1965 (8) TMI 66 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of notice served on the applicant and its impact on assessment.
2. Whether the applicant was a dealer during the assessment period and liable for purchase tax.

Detailed Analysis:

Issue 1: Validity of notice served on the applicant and its impact on assessment
The case involved a reference under section 44 of the Madhya Pradesh General Sales Tax Act, 1958, regarding the validity of a notice served on the assessee, and its impact on the assessment. The notice in Form XVI was issued to the assessee, asking him to appear with his account books, as he failed to submit a return for the assessment period. The Sales Tax Officer assessed the assessee for purchase tax based on the purchases made from unregistered dealers. The question raised was whether the notice served was invalid and if the assessment based on it was lawful. The court held that although the notice did not provide the required 15 days for the assessee to respond, the assessment was not invalidated solely on this ground as the rule allowed flexibility in the timeline for showing cause. The court clarified that the complaint did not demonstrate prejudice due to the shorter notice period, leading to a negative answer to the first question.

Issue 2: Dealer status of the applicant and liability for purchase tax
The second issue revolved around whether the applicant qualified as a dealer during the assessment period and was liable for purchase tax. The argument presented was that since the turnover was nil, the applicant could not be considered a dealer under the Act and, therefore, should not be subject to purchase tax. The court analyzed the definition of a "dealer" under the Act, emphasizing that engaging in buying goods for profit constitutes a business activity. Referring to a Supreme Court decision, the court clarified that buying goods for profit-making purposes qualifies as a business transaction, regardless of the turnover status. The court concluded that the applicant, being involved in purchasing goods for business purposes, was indeed a dealer during the relevant period and thus liable for purchase tax. The court rejected the reliance on previous cases that did not align with the specific definition of a dealer in the present Act, emphasizing the need to interpret the term based on profit-oriented buying activities. Consequently, the court answered the second question affirmatively, stating that the applicant was liable for purchase tax.

In conclusion, the court answered the first question negatively and the second question affirmatively, holding the applicant responsible for the costs of the reference and setting the counsel's fee at Rs. 100.