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The Board of Trustees of the Port of Bombay Versus The State of Maharashtra & The Commissioner of Sales Tax, Maharashtra

2017 (11) TMI 529 - BOMBAY HIGH COURT

Constitutional validity of Section 2(11) of the Port Trust Act - tax on sale of goods - scope of the term 'Dealer' - Petitioner's main contention in the Writ Petition is that the sale of goods by the Petitioner is in pursuance of their statutory functions under the Port Trusts Act and these sales are not executed by the Petitioners as a matter of business for commercial enterprise but by way of administering and managing the port of Bombay. The Petitioner has accordingly submitted that they are .....

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tion 2(11) of the said Act and Section 2(8) of the MVAT which is pari materia. It was held in the case of Controller of Stores that the Explanation to Section 2(11) of the said Act which had included “Railway Administration” in “dealer” has been held to be clarificatory and that Indian Railways represented by the Controller of Stores is a dealer. - It is clear from the deeming fiction brought in by the explanation that all these entities are now within the definition of “dealer” irrespective of .....

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service, any goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, whether in course of business or not, would fall within the purview of Section 2(viii) of the Act. Hence, the assessee-Port Trust would fall within the meaning of "dealer" under Section 2(viii) of the Act and is consequently assessable to tax under the Act - The legislature having greater latitude for classification in taxing statute was competen .....

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- State. ORAL JUDGMENT:- (Per Riyaz I. Chagla J.) 1. The Petitioner is a body corporate originally established under the Bombay Port Trusts Act, 1979 and now constituted under the provisions of the Major Port Trust Act, 1963 (for short the Port Trust Act ). The second, third and fourth Respondents are officers of the first Respondent, carrying on duties and performing functions under the provisions of Bombay Sales Tax Act 1954 (in short the said Act ). 2. The Writ Petition is filed under Article .....

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on 61 and 62 of the Port Trust Act. 3. The Petitioner in exercise of powers conferred on them under the Port Trust Act has been recovering rates for services rendered by them and recovering rent in respect of its properties. In the event such rates or rents remain unpaid, the Petitioner takes recourse to recovery of the same by sale of the goods which are in their custody in terms of Section 61 of the Port Trust Act. Further, when goods are placed in their custody after landing of the goods and .....

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not being less than twenty-four hours after the landing of the animals or goods as the Board may think fit, sell by public auction 1[or in such cases as the Board considers it necessary so to do, for reasons to be recorded in writing, sell by tender, private agreement or in any other manner] such goods or so much thereof as, in the opinion of the Board, may be necessary- (1) A Board may, after the expiry of two months from the time when any goods have passed into its custody, or in the case of .....

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in respect of such goods have not been paid, or (b) if any rent payable to the Board in respect of any place on or in which such goods have been stored has not been paid, or (c) if any lien of any ship-owner for freight or other charges of which notice has been given has not been discharged and if the person claiming such lien for freight or other charge has made to the Board an application for such sale. (2) Before making such sale, the Board shall give ten days notice of the same by publicatio .....

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ands of the Board, or is otherwise known notice shall also be given to him by letter delivered at such address, or sent by post, but the title of a bona fide purchaser of such goods shall not be invalidated by reason of the omission to send such notice, nor shall any such purchaser be bound to inquire whether such notice has been sent. (4) Notwithstanding anything contained in this section, arms and ammunition and controlled goods may be sold at such time and in such manner as the Central Govern .....

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ot removed by the owner or other person entitled thereto from the premises of the Board within one month from the date on which such goods were placed in their custody, the Board may, if the address of such owner or person is known, cause a notice to be served upon him by letter delivered at such address or sent by post, or if the notice cannot be so served upon him or his address is not known, cause a notice to be published in 1[the Port Gazette or where there is no Port Gazette, in the Officia .....

