T.V.R Tatachari, C.J:— These are four Civil Writ Petitions and three Sales Tax References. As a common contention has been raised in all the seven matters, they have been heard together. The contention is that the turnover of the sales effected by the petitioners in the canteens run by them is not liable to be included in the taxable turnover for the purposes of levy of sales tax under the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi with effect from 28th May, 1951, and as amended from time to time (hereinafter referred to as the Sales Tax Act).

2. We shall first state the facts which led up to the filling of Civil Writ Petition No. 214 of 1968 and the making of Sales Tax Reference No. 1 of 1972. The petitioner in Civil Writ Petition No. 214 of 1968 and Sales Tax Reference No. 1 of 1972 is the Delhi Cloth & General Mills Company Limited which is a public Limited company registered under the Indian Companies Act, 1882, and has its Registered Office at Bara Hindu Rao, Delhi. It runs the following factories at Delhi: (a) The Delhi Cloth Mills, (b) S.D Mills, (c) D.C.M Silk Mills, (d) D.C.M Chemical Works, and (e) D.C.M Manufacturing Works. As required by Section 46 of the Factories Act, 1948, read with Rule 68 of the Delhi Factories Rules, 1950, the company set up canteens in its factories mentioned above on a non-profit basis. The company has been registered as a dealer under Section 7 of the Sales Tax Act in respect of the business carried on by it in the aforesaid factories. As such, it has to submit quarterly returns of its turnover of the said effected by the said factories.

3. In the quarterly returns of its turnover of the sales for the assessment year 1958-59, the company did not include the receipts in respect of the sales effected in the canteens on the ground that the said canteens were being run in compliance with a statutory obligation without any profit motive and, as such, the company could not be said to be carrying on business as a runner of canteens, that it was not, therefore, a dealer so far as the sales effected in the canteens were concerned, and that the sales effected in the canteens were thus not liable to sales tax and, therefore, did not form part of the turnover assessable under the Sales Tax Act. The assessing authority did not accept the said contention and by its order, dated 29th March, 1963, included the receipts from the canteens amounting to Rs. 1,33,233.94 in the turnover and levied tax accordingly under Section 11 (1) of the Sales Tax Act.

4. Against that order, the company filed an appeal, No. 225 of 1963-64, under Section 20 (1) of the Sales Tax Act before the Assistant Commissioner (Sales Tax) Delhi. By its order, dated 24th September, 1963, the appellate authority confirmed the order passed by the assessing authority so far as it related to the inclusion of the receipts from sales in the canteens.

5. The company filed a revision petition No. R-318 of 63-64, under Section 20 (3) of the Sales Tax Act before the Commissioner (Sales Tax), Delhi. By his order, dated 10th June, 1964, the Commissioner dismissed the revision petition.

6. The company then filed a second revision petition, No. 28 of 1967, under Section 20 (3) of the Sales Tax Act before the Chief Commissioner, Delhi. The said revision petition was assigned to and tried by Shri O.N Vohra, Additional District Judge, Delhi. By his order, dated 1st September, 1967, the learned Additional District Judge allowed the said revision petition, set aside the order passed by the assessing authorities below and directed that the company be assessed on the turnover for the assessment year 1958-59 after excluding the receipts of the sales from the canteens. The assessing authorities did not challenge the said decision and it had become final between the parties.

7. During the pendency of the assessment proceedings in respect of the assessment year 1958-59, the company submitted returns of the turnover in respect of the sales during the four quarters of the assessment year 1959-60 in which again it did not include the receipts from the sales in the canteens. The assessing authority included the receipts from the sales in the canteens for the first quarter of 1959-60 amounting to Rs. 75,244 in the turnover for the said quarter. The company preferred an appeal, No. 175 of 1964-65, against that order to the Assistant Commissioner (Sales Tax) Delhi under Section 20 (1) of the Sales Tax Act, who rejected the same by his order, dated 6th June, 1964. The company filed a revision petition, No. R-218 of 1964-65, under Section 20 (3) of the Sales Tax Act before the Assistant Commissioner of Sales Tax.

8. During the pendency of the revision petition for the assessment year 1958-59 which was subsequently decided by the Additional District Judge, the petitioner had also submitted returns for the turnover for the assessment years 1960-61, 1961-62, 1962-63 and 1963-64. In those returns also, it did not include the receipts from the sales in the canteens. The assessing authority assessed the sales tax on the aforesaid turnovers without including the receipts from the sales in the canteens by his order, dated 30th December, 1967. The company then received a notice, dated 4th March, 1968, from the Commissioner of Sales Tax under Section 20 (3) of the Sales Tax Act stating that he proposed to revise, of his own motion, the assessment order, dated 30th December, 1967, passed by the assessing authority for the period from 1st April, 1963, to 30th March, 1964, on the ground that the said order of assessment was erroneous inasmuch as no tax had been levied on the sales effected in respect of the canteens run by the company.

9. The company thereupon filed Civil Writ Petition, No. 214 of 1968, praying that the said notice may be quashed, and a direction be issued that the receipts from the sales in the canteens are not liable to be included in the taxable runover for the purposes of assessment to sales tax for the subsequent years under the Sales Tax Act. The respondents to the Writ Petition are (1) Union of India and (2) The Commissioner of Sales Tax, New Delhi.

10. In respect of the assessment year 1959-60, the company filed an application before the Lt. Governor, Delhi, under Section 20 (1) of the Sales Tax Act requiring him to state the case and refer a question of law to this High Court stated to arise out of the order of Shri O.N Vohra, Additional District Judge, Delhi, in Revision Petition No. 149 of 1968, dated 22nd July, 1969. The Lt. Governor, acceding to the prayer, referred the following question: —

“Whether on the facts and in the circumstance of the case the proceeds of sales made through the canteens run by the applicants for the benefit of their employees should form any part of the applicant's turnover?”

The said reference has since been numbered as 1 of 1972.

11. The facts which have led up to the filing of the Civil Writ Petitions Nos. 251 of 1971, 350 of 1972, and 278 of 1975, and the making of sales tax references Nos. 8 and 9 of 1972 are the following. The petitioner in the said Writ Petitions is M/s. Birla Cotton, Weaving and Spinning Mills Company which is a public limited company registered under the Indian Companies Act, 1882, and having its Registered Office at Delhi. It is also registered as a factory under the Factories Act, 1948. As required by Section 46 of the Factories Act, read with Rule 68 of the Delhi Factories Rules, 1960, the said company set up a canteen in its factory mentioned above on a nonprofit basis. The company has also been registered as a dealer under Section 7 of the Sales Tax Act and, as such, has to submit quarterly returns of its turnover of the sales effected by it. In respect of the turnover of its sales for the assessment year 1966-67, it did not include the receipts in respect of the sales effected in the canteen on the same ground as the one taken by the Delhi Cloth and General Mills Company. The said contention was not accepted by the assessing authority, and by its order, dated 7th January, 1971, included the said receipts from the canteen in the taxable turnover of the company. The company thereupon filed Civil Writ Petition No. 251 of 1971 praying that the said assessment order be quashed, and that a direction be issued that the receipts from the sales in the canteen are not liable to be included in the taxable turnover of the company for the purposes of assessment to sales tax for the assessment year 1966-67 and for the future assessment years. Similarly, on the assessing authority passing an order, dated 15th March, 1972, in respect of the assessment year 1969-70 and an assessment order, dated 31st January, 1975, in respect of the assessment year 1970-71 including the receipts from the sales in the canteen in the taxable turnover of the company, the company has filed Civil Writ Petition Nos. 350 of 1972 and 278 of 1975 respectively, praying that the said assessment orders may be quashed.

