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TMI Blog1995 (1) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... 980 MMD 4855 Ford 25,000 August, 1980 MMF 9814 Ambassador 40,000 December, 1980 MSF 3561 Ford 45,000 December, 1980 MRF 1367 Peygot 17,000 1,27,000 While assessing the assessee under the Bombay Sales Tax Act, the Sales Tax Officer held the assessee liable to pay tax on the above sales of used motor cars on the ground that these were made in the course of business of the assessee and accordingly levied tax on the amounts received on the sales thereof at the rates applicable at the material time, which was 12 paise in a rupee. This was done by him in view of the definition of the word "business" in section 2(5A) of the Act inserted with effect from January 15, 1975, by the Maharashtra Act 62 of 1974 by which business was defined to include not only trade, commerce or manufacture or any adventure in the nature of trade, but also any transaction connected with or incidental or ancillary thereto. Aggrieved by the above order of the Sales Tax Officer, the assessee appealed to the Assistant Commissioner of Sales Tax on the ground that he was not a dealer in respect of sales of cars or used cars as he neither carried on the business of buying or selling of cars nor buying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the amount received by the assessee from sale of three used cars. According to him, the Tribunal misinterpreted and misunderstood the scope and ambit of the expression "business" defined in section 2(5A) of the Act and reached an erroneous conclusion that the transactions of sales of the three used cars were transactions in connection with, or incidental or ancillary to the business of the assessee. His submission is that on a proper construction of section 3 and clauses (11) and (5A) of section 2 of the Act, in the absence of any material to show that the assessee was a dealer in cars or used cars, levy of tax on sales of used cars by the assessee cannot be sustained. In support of this contention reliance is placed on the decision of the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1. Counsel for the Revenue, on the other hand, relied on the definition of "business" as introduced by Maharashtra Act 62 of 1974, which was applicable at the time the sales of the three used cars took place, in support of his contention that the sales in question amounted to transactions incidental to the business of the assessee. According to him, after the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the liability under the Bombay Sales Tax Act is on a dealer to pay tax on the amount received and receivable by him in respect of sales of goods made by him "as a dealer". In other words, tax will be levied only on the turnover of such commodities in which he carries on business. The amount received by him from sale of any other commodity will be included in his turnover only if he carried on the business of selling that other commodity also. Mere sale of a commodity which had been purchased by the dealer for his business cannot justify an inference that a business of selling that commodity was intended. A person is a dealer of those goods only of which he carries on the business of buying and selling. It cannot be said that once a person is a dealer in respect of certain goods, he would be a dealer in respect of all goods sold by him, irrespective of the fact whether he carries on business of buying or selling those goods or not. Such a construction would run counter to the very scheme and purpose of the Act. 5.. An identical controversy came up for consideration before the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1. The assessee in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fixed assets or discarded goods would not ordinarily arise. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist." The Supreme Court referred to a number of decisions of different High Courts and observed: "It is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behalf of the State that where a dealer with a view to reduce the cost of production disposed of unserviceable articles used in the manufacture of goods and credits the price received in his accounts, he must be deemed to have a profit-motive, for it would be uneconomical for the business to store unserviceable articles and to survive as an economic unit. But the question is of intention to carry on business of selling any particular class of goods. Undoubtedly from the frequency, volume, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odities consumed in the factory. Those goods are sold by the company for a price which goes into the profit and loss 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." (Emphasis* supplied) Dealing with the question whether the assessee could be regarded as a dealer in respect of sale of a part of the coal which had been purchased by it for the purpose of lighting its furnaces and heating boilers, it was held: ".........Unless there is evidence to show that there was an intention to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of manufacture and the sale thereof is incidental to the business of the company and the turnover in respect of both 'kolsi' and'waste caustic liquor' would be liable to sales tax." (Emphasis supplied) 6.. The following propositions emerge from the above decision of the Supreme Court in Raipur Manufacturing Co. [1967] 19 STC 1: 1.. 