1968 (8) TMI 120 - SC - VAT and Sales Tax

Whether in the circumstances and on the facts of the case the assessee came within the meaning of the term dealer under section 2(c) of the U.P. Sales Tax Act? Held that - Appeal dismissed. Under the contract under which the parcel vans were to be supplied to the Union Government the respondents supplied 64 more vans in the year 1953-54 and received an amount of Rs. 6, 88, 000. For the reasons given by us in disposing of the case in respect of the turnover for the year 1952-53 this appeal must also fail and is dismissed with costs.

Summary

Issues: Assessment of sales tax on turnover received by sale of parcel vans by the respondents under the U.P. Sales Tax Act, 1948. Determination of whether the respondents qualify as "dealers" under section 2(c) of the Act based on the nature of their business activities in Uttar Pradesh.

Analysis:
In this case, the respondents entered into a contract with the Union Government for the supply of parcel vans to be assembled by them in the railway workshop at Izatnagar in Uttar Pradesh. The Sales Tax Officer assessed the respondents to sales tax on the price of the parcel vans, considering them as "dealers" under the U.P. Sales Tax Act, as they were deemed to be carrying on the business of selling railway vans in Uttar Pradesh. However, the judge (Appeals) and the judge (Revisions), Sales Tax, both held that the respondents were not liable to be assessed to sales tax as they were not considered "dealers" under the Act. The High Court agreed with this view, stating that the turnover received by the respondents on the sale of parcel vans was not taxable.

The key issue revolved around whether the respondents qualified as "dealers" under section 2(c) of the U.P. Sales Tax Act. The definition of "dealer" in the Act includes any person carrying on the business of buying or selling goods in Uttar Pradesh. The respondents, engaged in fabricating wagons and coaches, had entered into the contract for assembling parcel vans as part of their business activities. While the sale of goods by the respondents in Uttar Pradesh was acknowledged, the crucial question was whether they were actively carrying on the business of selling goods in the state. The absence of a business organization, office, or agency in Uttar Pradesh, coupled with the lack of continuity and repetition of sales, indicated that the respondents did not meet the criteria of a "dealer" as per the Act.

The Commissioner of Sales Tax contended that the time taken by the respondents to assemble the parcel vans and receive payments was irrelevant to determining their status as "dealers." The argument emphasized that the definition of a "dealer" does not encompass a person engaged in manufacturing within the state unless they are actively involved in buying or selling goods. Since the respondents did not establish a business of buying or selling goods in Uttar Pradesh, the appeal was dismissed, affirming that the respondents were not liable to be assessed for sales tax on the turnover from the sale of parcel vans.

In a related appeal concerning the supply of additional parcel vans in the subsequent year, the court reiterated its decision based on the same reasoning as in the previous case. The appeal was dismissed, and costs were awarded accordingly, with a single hearing fee for both appeals.

Overall, the judgment focused on interpreting the definition of a "dealer" under the U.P. Sales Tax Act and emphasized the requirement for active engagement in buying or selling goods within the state to qualify for assessment of sales tax. The court's decision rested on the absence of a business setup and the lack of continuous sales activities by the respondents in Uttar Pradesh, leading to the dismissal of the appeals.