1963 (11) TMI 60 - HC - VAT and Sales Tax

Summary

Issues:
Assessability to tax of the petitioners under the Madras General Sales Tax Act, 1959.

Detailed Analysis:
The tax revision petition involved a dispute regarding the assessability of the petitioners, who were tanners at Ranipet, under the Madras General Sales Tax Act, 1959. The petitioners were assessed on a taxable turnover that included the purchase value of tanning materials. The primary contention was whether the petitioners, who were mere tanners and did not buy or sell hides and skins, should be considered dealers in tanning materials and thus liable to tax. The appellate authorities upheld the assessment, considering the purchase of tanning materials by the petitioners as part of their business activities, thereby satisfying the definition of "dealer" under the Act. The Sales Tax Appellate Tribunal also affirmed this decision, leading to the current challenge.

The central issue revolved around whether the petitioners should be classified as "dealers" under the Act, necessitating tax liability on the purchase value of tanning materials. The statutory definition of a "dealer" encompassed individuals engaged in buying, selling, or distributing goods in the course of business. The Act also defined "business" broadly to include various commercial activities. Notably, the Act prescribed a tax rate for specific goods like tanning materials, indicating the liability of the last purchaser in the State. The petitioners, although not involved in buying and selling hides or tanning materials directly, were deemed to be carrying on a business by tanning goods for remuneration, thereby requiring them to purchase tanning materials as an integral part of their operations.

The court delved into the interpretation of the term "dealer" within the Act, emphasizing that engaging in any business activity involving buying, selling, or supplying goods sufficed to meet the statutory definition. The court rejected the argument that the petitioners' activity of purchasing tanning materials was insignificant or ancillary to their main business of tanning. Drawing parallels with English cases, the court highlighted that even minor activities forming part of a broader business could render an individual liable as a dealer. The court concluded that the petitioners' assessment on the purchase price of tanning materials was valid under the Act, considering their business of tanning goods for remuneration necessitated the purchase of such materials.

In referencing a prior judgment, the court underscored that the profit motive associated with business activities, such as tanning hides or running a tannery, was pivotal in determining tax liability on purchased goods. The court rejected the petitioners' attempt to distinguish their case from the precedent, emphasizing that the profit motive inherent in the tanning process encompassed the purchase of tanning materials within the course of business. Ultimately, the court dismissed the tax revision petition, upholding the assessment on the purchase price of tanning materials and ordering costs to be paid by the petitioners.