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onth from the date on which such goods were placed in their custody, the Board may, if the address of such owner or person is known, cause a notice to be served upon him by letter delivered at such address or sent by post, or if the notice cannot be so served upon him or his address is not known, cause a notice to be published in 1[the Port Gazette or where there is no Port Gazette, in the Official Gazette] and also in at least one of the principal local daily newspapers, requiring him to remove .....

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referred to in sub-section (1) may also be served on the agents of the vessel by which such goods were landed. (3) If such owner or person does not comply with the requisition in the notice served upon him or published under sub-section (1), the Board may, at any time after the expiration of two months from the date on which such goods were placed in its custody, sell the goods by public auction 2[or in such cases as the Board considers it necessary so to do, for reasons to be recorded in writin .....

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e and in such manner as, in the opinion of the Board, the urgency of the case requires; (b) arms and ammunition and controlled goods may be sold in accordance with the provisions of sub-section (4) of section 61. (5) The Central Government may, if it deems necessary so to do in the public interest, by notification in the Official Gazette, exempt any goods or classes of goods from the operation of this section. 4. The Petitioner's main contention in the Writ Petition is that the sale of goods .....

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der the said Act. 5. Mr. Makhija the learned counsel appearing for the Petitioners has drawn this Court's attention to Section 2(5a) of the Said Act, which reads thus :- 5A) business includes 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 with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce .....

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ernment, or any State Government which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to, its members. Explanation - For the purpose of this clause - [(i)] each of the following persons and bodies who dispose of any goods (including goods) as unclaimed or confiscated or as unserviceable or as (scrap, surplus, old, obsolete or discarded material or waste products) whether by auction or otherwise directly or through an agen .....

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; (g) Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950; (h) Customs Department of the Government of India administering the Customs Act, 1962; (i) Insurance and financial corporations or Companies and Banks included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (j) Advertising agencies; (k) any other corporation, company, body or authority owned or set-up by, or subject to administrative control of, the Central G .....

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; and the rate at which turnover tax is to be levied where the turnover of either all sales or all purchases by any dealer liable to pay tax is within the specified amounts. He has submitted that Section 22 of the said Act provides for registration and that no dealer is liable to pay tax for carrying on business as a dealer unless he possesses a valid certificate of registration as provided by the said Act. Mr. Makhija has relied upon the judgment of the Supreme Court in the case of State of T. .....

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of the Visakhapatnam Port Trust Vs. CTO reported in (1979) 43 STC 36 (AP) holding that sales by the port trust are not eligible to tax, are correct, for the reasons given by the Supreme Court in the said decision. He has submitted that in the said decision of the Supreme Court, it has been held that if the main activity carried on by the port trust was not a business then the incidental or ancillary activities to the main non-business activities cannot be treated as business within the meaning o .....

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yment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hirepurchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated associ .....

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the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. 7. He has submitted that in the definition of Section 2(11) a dealer means any person who carries on business of buying and selling of goods in the State. Business is defined under Section 2 (5A) of the said Act and includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transactio .....

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r other valuable consideration cannot contemplate such sale by the Port Trust under Sections 61 and 62 of the Port Trusts Act. He has placed reliance upon the statement of objections and reasons to the Constitution (Forty-Sixth Amendment) Act, 1982 and in particular paragraphs 7 and 13 which read thus:- 7. There were reports from State Governments to whom revenues from sales tax have been assigned, as to large scale avoidance of Central Sales Tax leviable on inter-State sales of goods through th .....

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he State revenues to a considerable extent. Clause 6 of the Bill seeks to validate laws levying tax on the supply of food or drink for consideration and also the collection or recoveries made by way of tax under any such law. However, no sales tax will be payable on food or drink supplied by a hotelier to a person lodged in the hotel during the period from the date of judgment in the Associated Hotels of India case and the commencement of the present Amendment Act if the conditions mentioned in .....