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. 2. In the turnover of a person carrying on the business of selling one commodity will not be included the price received by him by sale of another commodity unless he carries on the business of selling that other commodity. 3.. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity, and regularity indicating an intention to continue the activity of carrying on the transactions must exist. 4.. Mere sale of a commodity which the assessee requires for the purpose of its business and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the taxability of sales of goods made by a dealer after that date. 9.. We have perused the definition of "business" contained in clause (5A) of section 2 of the Act as inserted by Maharashtra Act 62 of 1974 with effect from January 15, 1975, which reads as follows: "(5A) 'business' includes 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 such trade, commerce, manufacture, adventure or concern." By the above definition of "business", which was operative in the same form during the material period when the sales of the three used and discarded motor cars were made by the assessee and thereafter till June 30, 1981, the law laid down by the Supreme Court in Raipur Manufacturing Co.'s case [1967] 19 STC 1 is affected only to the extent that in the turnover of a person carrying on the business of selling one commodity, the turnover of any transaction (i) in connection with or (ii) incidental or (iii) ancillary to such business could also be included. The word "such business" refers to the main business of the assessee of selling goods. It is obvious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may also be expedient to deal with some of the decisions referred to by the learned counsel for the Revenue. We may first refer to decision of the Madras High Court in State of Tamil Nadu v. Thermo Electrics [1977] 39 STC 317 where it has been held that no distinction can be made for the purpose of levy of sales tax between sales of capital goods effected by a dealer and the sales of stock-in-trade of such dealer. We have carefully considered the above decision. It appears that the finding of the Madras High Court in the above case goes counter to the law laid down by the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 which, as stated above, does not stand nullified by insertion of the definition of "business". In the above case, the Madras High Court has held that if an assessee is a dealer, with reference to the business carried on by him, every transaction of sale, whether it is of a capital asset or a stock-in-trade, would be liable to be included in the turnover of the assessee. It has been observed that the question whether it is a capital asset or a stock-in-trade is foreign to the taxability under the Sales Tax Act and may be relevant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business" in section 2(bb) of the Madhya Pradesh General Sales Tax Act, 1958, as inserted by Amendment Act No. 16 of 1965 whereby profit-motive was rendered immaterial in the definition of "business". On careful reading of the above decision, it is obvious that the court arrived at the above conclusion in view of the fact that the assessee, who sold the Ambassador car purchased for its office use, happened to be the distributor of Ambassador cars and registered dealer in automobiles and their accessories. It was in that context that the above finding was arrived at. This decision is not an authority for the proposition that sales of capital assets or unserviceable machineries, cars, etc., by an assessee, can be regarded as sales in connection with or ancillary to the business of a dealer. This opinion of ours is fully supported by the decision of the same High Court in Commissioner of Sales Tax v. Sajjad Hussain Automotive Service [1991] 82 STC 335 where the sales of a second-hand car by a dealer in motor spirit and lubricants was held to be not covered by the term "business" for the purposes of taxation under the Madhya Pradesh General Sales Tax Act, 1958. The above conclusion wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r selling such goods that are liable to tax under the Act. Had the legislative intent been otherwise, it was not necessary to provide in the charging section that tax would be payable only by "a dealer " and to define the expression "dealer" as a person who carries on the "business of buying or selling goods in the State" and to further define the expression "business" for that purpose and to amend the same from time to time with a view to widening the ambit thereof. All this would be rendered redundant, if "all purchases or sales" of taxable goods by a dealer, per se, are held to be taxable under the Act. Had it been so, section 3 would have provided that every person who is engaged in business and whose turnover of sales and purchases during the given period exceed the specified limits, would be liable to pay tax on the turnover of all sales or purchases made by him. We cannot lose sight of the fact that clause (5A) merely defines "business", whereas in order to be a dealer, a person must carry on the business of "buying or selling goods". The expression "business " in clause (11) is thus qualified by the words "of buying or selling goods" and this qualification cannot be ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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