TMI Blog2002 (6) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and 1997-98, dated February 12, 2002, by the first respondent and to pass such other orders as deemed to be fit and proper in the circumstances of the case. 4.. In W.P. No. 1828 of 2002 the petitioner seeks to quash the demand notice P.R. No. 3/2002 (G.I. No. 98/99), dated January 11, 2002 relating to the assessment year 1998-99 and to pass such other orders as deemed to be fit and proper in the circumstances of the case. 5.. Before we set out to decide the issue raised in these two writ petitions relating to the determination of tax liability for the assessment years 1996-97, 1997-98 and 1998-99 by the appropriate authority on the basis of the turnover as affirmed by the appellate authority, few facts are necessary to be narrated here in order to appreciate the contentions raised on behalf of the petitioner and also the stand taken by the Revenue. 6.. The petitioner is a Port Trust governed under the Major Port Trusts Act, 1963 and Indian Ports Act, 1908. It is a body corporate under these enactments and mainly carries on the functions entrusted to it under the Major Port Trusts Act. Section 37 of the Major Port Trusts Act provides powers to Board to order sea-going vessel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals filed by the department, the department made yet another effort by issuing demand notices for payment of sales tax for the assessment years 1991-92 and 1992-93 to the writ petitioner and questioning the same, the writ petitioner filed W.P. No. 560 of 1994 before this Court and this Court seems to have granted interim stay directing the respondents not to demand any tax pending a decision in W.P. No. 560 of 1994. 10.. While matters stood thus, the respondents, i.e., Commercial Tax Department initiated proceedings against the writ petitioner, made assessment for the years 1996-97 and 1997-98 under the A.P. General Sales Tax Act determining the liability to the tune of Rs. 2,32,02,080 and Rs. 2,47,84,340 for the said assessment years respectively. As against the said assessment orders, the writ petitioner filed appeals before the Appellate Deputy Commissioner. The Appellate Deputy Commissioner by common order partly dismissed the appeals and remanded the matter to the original authority with a direction to examine the receipts in detail and levy tax if they are eligible or give exemption as per the provisions of the A.P. General Sales Tax Act. The original authority after exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the stay granted by the honourable Supreme Court on the collection of the disputed tax for the assessment years 1996-97 and 1997-98, which is the subject-matter of W.P. No. 3566 of 2001, this Court granted interim stay of the assessment order dated January 11, 2002, for the assessment year 1998-99 in W.P. No. 1828 of 2002. 12.. As these two writ petitions have fallen for consideration, they are decided by the following common order: Through the amendment (Act 27 of 1996), Explanation IV to section 2(e) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act") is inserted, which reads as under: "Explanation IV.-For the purpose of this clause, each of the following persons and bodies who sells or dispose of any goods including unclaimed or confiscated or unserviceable goods or scrap surplus, old, obsolete, or discarded material or waste products whether by auction or otherwise, directly or through an agent for cash, or for deferred payment or for any other valuable consideration shall be deemed to be a dealer to the extent of such disposals or sales, namely: (a) The Port Trust; (b) Municipal Corporation and Municipal Councils, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits, interest on advances, penalties, survey fees, telephone rent and call charges, medical attendance charges, etc. In support of his contention, the learned counsel drew our attention to a decision of the Calcutta High Court in Bank of India v. Commercial Tax Officer, Central Section, Calcutta [1987] 67 STC 199, wherein the question whether the bank locker facility provided by the banker and any fee collected would fall within the taxation, held that such facilities provided and any fee received would not amount to sale and no liability under Sales Tax Act. The learned counsel also took us to a latter decision of the honourable Supreme Court in State of Tamil Nadu v. Board of Trustees of the Port of Madras [1999] 114 STC 520. Relying on the above decision, the learned counsel stated that the honourable Supreme Court, on consideration of various contentions raised before it and considering the activity of Port Trust as envisaged under section 35 of the Major Port Trusts Act, 1963, declared that the Port Trust is not a "dealer" and no business activity is undertaken by the Port Trust and as such it is not liable to be assessed under the Tamil Nadu General Sales Tax Act. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 14 of the Constitution of India and this attitude amounts to denial of equal protection under law. According to the learned counsel, even though the decision of the honourable Supreme Court in [1999] 114 STC 520 (State of Tamil Nadu v. Board of Trustees of the Port of Madras) was brought to the notice of the department, the department ignored the same only on the ground that the said decision is after the amendment brought to section 2(e) of the Act and has no application. In this background, the learned counsel stated that the respondents are bent upon to rope in every body on the earth under the tax net in order to increase revenue to the department. The learned counsel submitted that as held by the various courts including the decision of the honourable Supreme Court in [1999] 114 STC 520 (State of Tamil Nadu v. Board of Trustees of the Port of Madras) the Port Trust can never be treated as a "dealer" within the meaning of section 2(e) of the Act and its activity can never be treated as a "business activity" attracting the provisions under section 5-E of the Act. 16.. On behalf of the respondents, i.e., Commercial Taxes Department, the learned Special Government Pleader ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying or distributing goods, etc. 20.. For the assessment years 1969-70 to 1974-75 the Commercial Taxes Department initiated proceedings against the petitioner on the supply of water to the visiting vessels, bunkering visiting vessels with liquid fuel, offering of tender documents for a consideration to prospective contractors, supply of water and issue of stores to accepted contractors, supply of water and issue of stores to its own engineers and staff and disposal of unserviceable material or surplus material by auction or by inviting tenders. The assessment completed for the years as indicated above fell for consideration before a Division Bench of this Court in W.P. Nos. 3107 to 3112 of 1976 and the Division Bench of this Court by rendering the decision in [1979] 43 STC 36 (Board of Trustees of the Visakhapatnam Port Trust v. Commercial Tax Officer) declared that the petitioner is not a "dealer" and it cannot be said to be "carrying on any business". The division Bench further held that none of the activities undertaken by the petitioner would amount to doing "business" either under its constitution or as defined under section 2(1)(bbb) of the Act. Visakhapatnam Port Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther held that taxable event under section 5-E of the Act is transfer of the right to use any goods and that the essence of transfer is passage of control over the economic benefits of the property which results in terminating rights and other relations in one entity and creating them in another. Distinguishing the situation, the division Bench held that the right in the goods lent are not transferred and are retained with the management and as such imposition of sales tax on the hire charges of the machinery under section 5-E of the Act is ultra vires and illegal. 23.. Applying this ratio also to the facts of the case on hand, what all the Port Trust has done, admittedly, is collection of nominal fee for supply of tender forms, collection of hire charges for rendering services for loading and unloading purposes by providing cranage and pilot-age. In order to attract sales tax, the Revenue has to necessarily establish that the Port Trust's activity is a "business activity" and it is a "dealer" and therefore, it is liable to be assessed under the provisions of the Act. 24.. In the decision in [1999] 114 STC 520 (State of Tamil Nadu v. Board of Trustees of the Port of Madras), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these connected, incidental or ancillary activities of sales are not 'business' and the onus of proof of an independent intention to do 'business' in these connected, incidental and ancillary sales will rest on the department." 26.. It is true that in the amendment through explanation IV, the department desired to expand the meaning while bringing 11 persons and bodies which include State and Central Government Corporations by insertion of explanation IV to section 2(e). As long as such bodies or persons do not undertake "business activity" within the ambit of section 2(e) of the Act, they cannot be treated as "dealers" and their activity cannot be treated as "business" within the meaning of section 2(1)(bbb) of the Act, which reads as under: "Section 2(1)(bbb): Business includes: (1) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and (ii) any transaction in connection with, or incidental or ancillary to, such trade, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity is not a "business activity" as defined under section 2(1)(bbb) and in the absence of the respondents showing to the court that the activity undertaken is a "business activity" and that the Port Trust has to be treated as a "dealer" and is liable to be assessed under section 5 of the Act, it is difficult for us to take a contra view. When the main activity of the Port Trust is service activity, the ancillary or incidental activity undertaken by it cannot be brought under the net of A.P. General Sales Tax Act. 28.. In view of the above discussion and in the light of the ratio laid down by the various courts as stated by us, we have no doubt in our mind to hold that the activity undertaken by the writ petitioner-Port Trust is not a "business activity", but it is discharging obligation on its part as envisaged under sections 32 to 37 of the Major Port Trusts Act, 1963. Accordingly, we declare that section 2(e) of the A.P. General Sales Tax Act applies only to the persons, who are carrying on "business" who shall be the "dealers". The petitioner though sought to declare the explanation IV to section 2(e) of the Act as ultra vires, it is not necessary for us to declare that part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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