TMI Blog1966 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter called "the Company"-carries on the business of manufacturing and selling cotton textiles. In the account year 1953-54 the Company besides selling cloth sold coal and 25 different items of discarded or unserviceable goods and waste products from the factory. The goods sold may be classified under three heads: (1) Old containers-cans, boxes etc., discarded stores, machinery and iron scrap; miscellaneous discarded items, such as cotton ropes, chindis (rags) etc. (2) Kolsi (cinders), waste caustic liquor. (3) Coal. The Sales Tax Authorities brought the turnover from sales of these commodities to tax under the Bombay Sales Tax Act, 1953, and their order was confirmed in appeal by the Sales Tax Tribunal. The Tribunal was of the view that "a cotton textile mill manages to collect unserviceable articles in the course of manufacture of cloth" and since these articles have to be sold, if it is to survive as an economic unit, sales of these articles must be regarded "as part of the business of the textile mill" if the transactions of sale are large and frequent. The Tribunal did not deal with the sale of coal independently of the sale of other goods. At the instance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price received by him by sale of another commodity unless he carries on the business of selling that other commodity. That is so because within the meaning of section 2(6) of Bombay Act 3 of 1953 to be a dealer a person must carry on the business of selling those goods, price whereof is sought to be included in the turnover. In other words, he must carry on the business of selling a commodity before his turnover from sale of that commodity is taxable. As pointed out by this Court in State of Andhra Pradesh v. M/s. Abdul Bakshi and Bros.[1964] 15 S.T.C. 644; A.I.R. 1965 S.C. 531., 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 a 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 particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover in respect thereof was liable to taxation. It is not necessary to enter upon a detailed examination of those cases, because a majority of those cases are merely illustrative of the general principles set out hereinbefore. A few representative cases may be briefly referred to. In State of Bombay v. The Ahmedabad Education Society [1956] 7 S.T.C. 497., certain goods manufactured or imported by an Education Society for the purpose of its own use were, when found surplus, disposed of at cost, without any profit. The Bombay High Court held that no business of selling or supplying was intended to be carried on in those goods. In State of M.P. v. Bengal Nagpur Cotton Mills Ltd. [1961] 12 S.T.C. 333., a company which carried on the business of manufacturing textiles, supplied steel and cement on several occasions to their contractors, who were constructing buildings for the company, and debited the price of the materials to the contractors' account. It was held that the company was not liable to pay sales tax as the com- pany was not a dealer carrying on the business of selling steel and cement. In Commissioner of Sales Tax, Madhya Pradesh, Indore v. Ram Dulare Balkishan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh v. H. Abdul Bakshi Bros, in support of the contention that goods purchased for the purpose of being used in a manufacturing process are liable to purchase tax since the manufacturer must be deemed to be carrying on business of purchasing those goods. It was held in H. Abdul Bakshi's case [1964] 15 S.T.C. 644., that a person who consumes a commodity bought by him in the course of his trade or uses it in manufacturing another commodity for sale, is a dealer, since the Legislature has not made sale of the very article bought by a person a condition for treating him as a dealer. But the principle of that case has no application in the present case. In that case this Court declined to accept the view which prevailed with the High Court of Andhra Pradesh that unless a person is carrying on business both of purchasing and selling the same commodity, purchase of articles used in the course of manufacture of another commodity is not in the course of carrying on the business of purchasing that article. Counsel for the State also relied upon the judgment of the Kerala High Court in Gosri Dairy, Vyttila v. The State of Kerala [1961] 12 S.T.C. 683.. In that case the assessee-fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss account of the business and may indirectly be said to reduce the cost of production of the principal item, but on that account disposal of those goods cannot be said to become part of or an incident of the main business of selling textiles. In order that receipts from sale of a commodity may be included in the taxable turnover, it must be established that the assessee was carrying on business in that particular commodity, and to prove that fact it must be established that the assessee had an intention to carry on business in that commodity. A person who sells goods which are unserviceable or unsuitable for his business does not on that account become a dealer in those goods, unless he has an intention to carry on the business of selling those goods. But in dealing with the liability to pay tax on the price for sale of "kolsi" and "waste caustic liquor" different considerations arise. As found by the High Court "kolsi" (cinders) are small pieces of coal which are not fully burnt. It appears that "kolsi" is not capable of "extreme fuel potency required in the furnaces " of the appellant- Company, but it is still capable of being used in "lighter furnaces". This "kolsi" is discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the business of the Company and the turnover in respect of both "kolsi" and "waste caustic liquor" would be liable to sales tax. It appears from the statement furnished that coal of the value of Rs. 16,083 was sold by the Company under 12 bills in the year 1953-54. Coal is purchased by the Company for the purpose of lighting its furnaces and heating boilers. A part of the coal purchased was sold. The Tribunal merely stated in respect of all the items of goods sold that looking to the volume and frequency of their sale, the Company should be regarded as a dealer in respect of those goods. Unless there is evidence to show that there was an intention to carry on business of selling coal, the mere fact that coal of the value exceeding Rs. 16,000 was sold will not by itself make the Company a dealer carrying on business in coal. We have no evidence on the record as to what the total quantity of the coal purchased by the Company was, and what percentage thereof was sold. No investigation has been made as to the circumstances in which the coal came to be sold. Mere sale of a commodity which a Company requires for the purpose of its business and which has been purchased for use in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1965 arises out of Reference No. 3 of 1962. Appeal No. 605 of 1965 relates to the period between November 1, 1952, and March 31, 1953, and during that period the Company sold 21 items of goods for the total value of Rs. 54,829. The goods fell under four heads: (1) Old containers such as cans, boxes etc. (2) Discarded stores, machinery and iron scrap. (3) Waste caustic liquor. (4) Miscellaneous discarded items such as hessian, oil, chemicals, colours, lime etc. In Appeal No. 608 of 1965 which relates to the period April 1, 1953, to March 31, 1954, there was sale of 20 items of the total value of Rs. 1,09,300. The goods sold were of the same description and classes as set out in Appeal No. 605 of 1965. For reasons mentioned in the judgment of the principal appeal No. 603 of 1965, the answer to the question submitted will be in the negative, except as to waste caustic liquor. There will be no order as to costs in these appeals. THE STATE OF GUJARAT v. AMBICA MILLS LTD. (Civil Appeal No. 606 of 1965.) The judgment of the Court was delivered by SHAH, J.- This appeal arises out of Reference No. 34 of 1963. The goods sold are a number of looms and car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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