NATIONAL TAX NEWS &VIEWS (NTN) A FORTNIGHTLY VAT/GST LAW REPORTER

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1 2011 NTN (Vol. 46)-229 [UTTARAKHAND HIGH COURT] Hon ble Tarun Agarwala, J.] Writ Petition No.1611 of 2009 (M/S) Along With Writ Petition No , 1634, 1639, 1642 of 2009, 2019, 2026, 2160, 2227 of 2009, 13, 16, 456, 531, 571, 707, 757, 940 of 2010, 293, 432, 490, 498, 499, 516, 522, 523, 545 of 2011 M/s Scholors Home Senior Secondary School, Dehradun vs. State of Uttarakhand and another Date of Decision: 7 th July, 2011 Counsel for the Parties: Mr. Bharat Ji Agarwal, Senior Advocate Mr. S. K. Posti, Mr. Kanwaljit Singh, Mr. Shubham Agarwal, Advs. - Mr. Sudhir Kumar, and Mr. R. C. Arya, for the respondents. [A] Business Sale Educational Institutions - If the main activity is not a business, then any transaction incidental or subsidiary to it would not amount to a business unless the main intention is to carry on the business - When the main activity is imparting education and is not business, then any transaction, namely, supply of food stuff to its residential students, which is incidental, would not amount to business since the main activity could not be treated as a commerce or a business - The incidental activity of supplying food stuff would not come within the meaning of the word business as defined under Section 2(6) of the Uttarakhand Value Added Tax Act, Uttarakhand Value Added Tax Act, 2005 Sections 2(6), 2(40). [B] Dealer - Educational Institutions - Incidence of tax - Dominant Nature Test Constitution of India Article 366(29A)(6) - The question of a deemed sale under Section 2 (40)(f) of the Act would only apply if a person on whom the tax is imposed is a dealer who is doing the business of sale of taxable goods Since the main activity is to impart education which is not a business activity nor a trade and consequently such person is not a dealer as defined under Section 2(11) - Uttarakhand Value Added Tax Act, 2005 Sections 2(11), 3. Many students of the petitioner institution are using the boarding facilities provided by the institution and, for this purpose, the petitioner charges a lump sum amounts towards tuition fee and boarding fee. The petitioner is not charging any separate amount or cost for food supplied to the students, who are using hostel facility. The mess is being run by the institution itself and is not being done by a catering contractor. The petitioner has been issued notice to show cause as to why the petitioner should not be liable to pay VAT on the

2 supply of food to its students. On Writ - The main activity of the petitioner is imparting education and is not business. Any transaction, namely, supply of food stuff to its residential students, which is incidental, would not amount to business since the main activity could not be treated as commerce or a business. The incidental activity of supplying food stuff would not come within the meaning of the word business as defined under Section 2(6) of the Act. Consequently, since no business is being carried out and there is no sale, the petitioner would not come within the meaning of the word dealer as defined under the Act. cases referred: Commissioner of Sales Tax Vs. Sai Publication Fund 2002 (126) S.T.C. 288 (S.C.), Gowtham Residential Junior College Vs. Commercial Tax Officer, Benz Circle, Vijaywada 2009 (19) VST 305 (A.P.), Indian Institute of Technology, Kalanpur, Kanpur Vs. The State of Uttar Pradesh & another 1976 (38) STC 428 (Allahabad) State of Tamil Nadu & another Vs. Board of Trustees of the Port of Madras 1999 (114) STC 520 (S.C.), Swadeshi Cotton Mills Co. Ltd. vs. Sales Tax Officer AIR 1965 Allahabad Tata Main Hospital Vs. the State of Jharkhand & others 2008 NTN (Vol. 36) University of Delhi Vs. Ram Nath, AIR 1963 SC Visakhapatnam Port Trust Vs. Commercial Tax Officer & others 2002 (127) S.T.C. 393 (Andhra Pradesh), (Hon ble Tarun Agarwala, J.) JUDGMENT 1. This group of petitions raises a common question and is being decided together. For facility, the facts of Writ Petition No.1611 of 2009 (M/S) titled as M/s Scholars Home Senior Secondary School vs. State of Uttarakhand & another is being taken into consideration. 2. The petitioner is an educational institution managed by Vidya Mandir Society, Dehradun which is a society registered under the Societies Registration Act, The petitioner institution is affiliated to the Central Board of Secondary Education, Delhi since The institution was established in the year 1949 and is a day-cum-residential school having