12. In respect of the assessment years 1960-61 and 1962-63, on the assessing authority including the receipts from the sales in the canteen by its orders, dated 16th February, 1965, and 18th October, 1966, respectively, the company preferred appeals Nos. 43 of 1965-66 and 1110 of 1966-67 to the Assistant Commissioner of Sales Tax, Delhi, under Section 20 (1) of the said Act who rejected the said appeals by his orders, dated 19th August, 1965, and 26th April, 1968/17th May, 1968, respectively. Against the said orders, the company preferred revision petitions Nos. 311 of 1965-66 and 299 of 1968-69 to the Chief Commissioner who rejected them by his orders, dated 6th December, 1968, and 20th January 1969, respectively. The company then preferred second revision petitions, Nos. 8 of 1969 and 113 of 1969 under Section 20 (3) of the Sales Tax Act which were assigned to Shri O.N Vohra, Additional District Judge, Delhi, who rejected the same by his orders, both dated 13th August, 1969. Thereupon, the company filed applications Nos. 65 and 66 of 1969 before the Lt. Governor, Delhi, requiring him to state the case and refer a question of law to this High Court. The Lt. Governor, acceding to the prayer, preferred the following question in the two cases to this High Court: —

“Whether on the facts and circumstances of the case, the proceeds of sales made through the canteens run by the applicants for the benefit of their employees should form part of the applicant's turnover.”

The references have since been numbered in this Court as Sales Tax References Nos. 8 and 9 of 1973.

13. The question that is raised in all these cases is as to whether the proceeds of sales made in the canteen run by the particular assesses for the benefit of its employees on a non-profit basis form part of the taxable turnover of the assessee. The learned counsel for the assessees contend that the proceeds of the sales made in the canteen cannot form part of the taxable turnover of the assessee under the Sales Tax Act inasmuch as the assessee, so far as the said sales in the canteen are concerned, is not a “dealer” within the meaning of the Sales Tax Act, because (a) the assessee, in making the sales in the canteen, cannot be said to be carrying on “the business of selling goods” within the meaning of the Sales Tax Act and (b) the sales are not strictly “sales” within the meaning of the Act for the reason that the canteen is being run in order to fulfil the statutory obligation under Section 46 of the Factories Act, 1948, and Rule 68 of the Delhi Factories Rules, 1950.

14. It would be convenient to set out here the relevant provisions of law for proper appreciation of the aforesaid two reasons.

15. Section 4 (1) of the Sales Tax Act provides for the incidence of taxation under the Act as under: —

“With effect from such date as the Chief Commissioner may by notification in the official gazette, appoint, being not earlier than thirty days after the date of such notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the date so notified . . .”

It will be seen that an assessee has to be a “dealer” before the charging Section 4 (1) becomes applicable.

16. The term “dealer” is defined in section 2 (c) of the Sales Tax Act, as it stood at the relevant time, as meaning:

“Any person who carries on the business of selling goods in the Union Territory of Delhi and includes the Government.”

The term “sale”, with its grammatical variations and cognate expressions, is defined in Section 2 (g) of the said Act as meaning:

“any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of goods on hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods.”

Section 46 of the Factories Act, 1948, provides as follows: —

“46. CANTEENS — (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers.

(2) Without prejudice to the generality of the foregoing power, such rules may provide for —

(a) the date by which such canteen shall be provided;

(b) the standards in respect of construction accommodation, furniture and other equipment of the canteen;

(c) the foodstuffs to be served therein and the charges which may be made therefore;

(d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen;

(e) the delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c).

Rules 65 (2) and 68 (1) of the Delhi Factories Rules, 1950, provide as under: —

“65 (2) — The occupier of every factory notified by the Chief Commissioner and wherein more than two hundred and fifty workers are “ordinarily employed” shall provide in or near the factory an adequate canteen according to the standards prescribed in these rules.”

“68 (1) — Prices to be charged: (1) Food, drink, and other items served in the canteen shall be sold on a non-profit basis and the prices charged shall be subject to the approval of the canteen Managing Committee.”

17. The first reason suggested by the counsel for their contention that the assessee is not a “dealer” within the meaning of the Sales Tax Act so far as the sales in the canteen are concerned, is that in making the said sales in the canteen, the assessee cannot be said to be carrying on “the business of selling goods” within the meaning of the Sales Tax Act. In support of the said argument, the learned counsel relied upon some decisions.

18. In Gannon Dunkerley & Co. (Madras) Ltd. v. The State of Madras, 5 Sales Tax Cases 216 (1), the assessee company, Gannon Dunkerley & Co. was carrying out certain engineering contracts, etc. and to facilitate the execution of their works which situated all over the State and to provide amenities to the workmen, it was distributing food grains to the workmen and debiting the cost thereof against the wages which it had to pay to them. The question arose as to whether the assessee company was liable to pay sales tax on the value of the food grains supplied to the workmen. After referring to the definition of “dealer” in the Madras General Sales Tax Act No. 9 of 1939, which was similar to the definition in the Bengal Finance (Sales Tax) Act, as extended to the Union Territory of Delhi, and after considering certain English decisions, a Division Bench of the High Court of Madras (Satyanarayana Rao and Rajagopalan JJ.) held that the word “business” employed in the definition of “dealer” in the Madras General Sales Tax Act was used in the sense of buying or selling with a view to earn profit, that in the case before them the supply of food grains to the workmen by the assessee was not carried out with a view to earn profit, and that the assessee was not, therefore, a “dealer” within the meaning of the Act so far as the supply of food grains was concerned and was not liable to sales tax on the value of the food grains.

19. In Sree Meenakshi Mills Ltd. v. State of Madras, 5 Sales Tax Cases 291 (2), the assessee company was running canteens for the benefit of its employees, and the question arose as to whether the turnover relating to the sales effected by the assessee in the canteens was liable to be included in the taxable turnover and subjected to sales tax. The same Division Bench, as was referred to above, followed its earlier decision in the case of Gannon Dunkerlcy & Co. (supra) (1) and held that the word “business” was used in the Madras General Sales Tax Act in the commercial sense, an integral part of which was the motive to make profit out of the sales or purchases, and if that was wanting, a person buying or selling would not be a “dealer”. In that view, the learned Judges held that the assessee in the case before them was not a “dealer” in respect of the turnovers relating to the sales in the canteens, and that it could not be validly assessed to tax under the Act.

20. In Deputy Commercial Tax Officer, Triplicane Division, and another v. The Cosmopolitan Club, 6 Sales Tax Cases 1 (3), the assessee, the Cosmopolitan Club, was supplying refreshments to its members, and the question arose as to whether sales tax could be levied on the value of refreshments supplied by the Club to its members. A Division Bench of Madras High Court (Balakrishna Ayyar and Rajagopala Ayyangar JJ.) held as follows: —

“It will be noticed that to constitute a sale with the meaning of the Act at least three ingredients are required —

(i) there must be a transfer of property in goods,

(ii) the transfer must be in the course of a trade or business, and

(iii) it must be for valuable consideration.

In the absence of any of these ingredients, the transaction will not be “sale” within the meaning of the Act.”

Explaining the second ingredient, the learned Judges observed as follows: —

“Now, the expression “in the course of trade or business” which is incorporated in the definition of “sale” makes it plain that the transaction must be commercial in its nature, that is to say, the transaction must have its inception in a hope of profit i.e with a profit motive.”

Then, after considering certain decisions, the learned Judges observed —

“The Club being an association not designed for making a profit nor striving after profit, there being no intention to make a profit by or out of the sale of refreshments to members, and there being no taint of commerciality in the transaction, the turnover in respect of the sales in question cannot in our view be assessed to sales tax.”

