1969 (12) TMI 103 - HC - VAT and Sales Tax

Issues Involved:
1. Determination of whether the petitioner is a "dealer" under the Central Sales Tax Act, 1956.
2. Examination of the intention behind the purchase and sale of goods.
3. Applicability of concessional tax rates based on the availability of 'C' forms.
4. Consideration of the nature of transactions as regular, continuous, and frequent.
5. Assessment of whether the transactions were in the course of business.

Detailed Analysis:

1. Determination of whether the petitioner is a "dealer" under the Central Sales Tax Act, 1956:
The court examined the definition of a "dealer" under section 2(b) of the Central Sales Tax Act, 1956, which means "any person who carries on the business of buying or selling goods." The court noted that the definition should be interpreted harmoniously with the Madras General Sales Tax Act, 1959, which includes "any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment...or other valuable consideration." The court emphasized that all sales or supplies by a dealer are commercial activities, but not all commercial activities may be sales. The transactions must be integrated with the continuous trading activity of the dealer.

2. Examination of the intention behind the purchase and sale of goods:
The court highlighted that the intention behind the purchase of goods is crucial in determining whether a person is a dealer. The court referenced the Supreme Court's decision in State of Gujarat v. Vivekanand Mills, which held that selling goods to avoid locking up of funds does not infer an intention to carry on the business of selling those goods. The court also cited State of Madras v. K.C.P. Ltd., where it was observed that selling unsuitable or unserviceable goods does not indicate an intention to carry on the business of selling those goods. The court concluded that the intention to deal with goods in a commercial way and ultimately subject them to a sale is the deciding factor.

3. Applicability of concessional tax rates based on the availability of 'C' forms:
The court noted that the alternative plea of the petitioner for concessional tax rates was accepted by the Tribunal, provided the 'C' forms were available. This indicates that the petitioner sought to benefit from lower tax rates if the necessary documentation was provided, which was considered by the Tribunal.

4. Consideration of the nature of transactions as regular, continuous, and frequent:
The court found that the transactions by the petitioner to its sister concerns were not isolated but regular, continuous, and frequent. The Tribunal observed that the original idea of purchasing the goods was not only for the petitioner's requirements but also to sell to sister concerns without profit. The court agreed with the Tribunal's finding that the transactions were motivated from inception and intended to be dealt with in a commercial way.

5. Assessment of whether the transactions were in the course of business:
The court emphasized that the transactions must be in the course of business understood in a commercial sense. The court noted that the petitioner supplied or sold goods that were part of its capital assets, but the transactions were regular, continuous, and frequent, supported by consideration. The Tribunal found that the petitioner fabricated workshop material in its own workshop and supplied it to others, indicating a commercial intent. The court concluded that the transactions were in the course of business and integrated with the petitioner's trading activity.

Conclusion:
The court upheld the Tribunal's findings that the petitioner was a dealer and that the transactions were in the course of business. The intention behind the purchase and sale of goods was to deal with them in a commercial way, and the transactions were regular, continuous, and frequent. The turnover brought to tax was rightly assessed as taxable. The tax revision case was dismissed with costs, and the petitioner's plea was rejected.

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