1969 (2) TMI 128 - SC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the notice in Form XVI that was served on the applicant was invalid and therefore the assessment of the applicant on the basis of that notice was bad in law? Whether, in the facts and circumstances of the case, the applicant was a dealer during the assessment period under the Act and the imposition of purchase tax on him under section 7 of the Act was in order? Held that - Appeal dismissed. The High Court of Bombay held that the society was not supplying ice with the intention of carrying on business in ice, and on that account the society was not a dealer within the definition of that term in section 2(11) of the Act in regard to the supply of ice by it to its members. In that case the taxing authority did not seek to impose purchase tax he sought to bring to tax the difference between the price paid by the society for purchasing ice and the charges which it made from its members for supplying ice, and the High Court held that in supplying ice the society was not carrying on business in ice, and on that account was not a dealer . Whether in a particular set of circumstances a person may be said to be carrying on business in a commodity must depend upon the facts of that case and no general test may be applied for determining that question.

Summary

Issues:
1. Validity of notice served for sales tax assessment.
2. Imposition of purchase tax on a building contractor under the Sales Tax Act.

Analysis:
1. The first issue revolved around the validity of the notice served for sales tax assessment for two accounting periods. The High Court opined that although the notices did not provide a clear 15-day period for the appellant to show cause, it did not render the notices and assessments invalid. The court held that unless prejudice resulted to the taxpayer, the proceedings were not liable to be set aside. Precedents under the Income-tax Act were distinguished, emphasizing the non-mandatory nature of the rule in question. The Supreme Court upheld the High Court's decision on this issue.

2. The second issue dealt with the imposition of purchase tax on the building contractors under the Sales Tax Act. The appellants argued that they were not "dealers" as they did not carry on the business of buying goods, and the goods purchased for their construction business were not liable to tax under section 7. However, the Supreme Court clarified that a person need not both buy and sell goods to be considered a "dealer." Citing precedents, the court established that buying goods for consumption in the manufacturing process qualifies as carrying on a business. The court emphasized that the purchase price of goods consumed in any manner, not just for sale, is taxable under section 7. The court rejected the appellant's interpretation of the phrase "or otherwise" and distinguished a prior case involving the supply of ice. Ultimately, the Supreme Court dismissed the appeals, upholding the imposition of purchase tax on the building contractors.

In conclusion, the Supreme Court affirmed the High Court's decision regarding the validity of the notice served for sales tax assessment and upheld the imposition of purchase tax on the building contractors under the Sales Tax Act.