3 approximately 2700 students and is imparting education from Kindergarten to XII Class. 3. As per the memorandum of Association of the Society, the aim of the institution is to provide education without discrimination on the basis of race, caste or religion. One of the aims is to impart education to boys and girls through Hindi and English medium and to develop the students into allround personalities with the help of different activities. The society is managing the institution on a non-profit basis as a charitable organisation without their being any profit motive involved and, in this regard, the society is also registered under Section 12A of the Income Tax Act as a charitable organization. 4. Many students of the petitioner institution are using the boarding facilities provided by the institution and, for this purpose; the petitioner charges a lumpsum amount towards tuition fee and boarding fee. The petitioner is not charging any separate amount or cost for food supplied to the students, who are using the hostel facility. It has been stated that the mess is being run by the institution itself and is not being done by a catering contractor. 5. It is alleged that before the promulgation of the Uttarakhand Value Added Tax Act, 2005 (hereinafter referred as the Act), the U.P. Trade Tax Act was applicable in the State of Uttarakhand and, while the said Act was in force, the petitioner was not subjected to any tax for the supply of food to its residential students nor was the petitioner recognized as a dealer under the Act, but after coming into force the Act of 2005, the petitioner received a notice dated 2 nd of June June, 2009 for the assessment years , , and from the Assistant Commissioner, Commercial Tax to show cause as to why the petitioner should not be liable to pay Value Added Tax on the supply of food to its students, which amounted to a sale under the Act. The petitioner submitted a reply dated 14 th of September, 2009 indicating therein that the petitioner is not a dealer nor doing any business in supply of food and is only imparting education to the students for which the supply of food is only an incidental. 6. The petitioner, being aggrieved by the issuance of the notice, has filed the present writ petition praying for the quashing of the notice dated 2 nd June, 2009 for the assessment years , , and and for a direction restraining the respondents from making any assessment pursuant to the notice dated Similar petitions, claiming similar relief, have been filed by the other petitioners.

4 7. The contention of the petitioner is, that the primary and predominant activity of the petitioner is to impart education to the students, which is not a business activity and that the supply of food stuff to its residential students is only an incidental activity which does not amount to a sale nor such activity amount to business as contemplated under the Act. The petitioner contends that the petitioner is not carrying on the business of food stuff and is not a dealer carrying on the business of sale of food stuff and, therefore, is not liable to be taxed, nor the Act is applicable and, consequently, the issuance of the notice is wholly illegal and without jurisdiction. 8. On the other hand, the respondents in their counter affidavit admit that the petitioner institution is imparting education to the children and that the food is supplied to the students who are residing in the hostel. The respondents also admit that the institution is running a mess and is not being managed by a catering contractor. The respondents also admit that a lumpsum fee is charged and no separate bill is raised by the institution for the cost of food supplied to its students. The respondents however contend that in view of the amended definition of sale pursuant to the 46 th Amendment made in the Constitution, there is a deemed sale for the supply of food stuff and, consequently, the petitioner is a dealer for supplying food stuff to its students, even though, it could be incidental to its main activity. 9. In the light of the aforesaid contentions of the learned counsel for the parties, the court has heard Mr. Bharat Ji Agarwal, the learned senior counsel assisted by Mr. S. K. Posti, Mr. Kanwaljit Singh, Mr. Shubham Agarwal, the learned counsel for the petitioners and Mr. Sudhir Kumar, the learned Brief Holder assisted by Mr. R. C. Arya, the learned Brief Holder for the respondents. The learned counsel for the petitioners in the connected writ petitions have adopted the arguments of Mr. Bharat Ji Agarwal, Senior Advocate. 10. The controversy involved lies in a short compass. The petitioners are educational institutions and are providing boarding and lodging facilities to the students. The supply of food stuff is sought to be assessed as a sale under the Act. The primary object of the educational institutions is to impart education to the students and the students who are staying inside the campus cannot be imparted education if arrangements for their food are not made by the petitioners. Consequently, it is necessary to provide food in the hostel where the students are staying. 11. In the light of the aforesaid, the question which arises for consideration is, whether the supply of food stuff to the students is a

