1970 (12) TMI 79 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sales of coke-breeze and stores to staff should be excluded from the turnover for sales tax purposes.
2. Whether the absence of profit motive in these transactions exempts them from being considered as sales under the Bengal Finance (Sales Tax) Act, 1941.
3. Whether the applicant can be considered a "dealer" under the Act for these transactions.

Issue-wise Detailed Analysis:

1. Exclusion of Sales from Turnover:
The applicant, a registered dealer, contended that the sales of coke-breeze and stores to its staff at concessional rates should not be included in its turnover for sales tax purposes. The Commercial Tax Officer included these sales in the turnover, which was upheld by the Assistant Commissioner, the Additional Commissioner, and the Board of Revenue. The Board referred the question to the High Court: "Whether sales by the petitioner to the members of its staff of certain commodities such as coke-breeze and stores should be excluded from its turnover as dealer for the purpose of imposition of sales tax under the Bengal Finance (Sales Tax) Act, 1941, merely because such sales were without any profit-motive, and thus be exempt from sales tax?"

2. Absence of Profit Motive:
The applicant argued that the absence of profit motive in supplying coke-breeze and stores to staff should exempt these transactions from being considered as sales under the Act. The Additional Commissioner and the Board of Revenue rejected this argument, stating that the absence of profit motive does not exclude these transactions from being considered sales. The High Court noted that the definition of "business" under the Bengal Finance (Sales Tax) Act, as amended, includes activities irrespective of profit motive. However, the Court emphasized that the key issue is whether the applicant carried on the business of selling these goods.

3. Definition of "Dealer":
The Court examined whether the applicant could be considered a "dealer" under the Act for these transactions. The definition of "dealer" in the Act requires carrying on the business of selling goods. The Court compared this with the broader definition in the Bihar Sales Tax Act. The Court also considered the retrospective amendment to the Bengal Finance (Sales Tax) Act, which defined "business" to include activities regardless of profit motive. The Court cited several precedents, including the Supreme Court's decision in the State of Gujarat v. Raipur Manufacturing Co., Ltd., which stated that an activity must be of a commercial character to be considered a business. The Court concluded that supplying commodities to employees without profit to provide social amenities does not constitute carrying on business with a commercial motive.

Conclusion:
The High Court reframed the question to focus on whether the applicant was a "dealer" for these transactions. The Court answered in the affirmative, stating that the applicant was not a "dealer" in respect of coke-breeze and stores for the relevant assessment year. The transactions were not carried out with a commercial motive, and thus, the sales should be excluded from the turnover for sales tax purposes. Each party was ordered to bear its own costs. The reference was answered in the affirmative, and the judgment was agreed upon by both judges.