1976 (9) TMI 95 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the appellant is a dealer liable for registration under the Gujarat Sales Tax Act, 1969.
2. Whether the penalty imposed under section 45(2)(a) of the Gujarat Sales Tax Act, 1969 should be upheld.

Issue-wise Detailed Analysis:

1. Whether the appellant is a dealer liable for registration under the Gujarat Sales Tax Act, 1969:

The primary issue in this appeal concerns whether the appellant, Swashraya Benefit Pvt. Ltd., qualifies as a dealer under the Gujarat Sales Tax Act, 1969, and is thus liable for registration. The appellant company, formed with two directors, has its main objects outlined in its Memorandum and Articles of Association, which include enabling people to save money, securing loans, and organizing thrift schemes, among other financial and trading activities.

The Sales Tax Officer found that the appellant's purchases exceeded the prescribed limit of Rs. 30,000, making it liable for registration from January 1, 1972. Despite registering on September 21, 1973, the appellant was assessed for the period from January 1, 1972, to September 20, 1973, as unregistered. The appellant contended that it is not engaged in business but rather in collecting funds and promoting thrift.

The Tribunal examined the definition of "dealer" and "business" under the Act. A dealer is defined as any person who buys or sells goods in connection with his business, while business includes any trade, commerce, or manufacture, whether or not carried on with a profit motive. The Tribunal noted that the appellant's main object is to purchase land, construct buildings, and sell them at a profit, which constitutes a business activity. The purchases made in connection with this business, even if not directly involving the sale of goods, fall within the definition of business under the Act.

The Tribunal referenced the Supreme Court's decision in the case of Burmah Shell Oil Storage and Distributing Co. of India Ltd., which held that transactions incidental to trade or commerce, even without a profit motive, are liable to tax. The Tribunal concluded that the appellant's activities, including purchasing articles for distribution as gifts to attract deposits, are connected with its business of purchasing land, constructing buildings, and selling them. Thus, the appellant is a dealer liable for registration under the Act.

2. Whether the penalty imposed under section 45(2)(a) of the Gujarat Sales Tax Act, 1969 should be upheld:

The Tribunal also addressed the penalty imposed under section 45(2)(a) of the Act for the appellant's failure to register within the prescribed period. The appellant argued that the question of its liability as a dealer was debatable and not free from doubt, and therefore, the penalty should be removed.

The Tribunal agreed with the appellant, noting that the issue of liability was indeed debatable. Consequently, the penalty imposed under section 45(2)(a) of the Act was removed.

Conclusion:

The Tribunal partially allowed the appeal. It upheld the orders of the Sales Tax authorities regarding the appellant's liability as a dealer and the requirement for registration under the Act. However, it removed the penalty imposed under section 45(2)(a) of the Act. The orders of the Sales Tax authorities were modified accordingly, and any penalty paid was ordered to be refunded to the appellant.