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Air India Ltd. Air India (Formerly Known as Indian Airlines) Versus Commissioner of Sales Tax, Delhi

2017 (9) TMI 593 - DELHI HIGH COURT

Sales tax - services of civil aviation including the running of aircraft, ferrying of passengers and goods through air routes in both the domestic and international sectors - As part of running its business, it sells scrap, depleted parts and sometimes even out-dated or unused aircraft - whether petitioner is liable to pay sales tax on such sales, under the Delhi Sales Tax Act, 1975? - Held that: - matter referred to Larger Bench to decide the issue Whether the sale of unserviceable (rejected) a .....

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n, Mr. Rhishabh Jetley, Advocates. ORDER 1. The Petitioner, Air India Ltd. (hereafter Air India ) is involved in offering air transportation services. As part of running its business, it sells scrap, depleted parts and sometimes even out-dated or unused aircraft. The question that arises is whether it is liable to pay sales tax on such sales, under the Delhi Sales Tax Act, 1975 ( DST Act ). 2. The judgment of this Court in Commissioner of Sales Tax vs. DTC, 1996 III AD (Delhi) 462 (hereafter DTC .....

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AY ) 1994-95 which resulted in ST. Ref. 4/2004. Thereafter the Petitioner challenged the assessments made for AYs 1995-96, 1996-97 and 1997-98 which resulted in ST. Ref. 1/2015, ST.Ref. 2/2015 and ST. Ref. 3/2015. Brief Facts 4. The Petitioner is engaged in the services of civil aviation including the running of aircraft, ferrying of passengers and goods through air routes in both the domestic and international sectors. Till 1974, the Petitioner was registered with the Sales Tax Authorities as a .....

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in AY 1994-95 and thereafter in AYs 1995-96, 1996-97 and 1997-98. The assessment proceedings finally resulted in appeals before the Appellate Tribunal, Sales Tax, Delhi (hereinafter referred to as the Tribunal ), which upheld the assessment. 6. Before the Tribunal, the contention of the Petitioner was that its main activity is of running the aircraft and providing services of carriage of passengers and goods, which does not constitute sale of goods in Delhi. Hence it was not amenable to sales ta .....

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1994-95 and observed as under: The main objects of the appellant company leave no doubt as to the appellant's business as airline as well as to buy, sell and deal in aircrafts etc. The appellant s case, to our mind, is quite different from DTC and AP Road Transport Corporation relied upon by the appellant. 8. Thus, according to the Tribunal, the case of the Petitioner is different from the judgment in DTC (supra) and the Andhra Pradesh State Road Transport Corporation, Hyderabad v. The Comme .....

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st May, 2003 referred the following questions to this Court for AY 1994-95: (1) Whether in the facts and under the circumstances of the case, the Tribunal was right in holding that the activity of the Indian Airlines Limited is commerce covered under the definition of business in clause (i) of Section 2(c) of the Delhi Sales Tax Act, 1975? (2) If the answer to question No.1 is in the affirmative, whether in the facts and under the circumstances of the case, the Tribunal was right in holding that .....

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orporation? (4) Whether in the facts and under the circumstances of the case when the dealer did not impart the information to his assessing Authority, the Tribunal was right in law in holding that the knowledge and information with the other assessing authorities or the Enforcement Wing could not be imputed to the Assessing Authority of the dealer for the purpose of re-assessment? AYs 1995-96, 1996-97 and 1997-98 10. The assessment for AYs 1995-96, 1996-97 and 1997-98 were upheld by the Tribuna .....

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e case, the Tribunal was right in law in holding that the dealer was liable for penalty? 11. On 7th December, 2015, ST. Ref. 1/2015, ST. Ref. 2/2015 and ST. Ref. 3/2015 were tagged alongwith ST. Ref. 4/2004. Thus, the present 4 reference cases require decision in the above 6 questions referred to this Court. Provisions of the Delhi Sales Tax Act, 1975 12. The question that arises is whether the Petitioner is a dealer which is carrying on business of selling goods in Delhi in respect of the scrap .....

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and (ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; (e) dealer means any person who carries on business of selling goods in Delhi and includes - (i) the Central Government or a State Government carrying on such business; (ii) an incorporated society (including a cooperative society), club or association which sells or supplies goods, whether or not in the course of business, to its members for cash or for deferred p .....

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or by the principal or a nominee of the principal. Petitioner s Submissions 13. Mr. Mukul Gupta, learned Senior Counsel appearing for the Petitioner, relies heavily on the judgment of this Court in DTC (supra) to submit that the activity of the Petitioner is no different from that of the DTC. Mr. Gupta submits that the word such as appearing in Section 2 (c) (ii) of the DST Act takes colour from the main activity referred to in Section 2 (c) (i) of the Act and cannot be alienated therefrom. 14. .....

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scrap and spare parts is also not amenable to sales tax. 15. Mr. Gupta further contends that civil aviation services provided by the Petitioner is not a business as per Section 2 (c) of the DST Act. Mr. Gupta sought to reinforce his submissions by placing reliance upon State of Tamil Nadu vs. Burma Shell Oil Co. Ltd., [1973] 31 STC 426 (SC) (hereafter Burma Shell Oil Co. Ltd. ) and State of Gujarat vs. Raipur Manufacturing Co. Ltd.,[1967] 19 STC 1 (SC) (hereafter Raipur Manufacturing Co. Ltd. ) .....

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96-97 and 1997-98 respectively. Thus according to Mr. Gupta the revenues from sale of scrap and aircraft were minuscule as compared to the overall revenues of the Petitioner. Moreover, the Petitioner cannot change its nature of activity without the prior approval of the Central Government and hence it is not very different from a statutory corporation. Thus the predominant part of the Petitioner's revenues was from the main business of carrying passengers and baggage services which is not am .....

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n by the Supreme Court in State of Tamil Nadu vs. Board of Trustee of the Port of Madras, AIR 1999 SC 1647 (hereafter Port of Madras ). He thus submits that both DTC (supra) and Port of Madras (supra) apply squarely to the facts of the present case and hence no sales tax would be payable by the Petitioner. Respondent s Submissions 18. On the other hand, Mr. Sanjoy Ghose, learned Additional Standing Counsel appearing for the Respondents, submits that the present case is clearly distinguishable fr .....

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ssistant Commercial Taxation Officer AIR 1976 SC 489, • Controller of Stores Central Railway vs. Commissioner of Sales Tax Maharashtra State, Bombay, [1995] 99 STC 222 (Bom), • Member Board of Revenue West Bengal vs. Controller of Stores, Eastern Railway, Calcutta AIR 1989 SC 1468, 19. Mr Ghose also referred to the decision in M.P. State Road Transport Corporation vs. Commissioner of Sales Tax, 1995 MPLJ 696 (hereafter MPSRTC') and that this decision is authority to the proposition .....

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rrying on any kind of business and thus factually, the decision in DTC (supra) is distinguishable in its application to the case above. Mr. Ghose submitted that if Clause (ii) of Section 2(c) were to be interpreted as being dependent on the applicability of Clause (i) then it would be rendered totally redundant. Reference to Larger Bench 20. After hearing arguments of the parties, it is clear that the various cases cited before us deal with different modes of transportation, namely, road, rail a .....

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