5 business or not? Whether the petitioner is a dealer or not? And whether the petitioner is liable to pay tax under the Act or not? 12. The incidence of Tax under the Act is provided under Section 3 which provides that a sale made by a dealer or a person who carries on the business of taxable goods is liable to pay tax at such rates provided under the Act. The relevant portion of Section 3 of the Act is extracted hereunder:- 3. Incidence of tax: (1) Tax shall be levied and charged in accordance with the provisions of this Act on every sale made within the State by a dealer of a person; (2) Every person who is registered or is liable to be registered under the provisions of this Act shall be a taxable person and liable to pay tax in the manner provided in the Act. (3) Subject to provisions of sub-section (4) or sub-section (5) as may be applicable, every dealer or a person shall pay from the date he becomes so liable, a tax for each assessment year on his turnover, to be determined in the prescribed manner, of all sales inside the State, made on or after the date he becomes liable to pay tax at such rates as provided by or under Section 4 of the Act; (4) Where a dealer carries on the business of- (a) sale of any taxable goods in the course of inter-state trade of commerce; or (b) sale of any taxable goods in the course of export out of the territory of India; or (c) consigns any taxable goods for delivery at a place outside the State; or (d) sale of any taxable goods purchased of received from outside the State; or (e) purchases of any taxable goods after furnishing any form of declaration or certificate prescribed either under Uttaranchal (the Uttar Pradesh Trade Tax Act, 1948) Adaptation and Modification Order, 2002 or the Central Sales Tax Act, 1956; or under this Act; or (f) sales or purchases of taxable goods if such dealer is already registered under the Uttaranchal (the Uttar Pradesh Trade Tax Act, 1948) Adaptation

6 and Modification Order, 2002 or the Central Sales Tax Act, 1956; and desires to retain such registration after the commencement of this Act or applies for grant of registration voluntarily under the provisions of this Act; and (i) if such dealer has been carrying on the business in the immediately preceding assessment year and continues it on the date of commencement of this Act, he shall be liable to pay tax from the date of commencement of this Act; and (ii) if such dealer commences business on or after the date of commencement of this Act, he shall be liable to pay tax from the date on which any of events from (a) to (f) above takes place for the first time in any assessment year;. 13. From the aforesaid provision, it is clear that there has to be a sale of taxable goods. It is to be made by a dealer or a person and this dealer or person must carry on the business of taxable goods. 14. The word sale has been defined under sub-clause (40) of Section 2 of the Act, which is extracted hereunder:- 2(40) Sale with its grammatical variation and cognate expressions means any transfer of property in goods (other than by way of mortgage, hypothecation, charge or pledge) by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration, and includes (a) a transfer otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment of other valuable consideration; (b) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) the delivery of goods in hire purchase or any system of payment by instalments; (d) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

7 (e) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) any supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration; (g) a transfer of property in goods by an auctioneer referred to in clauses (g) of sub-section (11) or sale of goods by any dealer in the course of any other activity in the nature of banking or insurance, who in the course of his main activity also sells goods repossessed or reclaimed, And such delivery, transfer or supply of any goods under clause (a) to (g) above shall be deemed to be the sale of those goods by the person making the delivery, transfer or supply, and purchaser of those goods shall be the person to whom such delivery, transfer or supply is made; Explanation 1 : A sale or purchase shall not be deemed to have taken place in side the State if the goods are sold (a) in the course of inter-state trade or commere; or (b) outside the State of Uttaranchal otherwise than by way of sale; or (c) in the course of import into or export out of the territory of India; Explanation 2 : A sale or purchase shall be deemed to have taken place in the State under sub-clause (b) if the goods are in the State at the time of transfer of property in such goods (whether as goods or in some other form) involved in the execution of works contract, notwithstanding that the agreement for works contract has been wholly or in part entered into outside the State; Explanation 3 : Notwithstanding any thing contained in this Act, two independent sales or purchases shall, for the purpose of this Act, be deemed to have taken place (a) when the goods are transferred from a principal to his selling agent and from the selling agent to his purchaser;

8 (b) when the goods are transferred from the seller to a buying agent and from the buying agent to principal, and if the agent is found in either of the cases aforesaid (i) to have sold the goods at one rate and passed on the sales proceeds of his principal at another rate, or (ii) to have purchased the goods at one rate and passed them to his principal at another rate, or (iii) not to have accounted to his principal for the entire collection or deductions made to him, from the sales or purchases effected by him on behalf of his principal, or (iv) to have acted for a fictitious or non-existent principal; 15. The aforesaid provision indicates that there must be a transfer of property in goods by one person to another in the course of trade or business. 16. Dealer has been defined under Section 2(11) which is also extracted hereunder:- 2(11) Dealer means any person who, for the purposes of or in connection with or incidental to or in the course of his business, carries on in Uttaranchal the business of buying, selling, supplying or distributing goods with a motive of profit or not directly or indirectly, regularly or otherwise, whether for cash or deferred payment or for commission, remuneration or other valuable consideration, and includes 17. The aforesaid provision indicates that a dealer is a person who for the purpose of or in connection with or incidental to or in the course of his business carries on the business of buying, selling, supplying or distributing goods with a motive of profit. 18. Person has also been defined under Section 2(27) which is extracted hereunder:- 2 (27) Person includes (a) an individual; (b) a Joint Hindu Family;

