1980 (10) TMI 185 - HC - VAT and Sales Tax

Issues Involved:
1. Inclusion of sales turnover of discarded materials in taxable turnover.
2. Definition and scope of "business" under the Kerala General Sales Tax Act, 1963.
3. Applicability of the term "dealer" and "casual trader."
4. Interpretation of Supreme Court precedents on incidental sales.
5. Grant of certificates for appeal to the Supreme Court.

Issue-wise Detailed Analysis:

1. Inclusion of Sales Turnover of Discarded Materials in Taxable Turnover:

The primary question raised by the revenue was whether the sales turnover of scrap materials such as old gunnies, old drums, polythene bags, bottles, tins, etc., should be included in the total taxable turnover of the assessees. The assessing authority had included these amounts in the taxable turnover, but the Appellate Assistant Commissioner and the Kerala Sales Tax Appellate Tribunal directed their deletion, holding that the assessee was not a dealer in respect of these articles.

2. Definition and Scope of "Business" under the Kerala General Sales Tax Act, 1963:

The definition of "business" prior to the amendment by Act 22 of 1974 was considered. The term "business" included any trade, commerce, or manufacture, with or without profit-motive. Post-amendment, any transaction incidental or ancillary to the main business was also included. However, since the assessments in question related to periods before the amendment, the pre-amendment definition was applicable. The court emphasized that the meaning of "business" is crucial in determining whether the assessee is a dealer in respect of scrap and discarded materials.

3. Applicability of the Term "Dealer" and "Casual Trader":

The term "dealer" was defined as any person who carries on the business of buying, selling, supplying, or distributing goods. The court noted that even a casual trader, defined as a person having occasional transactions of a business nature, is included. However, the court concluded that the sales of discarded materials did not constitute a business activity, and thus the assessees could not be considered dealers or casual traders for these transactions.

4. Interpretation of Supreme Court Precedents on Incidental Sales:

The court referred to several Supreme Court decisions, including State of Gujarat v. Raipur Manufacturing Co. Ltd. and State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. These cases established that incidental sales of discarded materials do not constitute carrying on a business in those materials. The Supreme Court had held that the disposal of unserviceable or discarded articles does not imply an intention to carry on business in those goods, even if the sales were frequent and of large volume.

5. Grant of Certificates for Appeal to the Supreme Court:

After dismissing the tax revision cases, the court addressed an oral prayer by the Government Pleader for certificates under Article 133(1) of the Constitution to appeal to the Supreme Court. Given that appeals were already pending in the Supreme Court on a related matter, the court granted the certificates, allowing the State to appeal.

Conclusion:

The court concluded that the sale proceeds of scraps, empty gunny bags, etc., could not be included in the total taxable turnover of the assessee for the periods in question. The decisions of the Appellate Assistant Commissioner and the Appellate Tribunal were upheld. The tax revision cases were dismissed, and the State was granted leave to appeal to the Supreme Court.

Petitions dismissed. Leave to appeal to Supreme Court granted.

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