1971 (8) TMI 205 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the amount fetched from the auction sale of a damaged motor car by an insurance company constitutes assessable turnover under the Madras General Sales Tax Act.

Analysis:
The petitioner, an insurance company, sold a damaged motor car through an auctioneer after settling claims related to an accident. The respondent sought to tax the amount realized from the auction sale as assessable turnover under the Madras General Sales Tax Act. The petitioner contended that their primary business is insurance, not buying or selling goods, and the sale of the damaged car was incidental. The court referred to the definition of a dealer under the Act, which includes persons involved in buying, selling, or distributing goods. The court held that the petitioner's occasional sale of a damaged vehicle does not classify them as a dealer engaging in commercial activities. Citing a Supreme Court decision, the court emphasized that for an activity to be considered a business, it must be frequent, voluminous, continuous, and regular. Therefore, the court concluded that the petitioner does not fall under the definition of a dealer, and the amount from the auction sale cannot be treated as assessable turnover.

2. Whether the assessment and penalty imposed by the respondent were valid.

The court found that the respondent's assessment and penalty were based on an incorrect interpretation of the law. