1964 (11) TMI 85 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Director of Supplies and Disposals, United States Transfer Directorate, carries on the business of selling goods in West Bengal.
2. Whether the Directorate is a 'dealer' within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941.

Detailed Analysis:

Issue 1: Whether the Director of Supplies and Disposals, United States Transfer Directorate, carries on the business of selling goods in West Bengal.

Facts and Context:
The Directorate of Disposals (United States Transfer Directorate), an organization of the Government of India, was responsible for the disposal of surplus American war equipment taken over by the Government of India. The Directorate's functions included disposing of surplus goods and purchasing goods on behalf of the Government of India, various State Governments, and approved autonomous bodies. The Directorate refused to register under the Bengal Finance (Sales Tax) Act, 1941, claiming it was not a dealer. The Commercial Tax Officer issued a notice for assessment, leading to a series of appeals and revisions, all of which were rejected.

Legal Considerations:
The primary legal question was whether the Directorate's activities constituted 'business' under the Bengal Finance (Sales Tax) Act, 1941. According to section 2(c) of the Act, a dealer is a person who carries on the business of selling goods in West Bengal and includes the Government. The court examined whether the Directorate's disposal of surplus American war material constituted a business of selling goods.

Court's Findings:
The court found that the Directorate's activities did constitute a business of selling goods. The Member, Board of Revenue, noted that the Directorate's activities involved several sale transactions over a considerable period, indicating a profit motive. The court emphasized that to determine if a person is carrying on a business of selling goods, one must consider the magnitude and frequency of transactions and the profit motive behind them. The Directorate's widespread organization and systematic disposal of goods further supported the conclusion that it was engaged in a business of selling goods.

Precedents and Comparisons:
The court referred to several cases to illustrate the distinction between business activities and non-commercial transactions. In cases like Gannon Dunkerley & Co. (Madras) Ltd. v. State of Madras and Deputy Commercial Tax Officer v. Cosmopolitan Club, the courts held that activities without a profit motive or commercial nature did not constitute a business. Conversely, in cases like Aryodaya Spinning and Weaving Co. Ltd. v. The State of Bombay and Gosri Dairy Vytilla v. The State of Kerala, the courts found that regular and systematic sales with a profit motive constituted a business.

Conclusion:
The court concluded that the Directorate's activities of selling surplus American war material were not casual and involved a profit motive, indicating that it was engaged in a business of selling goods in West Bengal.

Issue 2: Whether the Directorate is a 'dealer' within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941.

Legal Definition:
Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, defines a dealer as a person who carries on the business of selling goods in West Bengal and includes the Government.

Court's Analysis:
The court analyzed whether the Directorate fit the definition of a dealer under the Act. Given that the Directorate was found to be engaged in the business of selling goods, it logically followed that it met the criteria of a dealer as defined in section 2(c) of the Act.

Supporting Judgment:
The court referred to the case of The State of Andhra Pradesh v. H. Abdul Bakshi & Bros., where the Supreme Court held that the expression 'business' in taxing statutes implies an occupation or profession normally pursued with the object of making a profit. The court found that the Directorate's systematic and organized disposal of surplus goods with a profit motive aligned with this definition.

Conclusion:
The court held that the Directorate of Disposals was a dealer within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, as it was engaged in the business of selling goods in West Bengal.

Final Judgment:
The question was answered in the affirmative, and the Directorate was deemed a dealer under the Bengal Finance (Sales Tax) Act, 1941. The assessee was ordered to pay the costs of the reference.

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