1970 (3) TMI 139 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the Andhra Pradesh State Road Transport Corporation is liable to be assessed for sales tax on the sale of scrapped vehicles and other scrap material.

Analysis:
The Andhra Pradesh State Road Transport Corporation was provisionally assessed for sales tax on the sale of scrapped vehicles and other scrap material. The Corporation argued that such transactions should not be considered part of its business activities, thus not subject to sales tax. The Corporation's primary objective, as per the Road Transport Corporation Act, 1950, is to provide efficient road transport services, not engage in trading activities. The Corporation has been disposing of unserviceable material through public auctions or tenders, with the proceeds being included in its taxable turnover for sales tax assessment. The critical issue is whether the Corporation's disposal of scrap material can be classified as part of its business activities, as defined under the sales tax law. The definition of "business" includes trade, commerce, manufacture, or any related transactions. The Supreme Court has established precedents where the sale of unserviceable assets or discarded goods does not automatically imply the intention to carry on the business of selling such items. The Court emphasized that incidental or ancillary transactions must be directly related to the primary business activities and share the nature of trade, commerce, or manufacture. In this case, the Corporation's core function is providing road transport services, not selling discarded vehicles or scrap material. The Court referred to previous judgments to support the argument that the Corporation cannot be considered a dealer or engaged in the business of selling scrap material based on the nature of its activities and objectives. Consequently, the Commercial Tax Officer's decision to provisionally assess the Corporation for sales tax on the sale of scrapped vehicles and scrap material was deemed incorrect. The assessment order was quashed, and the writ petition was allowed with costs.