9 (c) a company or a corporation; (d) a firm; (e) an association of person or a body of individuals, whether incorporated or not; (f) the Central Government or the Government of Uttaranchal or the Government of any other State or Union Territory in India; (g) a local authority, a club, a society or trust; 19. Business has been defined under Section 2(6) of the Act which is extracted hereunder:- 2 (6) Business includes (a) any trade, commerce or manufacture, or (b) any adventure or concern in the nature of trade, commerce or manufacture, or (c) any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern, or (d) any occasional transaction in the nature of such trade, commerce, manufacture, adventure or concern whether or not there is volume, frequency, continuity or regularity of such transaction, 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 gain or profit accrues from such trade, commerce, manufacture, adventure or concern, or (e) the execution of any works contract or the transfer of the right to use any goods for any purpose (whether or not for a specified period), and (f) Any transaction of buying, selling or supplying plant, machinery, raw materials, processing material, packing material, empties, consumable stores, waste or byproducts, 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 or any other transaction whatsoever which is ancillary to or is connected with or is incidental to, or results from such trade, commerce, manufacture, adventure or concern or works contract or lease but does not include any activity in the

10 nature of mere service or profession which does not involve the purchase or sale of goods; 20. The aforesaid definition indicates that business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, or any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern. 21. In the light of the aforesaid provisions, the Act would be applicable if a sale is made by a dealer or a person who carries on the business of taxable goods. The word business or business activity has been explained by various courts through several judgments. 22. In Indian Institute of Technology, Kalanpur, Kanpur vs. The State of Uttar Pradesh & another 1976 (38) STC 428 (Allahabad), the Indian Institute of Technology, Kalyanpur was maintaining a hostel for the scholars who would come for a brief period to the institute for the purpose of research. The food being supplied to these scholars was assessed to sales tax. The Allahabad High Court held that the Institute s principal activity was not doing business in a commercial way of buying food stuff and that the principal activity was predominantly academic and that the supply of food stuff was minor, subsidiary and incidental to the principal activity and was an integral part of the academic activity. The Allahabad High Court further held that the I.I.T. could not be dubbed as a dealer within the meaning of dealer as defined under Section 2(c) of the U.P. Sales Tax Act and that the Sales Tax Officer had no jurisdiction to initiate proceedings for the levy of sales tax. 23. In Swadeshi Cotton Mills Co. Ltd. vs. Sales Tax Officer AIR 1965 Allahabad 86, the Aligarh Muslim University was maintaining dining halls, wherein it served food and refreshments to its resident students. The Sales Tax Officer held the Aligarh Muslim University to be a dealer under the U.P. Sales Tax Act on the ground that it was selling food stuff to its students. The Allahabad High Court held that the University is an educational institution and its activities were predominantly academic and was not engaged in the business of supply of food to its students which was only incidental to its main activity of imparting education and, consequently, the University was not a dealer as defined under Section 2(c) of the U.P. Sales Tax Act. 24. In University of Delhi vs. Ram Nath, AIR 1963 SC 1873, the Supreme Court, while considering the question as to whether the University of Delhi was an industry within the meaning of the Industrial Disputes Act,