The learned Judges referred also to the decisions in the cases of Gannon Dunkerley & Co. (supra) and Sree Meenakshi Mills Ltd. (supra) (1).

20. In Davanagera Cotton Mills Ltd. v. State of Mysore and another, 8 Sales Tax Cases 793 (4), a Division Bench of the High Court of Mysore (Sreenivasa Rao and Hombe Gowda JJ.) held that where the assessee mills maintained a canteen on a “no-profit no-loss basis” for the benefit of the employees in conformity with the requirement of the Factories Act, the turnover relating to sales effected in the canteen was not liable to be taxed under the Mysore Sales Tax Act No. XLVI of 1948. Though a reference was made to the provision in Section 46 of the Factories Act and the rules thereunder, there was no discussion as regards the effect of the said provision in the factories act and the rules. The conclusion of the learned Judges was based on the view that the Act did not seek to levy sales-tax on all transactions but only on such transactions as are effected in the course of business, i.e for commercial purposes with a view to earn profit, following the view taken by the Madras High Court in the three decisions we have already referred to above.

21. The aforesaid view that the expression “business” employed in the definition of a “dealer” in Section 2 (b) of the Madras General Sales Tax Act was used in the sense of buying and selling goods with a view to earn profit and should be understood in a commercial sense, was reiterated by another Division Bench (Rajagopalan and Ramachandra Iyer JJ.) in Trustees of the Port of Madras v. The State of Madras, 11 Sales Tax Cases 224 (6), following the aforesaid earlier decisions.

22. In Chairman, Committee of Management, Integral Coach Factory Canteen, Madras v. Deputy Commercial Tax Officer, Perambur Division, 13 Sales Tax Cases 827 (6) Veeraswami J. (as the learned Judge then was) followed the aforesaid decisions in Sree Meenakshi Mills Ltd. (supra) and Trustees of the Port of Madras (supra). The learned Judge distinguished the decision of a Division Bench (Jagadisan and Srinivasan JJ.) of the Madras High Court in Madras Electricity Department Canteen, Madras v. The State of Madras 13 Sales Tax Cases 288 (7), by pointing out that in that case the Electricity Board did not appear to be under statutory obligation to run a canteen on a non-profit basis and there was no prohibition to sell lunch and tiffin to persons who were not members of the Canteen which necessarily implied that the Canteen had a business or profit motive.

23. In Swadeshi Cotton Mills Company Limited v. Sales Tax Officers, Special Investigation Branch, Kanpur and another, 15 Sales Tax Cases 505 (8), a Division Bench of the Allahabad High Court (V.G Oak and Satish Chandra JJ.) held that the concept of “carrying on business” in the U.P Sales Tax Act (No. 15 of 1948), was fundamentally changed by Section 2 (aa) of the U.P Sales Tax Act, 1948, introduced in the Act by the U.P Taxation Laws Amendment Act, 1963, with retrospective effect, and, therefore, a company running a canteen for its workers on a non-profit basis under the provisions of the factories act carries on the business of selling goods at the canteen and is liable to sales tax under the U.P Sales Tax Act, 1948. The decision was thus based on the new Section 2 (aa) introduced by amendment in 1963 whereby a business carried on without the motive of making profit was expressly included in the expression “business of buying and selling” for the purposes of the Act.

24. In The State Of Gujarat v. Raipur Manufacturing Co. Ltd 19 Sales Tax Cases 1 (9), the Supreme Court referred to the definition of “dealer” in Section 2 (6) of the Bombay Sales Tax Act (3 of 1953), as meaning “any person who carries on the business of selling goods in the State of Bombay, whether for commission, remuneration or otherwise . . .” and observed at page 5 as follows: —

“As pointed out by this Court in State of Andhra Pradesh v. M/s. Abdul Bakshi & Bros. (15 Sales Tax Cases 644) (9A), a person to be a dealer must be engaged in the business of buying or selling or supplying goods. The expression “business” though extensively used in taxing statutes, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation or profession which occupies the time, attention and labour of person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression “profit motive” it is not intended that profit must in fact be earned.”

25. In Director of Supplies and Disposals, Calcutta v. Member, Board of Revenue, West Bengal Calcutta, 20 Sales Tax Cases 398 (10), the Supreme Court reiterated the same view regarding the necessity for the existence of a profit motive.

26. The decision in Deputy Commissioner of Commercial Taxes v. Sri Thirumagal Mills Limited, 20 Sales Tax Cases 287 (11), shows that the definition of “business” in Madras General Sales-tax Act (1 of 1959) was amended in 1964 by Madras Act 15 of 1964 with retrospective effect making it clear that business may be with or without a motive to make gain or profit and whether or not any profit accrues.

27. In Commissioner of Sales Tax, Gujarat v. Anil Co-operative Credit Society, 24 Sales Tax Cases 180, 225, 226 (12), the assessee society ran a canteen for the benefit of its members without any profit motive, and it was held by the High Court of Gujarat (P.N Bhagwati, C.J) on a difference of opinion between Divan and Mehta JJ. that the word “business” in Section 2 (11) of the Bombay Sales Tax Act No. 51 of 1959 must be interpreted to mean a systematic or organised course of activity pursued with the set purpose of making profit, and since profit motive was admittedly absent in the activity of the assessee, it could not be regarded as “business” within the meaning of Section 2 (11). The learned Chief Justice referred to the decision of the Supreme Court in Deputy Commercial Tax Officer, Saidapet, Madras and another v. Enfield India Ltd. Co-operative Canteen Ltd., 21 Sales Tax Cases 317 (13), and distinguished the same by pointing out that explanation to Section 2 (g) of the Madras General Sales Tax Act, 1959 (as it stood in 1968) made it clear that a society shall be deemed to be a dealer for the purposes of the Act if it buys or sells goods “whether or not in the course of business”, and also that the Supreme Court was not in fact concerned in that case with the question whether an activity can be regarded as business even in the absence of a profit motive, and indeed it could not be, since the explanation to Section 2 (g) in so many terms dispensed with the requirement of the sale being in the course of business.

28. In Ganesh Prasad Dixit v. Commissioner of Sales Tax, Madhya Pradesh, 24 Sales Tax Cases 343, 348, 349 (14), the Supreme Court referred to its decision in State of Andhra Pradesh v. M/s. Abdul Bakshi and Bros. (supra) and held that the assessees in the case before it were registered dealers who consumed the materials otherwise than in the manufacture of goods for sale and for a profit motive, and that on the plain words of the section in the Madhya Pradesh General Sales Tax Act No. 2 of 1959, the purchase price was taxable.

29. In Fort Gloster Industries Ltd. v. Member, Board of Revenue, West Bengal, 26 Sales Tax Cases 141 (15), a Division Bench of the High Court of Calcutta (P.B Mukharji, Actg. C.J and T.K Basu J.) was dealing with Section 2 (1a) of the Bengal Finance (Sales Tax) Act No. 6 of 1941 as amended by West Bengal Taxation Laws (Amendment) Act No. 26 of 1969, according to which the term “business” would include business commission without a profit motive. The decision cannot, therefore, be of assistance in the case before us.

30. In Joint Commercial Tax Officer, Harbour Division II, Madras v. Young Men's Indian Association, Madras, 26 Sales Tax Cases 241 (16), the Supreme Court was not concerned with the question whether in the absence of a profit motive the transactions of sale can be regarded as “business” for the purposes of the Madras General Sales Tax Act No. 1 of 1959. Indeed, such a question could not arise since, as stated earlier, the Explanation 1 to the definition of “dealer” in Section 2 (g) of the Act which was added by amendment in 1964, made it clear that a person would be a dealer whether the buying or selling by him was “in the course of business” or not.

