1968 (1) TMI 49 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the applicants, as motion picture producers, are considered "dealers" under section 2(11) of the Bombay Sales Tax Act, 1959.
2. Whether the activity of producing motion pictures constitutes a business activity under the Act.
3. Whether the purchase of raw films by the applicants qualifies as a purchase in the course of business.
4. Whether cinematograph films produced by the applicants are considered goods and if they are saleable commodities.

Issue-wise Detailed Analysis:

1. Whether the applicants, as motion picture producers, are considered "dealers" under section 2(11) of the Bombay Sales Tax Act, 1959:
The Sales Tax Tribunal referred the question to the High Court to determine if the applicants, as motion picture producers, qualify as "dealers" under the Act. The Tribunal concluded that the applicants' activity of purchasing raw films for producing motion pictures constituted a business activity. The Tribunal observed that the definition of "dealer" does not require the person to carry on both buying and selling of goods. The High Court agreed that the applicants are engaged in a business activity but left the final determination contingent upon whether the cinematograph films are saleable commodities.

2. Whether the activity of producing motion pictures constitutes a business activity under the Act:
The applicants argued that producing motion pictures is not a business activity but rather a creation of a work of art. The Tribunal and the High Court, however, rejected this argument. The High Court noted that the production of films with the ultimate objective of earning profit qualifies as a business activity. It emphasized that the term "business" implies a continuous course of activities carried out for commercial purposes with an intention to earn profit.

3. Whether the purchase of raw films by the applicants qualifies as a purchase in the course of business:
The High Court examined whether the purchase of raw films by the applicants was in the course of business. The applicants contended that they do not sell the films they produce and, therefore, should not be considered as engaging in the business of buying raw films. The High Court referred to the Supreme Court decision in H. Abdul Bakshi and Bros., which held that a person who consumes a commodity bought by him in the course of his trade or uses it in manufacturing another commodity for sale would be regarded as a dealer. The High Court concluded that the purchase of raw films by the applicants for producing motion pictures, which are then distributed for profit, constitutes a business activity.

4. Whether cinematograph films produced by the applicants are considered goods and if they are saleable commodities:
The High Court noted that the applicants do not sell the films but enter into agreements for distribution and exhibition. The Court emphasized that the determination hinges on whether the films are saleable commodities. If the films are found to be saleable, the applicants would be considered dealers under the Act. The Court left this factual determination to the authorities, stating that the applicants would be considered dealers if the films are found to be saleable commodities.

Conclusion:
The High Court concluded that the applicants would be considered dealers under section 2(11) of the Bombay Sales Tax Act, 1959, if the cinematograph films produced by them are found to be saleable commodities. The matter was remitted to the authorities for a determination on whether the films are saleable. No order as to costs was made, and the fee of Rs. 100 was forfeited to the Government.