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in the goods which are sold and the Port Trust is only acting as a Bailee in respect of the goods which remain unclaimed or in respect of which rates or rents are not paid or discharged. He has submitted that for a sale of goods to be liable to tax, there must be concurrence of the four elements namely:- (a) parties competent to contract; (b) mutual assent; (c) a thing, the absolute or general property in which is transferred from the seller to the buyer; (d) a price in money paid or promised; H .....

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r which has gone into the definition of sale. Mr. Makhija has relied upon decision of the Supreme Court in M/s. Sunrise Associates V. Govt. of N.C.T. Of Delhi & Ors. to contend that for a transfer of goods under the said Act, there must be a transfer of title or ownership in the said goods. This decision was in the context of a Lottery Tickets and it was held that a sale of lottery ticket did not involve the sale of goods under the said Act. He has relied upon the judgment of the Supreme Cou .....

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or Port Trust Act which provides for the application of the proceeds of sale under Section 61 or 62 of the Major Port Trust Act and in the event there being a surplus in the proceeds, the surplus shall be paid to the importers, owner or consignee of the goods or his agent on application made by the concerned persons within six months from the date of the sale of the goods. He has contended that since the port trust does not retain the proceeds of sale, one of the elements of sale mentioned above .....

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rol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods . He has submitted that in Article 286 of the Constitution of India, the only restrictions to the imposing of tax on sale or purchase of goods have been provided. Apart from these restriction, there are no other restrictions to the imposition of tax by the State. He has poi .....

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.N. Act. Explanation (3) states that if the port trust disposes of any goods including unclaimed or confiscated or unserviceable or scrap surplus, old or obsolete goods 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, notwithstanding anything contained in the T.N. GST Act, it shall be deemed to be a dealer for the purpose of the Act. Therefore, by the Amendment Act the le .....

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ld, therefore, imply that, the port trust would be deemed to be a dealer despite the port trust not carrying on business. The judgment in Madras Port (Supra) has accordingly been held by the Supreme Court in Cochin Port Trust (Supra) to have lost its substratum. The learned APP has relied upon the judgment of this Court in the Controller of Stores, Central Railway, Bombay Vs. The Commissioner of Sales Tax, Maharashtra State wherein the Explanation to Section 2(11) of the said Act which had inclu .....

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APP has also relied upon the decision of the Supreme Court in the case of State of Madhya Pradesh Vs. Rakesh Kohli & Anr. He has submitted that legislature in taxation statutes enjoys greater latitude for classification as held in that decision and that the explanation to Section 2(11) of the said Act is within the legislative competence of the State. The learned APP also relied upon the decision of this Court in Lalbaugcha Raja Sarwajanik Ganeshotsav Mandal Vs. The State of Maharashtra, wh .....

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e explanation to Section 2(11) of the said Act in (i) reads thus:- Notwithstanding anything contained in clause (5A) or any other provision of this Act, be deemed to be a dealer, to the extent of such disposals, namely : (a) Port trust …. From a plain reading of the non-obstante clause in the explanation to Section 2(11) of the said Act it is clear that the Port Trust by a deeming fiction falls within the definition of dealer irrespective of whether it carries on business as defined under .....

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h, deferred payment or other valuable consideration. This would encompass a sale of goods by the Port trust under the Major Port Trust Act. Sections 61 and 62 of the Major Port Trust Act contemplates a sale of goods, either where the the rates or rents are not paid or where the goods are not removed from its premises within a particular period. These sales clearly come within Article 366 (29A) of the Constitution. The explanation to Section 2 (11) of the said Act is resultant from the 46th amend .....

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authorities; (c) Railway administration as defined under the Indian Railway Act, 1890; (d) Shipping and construction companies; (e) Air transport Companies and Airlines; (f) 7[***]; (g) Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950; (h) Customs Department of the Government of India administering the Customs Act, 1962; (i) Insurance and financial corporations or Companies and Banks included in the Second Schedule to the Reserve Bank of Ind .....

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