31. In the Indian Iron and Steel Co. Ltd. v. Member Board of Revenue, West Bengal, 27 Sales Tax Cases 373 (17), a Division Bench of the High Court of Calcutta (Sankar Prasad Mitra and K.L Roy JJ.) reiterated that “a person cannot be a “dealer” under the Bengal Finance (Sales Tax) Act, 1941, unless he carries on the business of selling goods in a commercial sense”, and that “if an employer sells without any profit motive certain commodities of daily use to the employees to provide them with social amenities it cannot be said that the employer is carrying on business with a commercial motive.”

32. In Motor Industries Co. Ltd. v. The State of Mysore and others, 27 Sales Tax Cases 379 (18), a Division Bench of the High Court of Mysore (G.K Govinda Bhat and K. Jagannatha Shetty JJ.) was concerned with the definition of “business” in Section 2 (i) (f. 2) of the Mysore Sales Tax Act, 1957, as amended by Mysore Act No. 9 of 1964, according to which any trade or commerce with or without profit motive would be included in the expression “business” for the purposes of the Act. This decision cannot, therefore, be of assistance in the present case.

33. In State of Tamil Nadu v. Thirumagal Mills Ltd., 29 Sales Tax Cases 290 (19), the Supreme Court, referring to the definition of “business” in Section 2 (d) of the Madras General Sales Tax Act (No. 1 of 1959) prior to its amendment by Amendment Act No. 9 of 1964 specifically excluding the requirement of profit motive, held that the value of the articles sold in the fair price shop and the canteen run exclusively for the benefit of the employees and without any profit motive in running the same was not liable to sales tax under the Act.

34. In Hyderabad Asbestos Cement Products Limited and another v. The State of Andhra Pradesh and others, 30 Sales Tax Cases 26 (20), a Division Bench of the High Court of Andhra Pradesh (Chinnappa Reddy and Madhava Reddy JJ.) was concerned with the definition of “business” in Section 2 (bbb) introduced into the Andhra Pradesh General Sales Tax Act by Amendment Act of 1966, according to which profit motive was unnecessary to constitute “business”. This decision also is, therefore, not of assistance in the case before us.

35. State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. and another, 31 Sales Tax Cases 426 (21), is again a case in which the Supreme Court of India held that under the Madras General Sales Tax Act, 1959, before its amendment in 1964, transactions in which there was no profit motive were not liable to tax, while canteen sales after 31st August, 1964, in view of the amendment of the definition of “business” in 1964 in Section 2 (d) of the said Act, were liable to sales tax.

36. In Union of India v. The State of Punjab, 34 Sales Tax Cases 394 (22), a Division Bench of the High Court of Punjab and Haryana (D.K Mahajan and Pritam Singh Pattar JJ.) held that the Union of India owning the Northern Railway Departmental Catering was selling food stuffs in the canteen on no-profit no-loss basis, and was not, therefore, a “dealer” within the meaning of Section 2 (d) of the Punjab General Sales Tax Act No. 46 of 1948.

37. In Tata Iron and Steel Co. Ltd. v. State of Orissa, 35 Sales Tax Cases 195 (23), a Division Bench of the High Court of Orissa (G.K Misra, C.J and B.K Ray J.) held that the running of a canteen by the Tata Iron and Steel Co. Ltd. taken separately was not done with a view to earn profit and if it could be separately considered it would not have been a “business” within the meaning of the definition of “dealer” in Section 2 (c) of the Orissa Sales Tax Act No. 14 of 1947, but that running the canteen could not, however, be dissociated from the assessee's business of running quarries, that it constituted an integral component part of mining business, and that whether the intention of the assessee in doing business was to earn profit was to be determined with reference to the entire business of running quarries.

38. In Commissioner of Sales Tax v. Cutchi Dasha Oswal Mahajan Graha Udyog Committee, 36 Sales Tax Cases 1 (24), a Division Bench of the High Court of Bombay (D.P Madon and M.H Kania JJ.) held that in order that a person may come within the definition of the term “dealer” in Section 2 (11) of the Bombay Sales Tax Act, 1959, he must be carrying on the business of buying or selling goods in the State, that in order to be considered as a dealer the person concerned must not merely be buying or selling goods or both but doing so as a business, that to regard an activity as business there must be a course of dealings with a profit motive and not for sport and pleasure, that in the instant case eatables were got prepared and sold by the assessee not with the intention of carrying on business in the preparation and sale of those eatables, but in the carrying out of the main object of the trust, viz. to give employment to the destitute women of the community for whose benefit the trust was formed, that the sale transactions, which resulted in profits, must reasonably be regarded as incidental transactions and those transactions would not convert the activity of getting the eatables prepared and sold into a business activity, and that the assessee, therefore, could not be regarded as a dealer within the meaning of that term in Section 2 (11) of the Act in connection with that activity.

39. In Chief Commercial Superintendent, South Eastern Railway v. Member, Board of Revenue, W. Bengal, 1974 Tax Law Reports, 1636 (25), a Division Bench of the High Court of Calcutta (Sabyasachi Mukharji and Hazra JJ.) held that the essential function of Railway is to carry passengers and goods, that the sales of unclaimed goods by the Railways is only incidental and ancillary and not as business of selling goods, and that when effecting sales of unclaimed goods under Section 56 of the Railways Act, a Railway is not a “dealer” within the meaning of Section 2 (c) of the Bengal Finance (Sales Tax) Act No. 6 of 1941.

40. In the State of Andhra Pradesh v. M/s. Hotel Sri Lakshmi Bhavan, Visakhapatnam, 1974 Tax Law Reports 1719 (26), a Division Bench of the High Court of Andhra Pradesh (Kondaiah and Shriramulu JJ.) held that the definition of “business” under section 2 (bbb) of the Andhra Pradesh General Sales Tax Act No. 6 of 1957, as amended in 1966, whereby the element of profit motive or gain was made an unnecessary ingredient for a sale to be assessable to Sales Tax, being prospective, was not applicable to the facts of the case before them.

41. In the State of Tamil Nadu v. Thiru Cauvery Spinning and Weaving Mills Ltd. Madras, 1974 Tax Law Reports 2289 (27), a Division Bench of the High Court of Madras (Ramanujam and V. Ramaswami JJ.) following the decision of the Supreme Court in State of Tamil Nadu v. Burmah Shell Oil Storage (supra) (27) held that after the amendment of the definition of “business” in Section 2 (d) of the Tamil Nadu General Sales Tax Act I of 1959 in 1964, the transactions of sale which are incidental and ancillary to the assessee's trade or commerce would be liable to sales tax even if there was no profit motive.

42. In Messrs East India Hotels Ltd. (Oberoi Inter-Continental Hotels) v. The Additional Commissioner, Sales Tax New Delhi, Civil Writ Petition No. 242 of 1974, decided on 21st November, 1975 (28), a single Judge of this High Court (Prakash Narain J.) held that the hotel cannot be said to be a “dealer” within the meaning of the definition of that expression in Section 2 (c) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, in respect of its cafeteria activity in as much as there was admittedly no profit motive in the sales effected in the cafeteria run by the hotel for the employees of the hotel on subsidised basis. Thus, courts have consistently held that “business” for the purposes of sales tax should be understood in a commercial sense, i.e, as an organised activity carried on with a view to earn profit or gain, unless there is any provision in the Statute to the contrary. Rule 68 (1) of the Delhi Factories Rules, 1950, specifically provides that food, drinks and other items served in the canteen shall be sold on a no-profit basis. The assessees in the cases before us are admittedly governed by the said rule. It, therefore, follows that the assessees in the cases before us, so far as the sales in their respective canteens are concerned cannot be said to be “carrying on the business of selling goods” within the meaning of the definition of the term “dealer” in section 2 (c) of the Sales Tax Act as it stood at the relevant time. Consequently, they cannot be treated as “dealers” within the meaning of the Sales Tax Act so far as the sales in the canteens are concerned, and the receipts in respect of the sales in the canteens are not liable to sales tax under the Act and cannot be included in the taxable turn over of the assessees.

