Supreme Court was in respect of the sale of (1) advertisement materials, (2) canteen sales, (3) sale of scrap. The taxability of turnover of these items had to be adjudged by reference to the 1959 Act for the period 1st April, to 31st August, 1964, and for the period 1st September, 1964, to 31st March, 1965, in accordance with the amended definitions of the words "business" and "dealer" as already extracted. The definitions of the words "business" and "dealer" under the 1959 Act were:-

'business* includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern."

"Section 2. (g) 'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes-

(i) ...

(ii) a casual trader.

15. It will be noticed that the accrual of profit was not necessary in order to constitute a trade, commerce, manufacture, adventure or concern in the business as defined in Section 2(d) before the amendment. The Madras High Court had excluded the canteen sales following its earlier decision in Thirttmagal Mills Ltd.'s case [1967] 20 S.T.C. 287. When the matter came up before the Supreme Court their Lordships held that the decision of the Andhra Pradesh High Court in Hyderabad Asbestos Cement Products Ltd. [1972] 30 S.T.C. 26 was correct, and partly reversed the decision of the Madras High Court. However, they upheld the decision of the Madras High Court for the period 1st April, to 31st August, 1964, which covered canteen sales for the period 1st April, to 31st August, 1964. It is necessary to refer to the reasons given by the Supreme Court for dismissing the appeals for the period 1st April, 1964, to 31st August, 1964. Dealing with the appeals for these periods the Supreme Court observed :

...In so far as the business turnover for the first part of the assessable year 1964-65 is concerned, it is not denied that the Act of 1959 prior to its amendment in 1964 is applicable. The contention that the 1964 amendment has retrospective operation was negatived in State Of Tamil Nadu v. Thirumagal Mills Ltd., Etc. [1972] 29 S.T.C. 290 (S.C.) but before this judgment was rendered the Sales Tax Tribunal had , held that that part of the assessment is also covered by the 1964 amendment. But the learned Advocate for the appellant none the less submits that even under the 1959 Act before its amendment the transactions, which are incidental or ancillary to trade or commerce whether or not profit has been made, are liable to tax. This contention was clearly negatived in State Of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 S.T.C. 1 (S.C.). In this case which was under the Bombay Sales Tax Act, 1953, where the definition of a dealer under Section 2(6) is in pari materia with Section 2(g), the disposal by a company carrying on the business of manufacturing and selling cotton textiles of its miscellaneous old and discarded items such as cans, boxes, cotton ropes, rags, etc., was held by this court not to be carrying on the business of selling these items of goods. It further stated that from the fact that the sales of these items were frequent and their volume was large, it cannot be presumed that when the goods were acquired there was an intention to carry on the business in those discarded materials, nor are the discarded goods by-products or subsidiary products of or arising in the course of manufacturing process. Shah, J., who spoke for the court, observed at pages 7-8 :

But the question is of intention to carry on business of selling any particular class of goods. Undoubtedly from the frequency, volume, continuity and regularity of transactions carried on with a profit-motive, an inference that it was intended to carry on business in the commodity may arise. But it does not arise merely because the price received by sale of discarded goods enters the accounts of the trader and may on an overall view enhance his total profit, or ' indirectly reduce the costs of production of goods in the business of selling in which he is engaged. An attempt to realize price by sale of surplus unserviceable or discarded goods does not necessarily lead to an inference that business is intended to be carried on in those goods, and the fact that unserviceable goods are sold and not stored so that badly needed space is available for the business of the assessee also does not lead to the inference that business is intended to be carried on in selling those goods.

The contention on behalf of the State in respect of the first part of the turnover for 1964-65 therefore fails.

16. The implication of this decision clearly is that an activity, which is incidental or ancillary to trade or commerce will not constitute the business of the assessee, and the sales turnover as a result of an incidental or ancillary activity would not be liable to tax. Further that canteens run by companies do not constitute its business but an incidental or ancillary activity. It is clear from a perusal of this decision f that the canteen sales were excluded only on this premise. In the assessment year in question transactions which were incidental or ancillary to the business of buying and selling were not included in the definition of the words "business of buying and selling" under the U. P. Act. The amendment came later, and as a result the U.P. Act became in pan materia with the Sales Tax Act of the other States, which have been noticed earlier. It is not disputed that the business of the assessee was the manufacture of fertilisers, not of running canteens. Canteens were being run by the assessee in the discharge of its statutory obligation. They were incidental or ancillary to this business. This being so, the turnover could not be brought to tax. In view of the pronouncement of the Supreme Court we are unable to agree, with respect, with the earlier decision of this Court given in Swadeshi Cotton Mills' case [1964] 15 S.T.C. 505. On this view it is also not necessary to consider the decision of the Supreme Court in Northern India Caterers (India) Lid. v. Lt. Governor of Delhi 1979 U.P.T.C. 826 (S.C.). The contention that no sale takes place when goods are supplied in the canteen to the workmen, or that the running of canteen is not a commercial activity need not also be considered on the view already expressed. In fact in view of this decision of the Supreme Court it is not possible to contend that no sale takes place when goods are supplied by the company through its canteens to its employees, for the Andhra Pradesh High Court in Hyderabad Asbestos Cement Co.'s case [1972] 30 S.T.C. 26 had dealt with this contention, and repelled it, and that decision has met the approval of the Supreme Court in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 S.T.C. 426 (S.C.). These conclusions obviate the necessity of considering as to whether the running of canteens is a commercial activity so as to bring it within the definition of the words "business of buying and selling" as defined in Section 2(aa) of the Act.

17. However, instead of answering the question referred, we, in view of Section 20(6) of U.P. Act No. 27 of 1978, allow the revision, by holding that the turnover of sales of the canteen was not liable to tax under the Act, and the activity of running of these canteens did not amount to carrying on the business of buying and selling goods by the assessee. The assessee is entitled to its costs, which is assessed at Rs. 200.