11 held that the distinctive purpose and objective of education would make it very difficult to assimilate it to the position of any trade, business or calling or service within the meaning of Section 2(j) of the Industrial Disputes Act. It held that the main scheme was imparting education and subsidiary and incidental work would not make it the character of an industry. 25. The distinction laid down in the aforesaid decisions is that where the principal activity of an institution is predominantly academic or charitable, an activity which may have some incident of business which is minor, subsidiary and incidental to the principal activity and is an integral part of it could not be held that the institution would become a dealer doing a business in the supply and sale of food stuff. 26. In Commissioner of Sales Tax vs. Sai Publication Fund 2002 NTN (Vol. 20) 305(SC); 2002 (126) STC 288 (S.C.), the devotees of Saibaba of Shridi were printing pamphlets containing messages of Sai Baba and the pamphlets were being made available to the devotees on a nominal charge. The Supreme Court held that the trust was neither a dealer nor was it doing any activity which could be termed as a business activity under the definition of the word business as defined under the Bombay Sales Tax. The Supreme Court held as follows:- 10. The contention that the Trust in question is dealer within the meaning of Section 2(11) read with Section 2(5A) requires careful scrutiny. As is evident from Section 2(11), every person is not dealer but only those persons who carry on the business by buying or selling goods are regarded as dealers. From the very definition of dealer, it follows that a person would not be a dealer in respect of the goods sold or purchased by him unless he carries on the business of buying and selling such goods. Dealer and person are separately defined in Section 2(11) and Section 2(19) of the Act respectively. Person means not only natural person but includes any company or association or body of individuals whether incorporated or not and also a Hindu Undivided Family, a firm or a local authority; whereas dealer on the other hand means only such persons who carry on the business of buying and selling of goods in the State including those who are deemed to be dealers by virtue of definition of dealer contained in Section 2(11) of the Act. As rightly noticed by the High Court, it is clear from charging Section 3 that every dealer, whose turnover of sale or purchase during any year exceeds the limits specified therein, is liable to payment of tax under the Act on his turnover of sales or purchases. Although the Act provides for levy of tax on the sales or purchases of certain goods in the State of Maharashtra, the levy is restricted only to sales or purchases made by dealers. As is manifest from Section 3 itself, the liability

12 to pay sales tax is only on the dealers. From the combined reading of Section 3, 2(5A) and 2(11) of the Act, it follows that the tax under the Act is leviable on the sales or purchases of taxable goods by a dealer and not by every person. From the facts of the present case, the sole object of the assessee Trust is to spread the message of Siababa of Shridi. It is also not disputed that the books and literature etc. containing the message of Saibaba were distributed by the Trust to the devotees of Saibaba at cost price. There is no dispute that the primary and dominant activity of the Trust is to spread the message of Saibaba. This main activity does not amount to business. The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading message of Saibaba and not to any business as such even without profit motive and it is in a way a means to achieve the object of the Trust through which message of Saibaba is spread. It is clear from the Trust Deed and objects contained therein that it was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the Trust carries on the business of selling and supplying goods so as to fall within the meaning of dealer under Section 2(11) of the Act. 11. No doubt, the definition of business given in Section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come within the meaning of business. To put it differently, the inclusion of incidental or ancillary activity in the definition of business pre-supposes the existence of trade, commerce etc. The definition of dealer contained in Section 2(11) of the Act clearly indicates that in order to hold a person to be a dealer, he must `carry on business and then only he may also be deemed to be carrying on business in respect of transaction incidental or ancillary thereto. We have stated above that the main and dominant activity of the Trust in furtherance of its object is to spread message. Hence, such activity does not amount to business. Publication for the purpose of spreading message is incidental to the main activity which the Trust does not carry as business. In this view, the activity

13 of the Trust in bringing out publications and selling them at cost price to spread message of Saibaba does not make it a dealer under Section 2(11) of the Act. 27. From the aforesaid, it is clear that a tax is leviable on the sale of taxable goods by a dealer where the business of sale of that taxable goods is a primary and a dominant activity. The Supreme Court further held that if the main activity was not a business, then any transaction incidental or subsidiary to it would not amount to a business unless the main intention was to carry on the business. 28. In Visakhapatnam Port Trust vs. Commercial Tax Officer & others 2002 (127) STC 393 (Andhra Pradesh), the court held that the activity of the Port Trust was not a business activity and that the Port Trust could not be treated as a dealer within the ambit of Section 2(e) of that Act nor could it be subjected to a tax liability since the main activity of the Port Trust was not a business activity. 29. In State of Tamil Nadu & another vs. Board of Trustees of the Port of Madras 1999 NTN (Vol. 14) 482 (SC); 1999 (114) STC 520 (S.C.), the Supreme Court held :- 14. The words carrying on business require something more than merely selling or buying etc. 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 (Board of Revenue v. A.M. Ansari 1976 (3) SCC 512). Such profit motive may, however, be statutorily excluded from the definition of business but still the person may be carrying on business. and further held : In our view, if the main activity was not business, then the connected, incidental or ancillary activities of sales would not normally amount to business. 30. In Gowtham Residential Junior College vs. Commercial Tax Officer, Benz Circle, Vijaywada 2009 (19) VST 305 (A.P.), the Andhra Pradesh High Court held that the supply of food to the students residing in the hostel did not amount to a sale since the petitioner was not carrying on the business of sale and purchase of food stuff and that the petitioner s