43. We may mention here that the learned counsel for both the parties stated before us that under the new legislation, viz., the Delhi Sales Tax Act, 1975, which came into force from 21st October, 1975, sales without profit motive would be liable to sales tax, but that the present cases before us are governed by the old law and not by the new Act.

44. Mr. Wazir Singh, learned counsel for the Sales Tax authorities in some of the cases, sought to argue that even if profit motive is essential for business, the profit need not be in the activity or transactions of sale in the canteens, if there is profit in the main activity of running the factory, as they are all integrated activities. In support of his argument, the learned counsel referred us to the decision in Tata Iron and Steel Co. Ltd. v. State of Orissa (supra) (23). In that case, the assessee company was engaged in the business of mining limestone from a quarry. Under the Mines Rules, the company had to maintain a canteen for supplying articles of food to the employees engaged in the quarry. The food and drinks in the canteen were being sold only to the employees of the mine not only on no-profit basis but at a subsidised rate whereby the management incurred a loss in the relevant year. The question was whether the company was carrying on the business of selling food and drinks in the canteen, and the sales in the canteen were liable to sales tax. A Division Bench of the High Court of Orissa (G.K Misra C.J and B.K Ray J.) held (1) that the running of the canteen by the company taken separately was not done with a view to earn profit, and if it could be separately considered it would not have been a business; (2) that running the canteen could not, however, be dissociated from the petitioner's business of mining from the quarry as it constituted an integral component part of the mining business; (3) that the intention of the company in doing business to earn profit has to be determined with reference to the entire business of mining from the quarry; and (4) that the company was, therefore, liable to pay sales tax on the receipts from the canteen.

45. In taking the above view, the learned judges relied upon the decisions in The State of Andhra Pradesh v. H. Abdul Bakshi & Bros. (supra) (9A) and The State of Gujarat v. Raipur Manufacturing Co. Ltd. (supra) (9). In the former case, the assessee was carrying on the business of training hides and skins and selling the tanned skins. For the purpose of the said business, the assessee purchased undressed hides and skins and also tanning bark and other materials required in its tannery. The question arose as to whether the amount representing the price paid for buying tanning bark required in the tannery should be included in the turn over for the purposes of levy of sales tax. The argument on behalf of the assessee was that tanning bark was bought for consumption in the tannery and not for sale and the assessee was not, therefore, a dealer in tanning bark and, therefore, the price paid for paying the tanning bark was not liable to tax under the Hyderabad General Sales Tax Act. In the Hyderabad General Sales Tax Act, “dealer” was defined as meaning any person engaged in the business of buying, selling or supplying goods. The Supreme Court explained that the expression “business” is used in taxing statutes in the sense of an occupation or provision which occupies the time, attention and labour of a person, normally with the object of making profit, that to be a dealer a person need not follow the activity of buying, selling and supplying the same commodity, that mere buying for personal consumption, i.e, without a profit motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or uses it in manufacturing another commodity for sale, would be regarded as a dealer, and that the legislature had not made sale of the very article bought by a person a condition for treating him as a dealer, but the definition merely required that the buying of the commodity must be in the course of business, i.e, must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The Supreme Court held that it could not be said in that case that tanning bark was bought by the assessee for the purpose unconnected with the business carried on by it vis. Manufacture and sale of the dressed hides and skins, and that consumption in the business and not sale of the commodity bought therefore did not exclude the assessee from the definition of dealer qua the tanning bark. Thus, the Supreme Court referred to “integrated activity of buying and disposal” in the context of the inclusion of the price of the tanning bark bought by the assessee in the course of its business of tanning and selling tanned skins and hides, and observed that the price should be included in the turn over as the tanning bark was bought in the course of business “for sale or use with a view to make profit out of the integrated activity of buying and disposal”. The learned Judges in the case of Tata Iron & Steel Co. Ltd. (supra) (23) treated the above observations of the Supreme Court as laying down that “an activity integrated with the business is to be treated as a component part of the business”. With due respect, we are unable to agree with that view as the observation of the Supreme Court was made in an entirely different context. The Supreme Court referred to the “integrated activity of buying and disposal”, and not to the buying of tanning bark being an activity integrated with the business of tanning and selling tanned skins. The Supreme Court only emphasised that since the tanning bark was bought for use with a view to make profit out of the integrated activity of buying hides and skins, tanning them, and selling tanned skins, the purchase price of the tanning bark was to be included in the turn over. On the other hand, the question of sales in the canteens being liable to tax is different. In the case before the learned Judges, the main activity of the assessee was mining limestone from a quarry. The activity of running a canteen was not, by its very nature, “integrated with the mining business” or a “component part” of the mining business. It is true that the running of the canteens was obligatory under the Mines Rules. Merely because the said activity of running a canteen was made obligatory by the rules, it could not, in our opinion, be regarded as “integrated” with the mining business or as “a component part” of the mining business.

46. The other decision referred to by the learned Judges viz., the decision in the case of The State Of Gujarat v. Raipur Manufacturing Co. Ltd, (9) was also of a similar nature. In that case, the Supreme Court held that where a company which was carrying on the business of manufacturing and selling cotton textiles, disposes of miscellaneous old and discarded items such as stores, machinery, iron scrap, cans, boxes, cotton ropes, rags, etc. it could not be said to carry on the business of selling those items of goods, as the fact that the sales of those items were frequent and their volume was large does not lead to the presumption that when those items were acquired there was an intention to carry on the business in those discarded items, and also because the discarded goods were not by-products or subsidiary products of or arising in the course of the manufacturing process. It was in that context that the Supreme Court observed as follows: —

“Whether a person carries on a business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression “profit motive”, it is not intended that profit must in fact be obtained nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions affected by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions; in others it would have to be inferred from a review of the circumstances attendant upon the transaction . . . but no test is decisive of the intention of carrying on the business; in the light of all the circumstances, an inference that a person desires to carry on the business of selling goods may be raised.”

The Division Bench in the case of Tata Iron & Steel Co. Ltd., (supra) (23), referred to the above observations and commented that “apart from the emphasis given that the concept of business takes within its sweep a profit motive, the decision clearly lays down that the profit motive may pervade the whole series of transactions affected by the person in the course of his activity”. It has to be noted that the Supreme Court was emphasising the pervasion of the profit motive in the whole series of transactions effected by the assessee in the course of his activity for the purpose of finding out whether the main activity of the assessee was with a profit motive. The Supreme Court only pointed out that the existence of profit motive in the main activity of the assessee could be inferred from a review of all the circumstances attendant upon the said activity including other transactions effected by the assessee in the course of his activity. It was not necessary in that case to lay down, nor did the Supreme Court lay down in that decision, that all other transactions effected by the assessee in the course of its main activity, irrespective of their nature, were an integral or component part of the main activity of the assessee. In our opinion, the two decisions relied upon by the Division Bench do not lead to the conclusion arrived at by the Division Bench in respect of sales in the canteen run by the assessee company. We are, therefore, unable to agree with the conclusion that the activity of sales in the canteen was an integral component part of the main activity of the assessee. The main activity of the assessee in the case before the learned Judges was mining limestone from a quarry. The other activity of maintaining a canteen, which was entirely different in nature from the main activity, was undertaken by the assessee only as an additional activity by reason of the statutory compulsion, and not as an activity which is an “integral component part” of the main activity. In any case, as pointed out by the Supreme Court in the case of The State Of Gujarat v. Raipur Manufacturing Co. Ltd (supra) (9), no test is decisive of the intention of carrying on business, and it is in the light of all the circumstances in the case that an inference that the assessee desires to carry on the business of selling goods in a given case has to be drawn. That being so, the conclusion of the Division Bench in the case of Tata Iron & Steel Co. Ltd. (supra) (23) that the running of the canteen was an integral component part of the mining business must be taken to have been based on the facts of that case, and not as a general proposition that in all cases the running of a canteen is an integral component part of the main activity of the assessee. The said decision cannot, therefore, be of any assistance to the learned counsel.

