1968 (8) TMI 172 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the opponent-society is a dealer within the meaning of the definition of the term 'dealer' under section 2(11) of the Bombay Sales Tax Act, 1959.
2. If the opponent-society is not a dealer, whether it is still liable to pay tax during the period it holds a registration certificate by virtue of section 22(5-A) of the Bombay Sales Tax Act, 1959.

Issue-wise Detailed Analysis:

1. Whether the opponent-society is a dealer within the meaning of the definition of the term 'dealer' under section 2(11) of the Bombay Sales Tax Act, 1959:
The main part of the definition of "dealer" under section 2(11) requires that a person must carry on the business of buying or selling goods. The term "business" in taxing statutes implies an activity pursued with the object of making profit. The Supreme Court has consistently held that profit-motive is an essential ingredient of business in the context of sales tax legislation. In the present case, the canteen managed by the opponent-society is run without any profit-motive. Therefore, the activity of running the canteen does not constitute a business, and the opponent-society does not fall within the main part of the definition of a "dealer."

The second inclusive clause in section 2(11) which includes "any society, club or other association of persons which buys goods from, or sells goods to, its members" does not dispense with the requirement of business. The inclusive clause is intended to clarify that such entities are included within the category of "person" in the main part of the definition if they carry on the business of buying or selling goods. Since the opponent-society does not carry on its canteen activities with a profit-motive, it does not fall within the definition of a "dealer" under section 2(11).

2. If the opponent-society is not a dealer, whether it is still liable to pay tax during the period it holds a registration certificate by virtue of section 22(5-A) of the Bombay Sales Tax Act, 1959:
Section 22(5-A) of the Act provides that if any person has been registered as a dealer upon an application made by him and it is found that he ought not to have been so registered, he shall be liable to pay tax on his sales or purchases made during the period commencing on the date on which his registration certificate took effect and ending with its cancellation. This provision applies notwithstanding that the person may not be liable to pay tax under section 3.

However, section 22(5-A) is a non obstante clause to section 3 and applies only if the person has been registered as a dealer upon an application made by him and it is subsequently found that he ought not to have been so registered. In the present case, the opponent-society is not a dealer in respect of the sales effected in the canteen as it does not carry on the business of selling goods with a profit-motive. Therefore, the registration certificate issued to the opponent-society is non est concerning the canteen sales, and section 22(5-A) does not apply.

Conclusion:
1. The opponent-society is not a dealer within the meaning of the definition of the term 'dealer' under section 2(11) of the Bombay Sales Tax Act, 1959.
2. The opponent-society is not liable to pay tax during the period it holds a registration certificate by virtue of section 22(5-A) of the Bombay Sales Tax Act, 1959.

The Commissioner will pay the costs of the reference to the assessee.