1959 (11) TMI 44 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the Trustees of the Port of Madras to sales tax for water supplied to ships.
2. Definition and interpretation of "dealer" under the Madras General Sales Tax Act.
3. Applicability of limitation period under Section 18 of the Sales Tax Act versus Article 62 of the Limitation Act.

Detailed Analysis:

1. Liability of the Trustees of the Port of Madras to Sales Tax for Water Supplied to Ships:
The primary issue in this case is whether the Trustees of the Port of Madras are liable to pay sales tax on the charges levied for water supplied to ships. The court examined the statutory duties and powers of the Port Trust under the Madras Port Trust Act, which include regulation, conservancy, and improvement of the port. The court noted that the Port Trust's activities, including supplying water to ships, are performed as part of its statutory duties and not as commercial transactions intended for profit. The court concluded that the Port Trust is not a commercial entity engaged in the business of buying and selling goods, and therefore, it is not liable to pay sales tax on the water supplied to ships.

2. Definition and Interpretation of "Dealer" under the Madras General Sales Tax Act:
The court analyzed the definition of a "dealer" under Section 2(b) of the Madras General Sales Tax Act, which includes any person who carries on the business of buying or selling goods. The court emphasized that the term "business" implies a profit motive. Citing previous judgments, including Gannon Dunkerley and Co. v. State of Madras and Sree Meenakshi Mills Ltd. v. State of Madras, the court reiterated that a person or entity must engage in commercial activities with the goal of earning profits to be considered a dealer. The court found that the Port Trust's supply of water to ships is a statutory duty without a profit motive, and thus, the Port Trust cannot be classified as a dealer under the Act.

3. Applicability of Limitation Period under Section 18 of the Sales Tax Act versus Article 62 of the Limitation Act:
The court addressed the issue of whether the suit for recovery of the tax paid was barred by limitation. The respondent argued that under Section 18 of the Sales Tax Act, the suit should have been filed within six months from the date of the order. However, the court agreed with the lower court's interpretation that the limitation period applicable to such suits is governed by Article 62 of the Limitation Act, which provides a longer period. The court cited the case of State of Madras v. Abdul Kader to support this view. Consequently, the court held that the suit was not barred by limitation and the appellant was entitled to recover the entire amount claimed.

Conclusion:
The court concluded that the Trustees of the Port of Madras are not liable to pay sales tax on the water supplied to ships as they do not qualify as dealers under the Madras General Sales Tax Act. Additionally, the suit for recovery of the tax paid was not barred by limitation under Article 62 of the Limitation Act. The appeal was allowed with costs throughout.