47. Mr. Chawla, learned counsel for the Sales Tax authorities in some of the cases, sought to argue that Section 4 of the Sales Tax Act is the charging section, that under that section “all sales” are to be taxed, that the term “business” does not occur in the section, and that all sales are, therefore, liable to tax whether there is profit motive or not. The argument ignores that though the word “business” does not occur in Section 4, the term “dealer” occurs in it, and the term “dealer” has been defined in the Act as one who carries on the “business of selling goods”. The concept of “business” is thus brought in by the use of the term “dealer”, and consequently the requirement of profit motive is attracted. There is thus no force in the argument.

48. The second reason urged by the counsel for the assessees in support of their contention that the assessees are not “dealer” within the meaning of the Sales Tax Act so far as the sales in the canteens are concerned, is that the said sales are not strictly “sales” within the meaning of the Act, because the canteens are being run in order to fulfil the statutory obligation under Section 46 of the Factories Act, 1948, and Rule 68 of the Delhi Factories Rules, 1950. The argument is that it is one of the essential ingredients of a sale that the parties to the transaction of sale should have complete freedom to enter into the transaction, and that since the running of the canteen and the sales effected in it are entirely due to the aforesaid statutory compulsion and the assessees have no choice in the matter, the transactions cannot be regarded as sales at all for the purposes of the Sales Tax Act.

49. The aforesaid argument has been considered in a number of cases. In Sree Meenakshi Mills Ltd. v. State of Madras (supra) (2), the learned Judges referred to the circumstance that under Section 46 of the Factories Act the assessees in the case before them were under a duty to maintain canteens for the benefit of their employees, but did not go into the question as to whether the transactions in the canteens were “sales” or not by reason of the said provision in the Factories Act. They only held, following their earlier decision in Gannon Dunkerley & Co. (Madras) Ltd. v. State of Madras (supra) (1) that to constitute business there should be the motive to make profits, and as the assessees before them were making the sales in the canteens without profit motive they were not “dealers” within the meaning of the Madras General Sales Tax Act.

50. In Devangere Cotton Mills Lt. v. State of Mysore (4) (supra) the learned Judges referred to the decision in the case of Sree Meenakshi Mills Ltd. (1) and merely observed that the Madras High Court held that such sales could not be regarded as sales effected in the course of business and amenable to the levy of sales tax. In this decision also, the learned Judges did not go into the question as to whether the transactions in the canteens would not be sales by reason of the fact that the canteens were being run in fulfilment of the statutory obligation.

51. In Swadesh Cotton Mills Company Ltd. v. Sales Tax Officer (supra) (8), the learned Judges referred to the fact that the assessee before them was obliged to establish and maintain a canteen by reason of the provisions in Section 46 of the Factories Act and Rule 68 of the U.P Factories Rules, 1950, and held that the transactions in the canteen were not “transactions of sale” as understood in the Sale of Goods Act, and hence not liable to sales tax. The learned Judges pointed out that in Gannon Dunkerley & Co. (Madras) Ltd. v. State of Madras (supra) (1), the Supreme Court held that the power conferred by Entry No. 48 of List II was restricted to enacting legislation imposing tax liability in respect of sale of goods as understood in the Sale of Goods Act, 1930, and that the provincial legislature under the Government of India Act, 1935, had no power to tax the transaction which was not a sale of goods as understood in the Sale of Goods Act. They also pointed out that in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar 14 (29) Sales Tax Cases 316, the Supreme Court reiterated the above view and also held that “as observed by Benjamin in the 8th Edition of his work on “sale”, “to constitute a valid sale there must be a concurrence of the following elements, viz. (i) the parties competent to contract; (ii) mutual assent; (iii) a thing the absolute or general property in which is transferred from the seller to the buyer; and (iv) a price in money paid or promised”. The learned Judges then observed that the contention before them was that the second necessary element, namely, mutual assent was lacking in the case before them, that the statute forces the assessee to run a canteen, that under the Factory Rules the assessee had no choice in the conduct of the canteen or in fixing the prices or the persons who can be served in the canteen, and that in view of the decision of the Supreme Court in New India Sugar Mills' case (supra) (29) the transactions in the canteens could not be regarded as sales as mutual assent was lacking. The learned Judges negatived that contention by pointing out that in the case of New India Sugar Mills (supra) (29), the course of dealing was that the Governments of various States used to intimate to the Sugar Controller of India their requirements of sugar from time to time, that similarly, the factory owners used to send to the Sugar Controller a statement of stocks of sugar held by them, that the Sugar Controller used to make allotments directing the sugar companies to supply sugar to the State Governments in question specified quantities of sugar, that in pursuance of the allotment orders, sugar used to be supplied on payment of price, that the Supreme Court held that before a transaction can in law be a sale, it must be based on a contract of sale for which mutual assent of the contracting parties is essential, that is to say, there ought to be a voluntary offer and acceptance of the offer, that the Supreme Court also held that when a Provincial Government gave intimation of its requirement to the Sugar Controller it did not make any offer to purchase to the Controller because the Controller was not the manufacturer of sugar or its agent, and the communication of the allotment order to the sugar mill was not of any offer made by the purchasing State which it was open to the assessee to accept or decline, and that the Supreme Court further held that mere compliance of the despatch instructions of the Controller, which in law the sugar mill could not decline to carry on, did not amount to acceptance of an offer, and there being no offer or acceptance, the parties never came in contact as contracting parties and the despatch of sugar did not result in any sale of goods. The learned Judges observed that while it was manifest in the case before the Supreme Court that individual transactions themselves were controlled and the parties had no volition or choice in making the transactions themselves, in the case before them, at the point of time when the transactions take place, namely, when a particular refreshment or drink is supplied in the canteen, there was no control by any outsider. The learned Judges further observed that the assessee company displayed the goods in the canteen for the use of its workmen and thereby invited offers from the workmen, that the workmen were free to visit or not the canteen and when they visit the canteen and took the goods, they voluntarily made an offer, that the canteen then accepted the offer and made the supply on payment of the price on the happening of which a contract resulted and the property in the goods passed, that at the point of time when the transactions take place, the parties came into contact and did enter into a contract of sale voluntarily, and that in their opinion the transactions in the canteen were, therefore, “sales” within the meaning of the Sales of Goods Act, 1930. The learned Judges went on to observe that the condition in the factories act and the rules made thereunder that the assessee must maintain a canteen for the benefit of his workmen was not an absolute restriction, that it was open to a person not to carry on any business by employing more than 250 workmen, but if he did so, he impliedly consented to make contracts in respect of refreshments, etc. in a canteen established by him, that the fact that the price was controlled by the Managing Committee of the Canteen was not material, as the provision for the Managing Committee was ostensibly to ensure efficient management and a fair deal to the workers, that it was not intended to control the offer or acceptance at the time when the transactions took place, that it could not be said that the assessee was a servant or agent carrying out the legislative mandate of the factories act and the rules, as he was dealing not with any property or attending merely to a master's interests and the canteen was the property of the assessee in which he made specific bargains, that the relationship between the assessee and the workmen was that of vendor and purchaser, and that the transactions carried on at the canteen, therefore, did in law answer the connotation of “sales”. We may say with respect that we are in complete agreement with the above reasoning and conclusion of the learned Judges.