14 primary object was to impart education to the students and, therefore, was not a dealer. 31. In Tata Main Hospital vs. the State of Jharkhand & others 2008 NTN (Vol. 36) 149, the hospital was supplying medicines, surgical items etc. to its indoor patients during the course of treatment. The taxing authorities treated the hospital as a dealer under the Bihar Finance Act on the ground that the hospital was doing business of supplying medicines, surgical items, etc. The Jharkhand High Court held that the supply of the medicines, surgical items, etc. to the patients was a part of the composite services and such composite services does not come under the definition of business of selling goods and the hospital could not be treated to be a dealer as defined under Section 2(e) of the Bihar Finance Act. The High Court further held that the supply of medicines etc. to the indoor patients does not amount to a sale within the meaning of Section 2 (t) of the Bihar Finance Act. The special leave petition filed by the State against the judgment was dismissed by the Supreme Court by an order of 10 th March, In the light of the aforesaid decisions, it is clear that from a combined reading of Section 3, 2(6), 2(11), 2(27), 2(40) of the Act, that a tax is leviable on the sale made by a dealer or a person who is carrying on the business of taxable goods. There is no dispute that in the case of the petitioner, the primary and dominant activity is to impart education. This main activity of the petitioner does not amount to a commercial activity nor is a trade or business as held by the Andhra Pradesh High Court in Gowtham Residential Junior College (supra). In the opinion of the court, such education being imparted by the petitioner is neither a commercial activity nor a trade nor does it amount to business. It cannot be contended that the establishment of an educational institution is a business nor can it be called a trade since no trading activities are being carried out. In University of Delhi (supra), the Supreme Court held that imparting of education was a mission or a vocation rather than a trade or business. This court is of the opinion that imparting education cannot be treated as a trade or business and that education cannot be allowed to be converted into a commerce nor such activity could be a trade or business contemplated under Article 19(1)(g) of the Constitution. 33. In the light of the aforesaid, the main activity of the petitioner is imparting education and is not business. Any transaction, namely, supply of food stuff to its residential students which is incidental would not amount to business since the main activity of the petitioner could not be treated as a commerce or a business. The incidental activity of supplying food stuff would not come within the meaning of the word business as defined under Section

15 2(6) of the Act. Consequently, since no business is being carried out and there is no sale, the petitioner would not come within the meaning of the word dealer as defined under the Act. 34. The contention of the respondents that the dominant intention is not required to be seen in view of the amended definition of the word sale pursuant to the 46 th Amendment in the Constitution and that the sale of food stuff would be a sale as contemplated under Section 2 (40) (f) of the Act is based upon a decision in Bharat Sanchar Nigam Ltd. & another vs. Union of India & others 2006 NTN (Vol. 29) 307 (SC); 2006 (3) SCC 1, in which the Supreme Court in para 49 held that after the 46 th Amendment, the sale element of those contracts which are covered by sub-clause (6) of Clause 29- A of Article 366 are separable and subjected to sales tax and that there was no question of the dominant nature test to be applied. There is no quarrel with the aforesaid proposition. The judgment is however not applicable to the case at hand. Before imposing any tax, one has to see whether the Act is applicable or not. The question of a deemed sale under Section 2(40)(f) of the Act would only apply if the person on whom the tax is being imposed is a dealer who is doing the business of sale of taxable goods. If the person is not doing the business, the question of imposition of tax would not arise. Merely because there is a deemed sale or the fact that the deemed sale is incidental or casual, the tax could only be imposed if the person is a dealer and is engaged in a business activity of purchase and sale of taxable goods. The Supreme Court has clearly held that such business activity must be predominant i.e. the main activity. As held earlier, the petitioner s main activity is to impart education which is not a business activity nor is a trade and, consequently, the petitioner is not a dealer and is not liable to be taxed under the Act. 35. In the light of the aforesaid, the court finds that the issuance of notice proposing to make an assessment under the Act on the supply of food stuff to the residential students is patently without jurisdiction. The said notices are consequently quashed. The writ petitions are allowed. In the circumstances of the case, the parties shall bear their own cost