51. In the Indian Steel and Wire Products Limited v. The State of Madras, 21 Sales Tax Cases 138 (20), the appellant supplied steel products to various persons in the State of Madras during a certain period throughout which the sale or purchase of iron and steel products was controlled by the Iron and Steel (Control of Production and Distribution) Order, 1941, issued under the Defence of India Act, 1939, and which was administered by the Iron and Steel Controller in Calcutta. The procedure followed was as follows: The purchaser placed the order for materials according to the specifications given by him through the Iron & Steel Controller, agreeing that the indent was placed subject to the provisions of the sale price schedule regarding prices, etc. and the terms and conditions of business (including payment) of the registered producer on whom the order would be placed by the Iron and Steel Controller. The Controller forwarded the indent to the producer for delivery of the material in accordance with any general or special directions of the Iron and Steel Controller. But, in that instant case, there was no evidence regarding any general or special order issued by the Controller excepting that fixing the base price. The works order issued by the producer provided that all orders booked were subject to the producer's terms of business and general understanding in force at the time of booking the orders and despatch of goods. It was left to producer to supply the goods ordered at its convenience and the producer was willing to change by mutual agreement even the specifications of the goods to be supplied. It was also open to the producer to fix the time and mode of payment of the price of the goods supplied. The Supreme Court pointed out that as laid down by it in State Of Madras v. Gannon Dunkerley & Co., (Madras) Ltd), 9 Sales Tax Cases 353 (supra), to constitute a valid sale there has to be concurrence of the following elements viz., (i) parties competent to contract, (ii) mutual assent, (iii) a thing the absolute or general property in which was transferred from the seller to the buyer; and (iv) a price in money paid or promised, that out of these, three elements were established in the case before them, viz., the parties were competent to contract, the property in the goods was transferred from the producer to the buyer and the price in money was paid, that as regards the fourth element, there were several matters which the parties could decide by mutual consent, that the Controller only fixed the base price of the steel products and determined the buyers; but in other respects the parties were free to decide their own terms by consent, and that it would be incorrect to say that because law imposes some restrictions on freedom to contract, there was no contract at all, and that so long as mutual assent was not completely excluded in any dealing, in law it was a contract.

53. In the Andhra Sugars Ltd. and another v. State of Andhra Pradesh and others, 21 Sales Tax Cases 212 (31), the Supreme Court distinguished their earlier decision in M/s. New India Sugar Mills Ltd. v. Commercial Sales Tax Officer, Bihar (supra) (29) and held in the case before them that under Andhra Pradesh Sugar Cane (Regulation of Supply and Purchase) Act 45 of 1961, a cane grower made an offer to the occupier of the factory directly and the latter accepted the offer, that the parties then made and signed an agreement in writing, that there was thus a direct privity of contract between the parties, that the contract was a contract of sale and purchase of cane, though the buyer was obliged to give his assent under compulsion of a statute, and that the State legislature was, therefore, competent to tax purchases of canes made under such a contract.

54. In State of Rajasthan and another v. Karam Chand Thappar and Bros., 23 Sales Tax Cases 210, 227 (32), the Supreme Court pointed out the distinction between the principle laid down in M/s. New India Sugar Mills Ltd.'s case (supra) (29) and the principle laid down in M/s. Indian Steel Wire Products v. State of Madras (supra) (30) and Andhra Sugars Ltd. v. State of Andhra Pradesh and others (supra) (31), the Supreme Court explained that in the case of New India Sugar Mills Ltd. (29) it was held on the facts that there was no contractual relation between the State Government and the factory owner, as the Sugar Controller directed the manufacturer of sugar to supply sugar to the State Government and the factory owner complied with the direction, and that, on the other hand, in the cases of the Indian Steel and Wire Products Ltd. and Andhra Sugars Ltd. (30), it was held that when goods, supply of which is controlled by statutory orders, are delivered pursuant to contract of sale, the principle of the case in New India Sugar Mills Ltd. (30) has no application. As regards the case before them, the Supreme Court held that there was an agreement of sale between the parties competent to contract, in pursuance of the agreement of sale, property in the goods supplied passed to the purchaser for the price agreed to be paid, and that the transaction was, therefore, one of sale of goods within the meaning of the Rajasthan Sales Tax Act.

55. In Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P 26, Sales Tax Cases 344 (33), under clause 3 of the U.P Wheat Procurement (Levy) Order, 1959, every licence dealer was directed to “sell” to the State Government at controlled prices 50% of wheat held in stock by him at the commencement of the Order and 50 per cent of what was procured or purchased by him every day beginning with the date of commencement of the Order until such time as the State Government otherwise directed. The wheat had to be delivered by the dealer to the Controller or other authorised person. If the dealer failed to carry out his obligation under the Order, he was liable to be penalised. The Supreme Court held that the Order ignored the volition of the dealer, and the source of the obligation to deliver the specified quantities of wheat and to pay for them was not in any contract but in the statutory Order. The Supreme Court observed that assuming that the Controller might designate the place of delivery and place of payment of price at the controlled rate, and the licensed dealer acquiesced with them, the transaction of supply of wheat pursuant to clause 3 of the order and acceptance thereof did not result in a contract of sale, and, therefore, the supplies of wheat made by the appellant under the Order were not sales within the meaning of the definition in Section 2 (h) of the U.P Sales Tax Act, 1948, and the appellants were not liable to pay sales tax thereon. The Supreme Court pointed out that a sale predicates a contract of sale of goods between persons competent to contract for a price paid or promised, that a transaction in which an obligation to supply goods is imposed, and which does not involve an obligation to enter into a contract, cannot be called a “sale” even if the person supplying goods is declared entitled to the value of goods which is determined or determinable in the manner prescribed, and that if there be a contract, the restrictions imposed by statute would vitiate the consent, but the contract cannot be assumed.

56. In Salar Jang Sugar v. State of Mysore and others, 29 Sales Tax Cases 246 (34), the assessee-companies, which manufactured sugar in their factories, purchased sugar-cane from growers. The sale and purchase of sugar-cane was controlled by the Sugar-cane Control Orders. Under the said orders, a minimum price of sugar-cane was fixed, areas where sugar-cane was grown were reserved for the factories of the assessee, the annual quantity of sugar-cane required for the factories was determined, and the factories were to secure the quantity of sugar-cane so determined from the areas respectively reserved for them. The sugar-cane growers in the reserved areas were to supply 95% of the sugar-cane grown by them to the respective factories. The sugar-cane grower and the factories were to enter into an agreement for supply and purchase or sugar-cane. Under the said agreement, the factory agreed to buy and the grower agreed to sell, the quantity to be paid and sold was cultivated or to be cultivated by the grower, delivery was to be at the factory and in such lots, on such dates and at such times as shall be agreed upon, the grower could ask for advance payments, the sugar-cane was to be accepted after inspection and there was scope for rejection of goods. The Supreme Court held on those facts that the orders regulating the supply and distribution of goods did not absolutely impinge on the freedom to enter into contract, that delimiting areas for transactions or parties or denoting prices for transactions were all within the area of individual freedom of contract with limited choice, that in the cases before them the parties were certain and definite, the property in the goods was transferred from the grower to the factory and there was consideration for the transfer, that the statutory orders required the parties to enter into agreements and the agreements contained intrinsic evidence that the growers agreed to sell and the factories agreed to buy, that there was offer, inspection, and appropriation of goods of the contract, that the mutual consent was not merely implicit but was explicit, and that the transactions in these cases constituted “sales” within the meaning of Section 2 (f) of the Mysore Sales Tax Act, 1957.

In The Hyderabad Asbestos Cement Products Limited and another v. The State of Andhra Pradesh and others, (supra) (20), the learned Judges, after referring to the various decisions of the Supreme Court mentioned above, observed that it was clear from the said decisions that the mere fact that goods are supplied pursuant to statutory direction does not make the supplies not “sales” within the meaning of the Sale of Goods Act and for the purpose of the Sales Tax Act, and that in order that a transaction may not be a sale, it seemed to be the opinion of the Supreme Court that the whole of the transaction must be controlled by statute. The learned Judges then held that in the case before them, though the company was under an obligation to provide and maintain a canteen for the use of the workers, and though the running of the canteen was to be subject to the rules made under the Factories Act, the transactions were not regulated solely by statute, and there was a large amount of freedom left to the parties. The learned Judges pointed out that Section 46 of the Indian Factories Act merely obliges a factory to provide and maintain a canteen for the use of the workers, and that it also provides for the making of rules regarding the food-stuffs to be served in the canteens and the charges which may be charged therefore, and also for the constitution of a managing committee and representation of the workers in the management of the canteen. They also pointed out that Rules 68 of the Rules made under Section 46 of the Factories Act provides that food drink and other items served in the canteen shall be served at a non-profit basis, and that the prices charged shall be subject to the approval of the canteen's managing committee, and that if the committee did not approve the price list, the price list was to be sent to the Chief Inspector of Factories for approval. The learned Judges further pointed out that Rule 70 provides for the constitution of a managing committee, that the committee was to be a consultative committee in the matter of quality and quantity of food-stuffs to be served in the canteen, the arrangement of menus, the times of meals in the canteen, and any other matters as may be directed by the Committee. The learned Judges observed that it could thus be seen from the Act and the Rules that while the occupier of a factory is obliged to maintain a canteen and serve food and drink on a non-profit basis, there was a large amount of discretion in all other matters such as the choice of food and drink to be served, the prices at which they may be served, the time when they may be served, etc., that in those matters, the voice of the managing committee was of an advisor only, and that having regard to those circumstances they were of the opinion that transactions of supply of food and drink to workmen in the canteen maintained by the company in pursuance of the Indian Factories Act and the Rules were “sales” for the purposes of the Andhra Pradesh General Sales Tax Act.

57. In Food Corporation of India Cochin v. State of Kerala 34 Sales Tax Cases 189 (35), A Division Bench of the High Court of Kerala (P. Govinda Nair C.J and V. Bala Krishna Eradi J.) held that under the Fertiliser (Control) Order, 1957, the procedure followed for the distribution of the fertilisers was that indents would be placed by the State Governments with the Food Corporation of India specifying their requirements, that against those indents supplies would be made by the Food Corporation to the State Governments or their nominees and the cost was to be recovered from the State Governments through “Central Adjustment Accounts” that the Control Order contained provisions regarding the fixation of prices, licensing of dealers and imposition of restrictions on the manufacture or sale of fertilisers, that there was no statutory compulsion in the matter of sale or purchase of fertilisers and parties were left free to enter into sensual, contractual agreement in the exercise of their volition subject only to the restrictions regarding the price fixation, compliance with the quality requirements in respect of mixtures, the obtaining of licences by dealers and other minor provisions of a purely regulatory character, that the indents placed by the State Governments with the Food Corporation were clearly in the nature of offers made by them for the purchase of fertilisers, and it was as a consequence of the acceptance of those offers by the Food Corporation that the supplies were made by the Food Corporation to the State Governments, and that all the elements of a sensual contractual agreement were thus present in the case and the transaction was clearly a sale eligible to sales tax under Kerala General Sales Tax Act No. 15 of 1963.

58. In Tata Iron and Steel Company Ltd. v. State of Orissa (supra) (23), the learned Judges held that despite the compulsion of law under the Mines Rules that the assessee was to run a canteen and supply food to workers on non-profit basis, the assessee did not discontinue its business in mining operation, that freedom of contract in setting up a canteen was not wholly excluded, and that in such a case the transactions of selling food to the workers would constitute sales.

59. Thus, it is clear from the various decisions mentioned above, particularly the decisions of the Supreme Court, that although one of the ingredients for a transaction to be a contract of sale is mutual consent between the parties to the transaction, it would be sufficient if the contract comes into existence by mutual consent and it is immaterial if any restrictions are placed by law as regards the terms of the contract. In the cases under consideration, it is true that the assessees are under a statutory obligation to provide the canteens, maintain the same for the use of the workers, and supply food and drink, etc. to them by reason of the provisions in Section 46 of the Factories Act and Rules 65 of the Delhi Factories Rules, 1950. But, so far as the actual transactions in the canteens between the assessees and the workers are concerned, Rules 68 (1) prescribes that the food, drink and other items served in the canteen shall be sold on a no-profit basis and the prices charged shall be subject to the approval of the canteen managing committee. Rule 70 prescribes that the Manager shall appoint a canteen managing committee which shall be consulted from time to time as to (a) quality and quantity of the food-stuffs to be served in the canteen; (b) the arrangement of the menus, (c) times of meals in the canteens; and (d) any other matter as may be directed by the Committee. It has to be noted that the canteen managing committee merely approves the prices to be charged for the various items served in the canteen, and it is again merely consulted as to the quality and quantity of the food-stuffs to be served, the arrangement of the menus, the times of meals, and such other matters. It is the Manager of the factory of the assessee that is really ineffective charge of the transactions in the canteen and the role of the canteen managing committee is a very limited one. So far as the actual transactions between the assessees as owners of the factories acting through their managers and the workers are concerned, there is freedom to the seller to choose the items to be offered for sale, and the mode of payment, i.e in cash or on credit, and the workers who are the purchasers have the option to buy or not to buy as well as to choose the items they wish to purchase. When a worker comes to the canteen and purchases the same, the transaction or contract of sale is completed, based entirely on the mutual consent of the two parties. In those circumstances, in our opinion, there is hardly any scope for contending that the ingredient of mutual consent is absent and the transactions are not “sales”. We are, therefore, unable to accept the second reason urged by the learned counsel for the assessee.

60. Mr. Tiwari, learned counsel for the Sales Tax authorities in some of the cases, sought to contend that the assessees had themselves applied for registration as dealers under Section 7 of the Sales Tax Act, and had purchased goods necessary for the articles sold in the canteens free of sales tax on the basis of the registration certificates issued to them, and that if the sales in the canteens are held to be not “sales” for the purposes of sales tax under the Act, then the purchase turn over relating to the goods so purchased will have to be included in their taxable turn over by reason of the provision in the second proviso to Section 5 (2) (a) (ii). This contention does not arise for consideration in the present writ petitions and references before us, as we are concerned only with the question as to whether the sales turn over in respect of the sales in the canteens is to be included in the taxable turn over of the assessees, and not with the inclusion of their purchase turn over.

61. As we have held that the assessees cannot be said to be carrying on “business” within the meaning of the Sales Tax Act so far as the transactions in the canteens are concerned, the references are answered accordingly and the Civil Writ Petitions Nos. 214 of 1968, 251 of 1971, 350 of 1972, and 278 of 1975 are allowed. The notice, dated 4th March, 1968, from the Commissioner of Sales Tax under Section 20 (3) of the Sales Tax Act impugned in Civil Writ Petition No. 214 of 1968, is quashed. The assessment orders impugned in Civil Writ Petitions Nos. 251 of 1971, 350 of 1972 and 278 of 1975 in so far as they levied sales tax on the proceeds of the transactions in the canteens in question are also quashed. In the circumstances, we direct the parties to bear their own costs in all the matters.

Petitions Accepted.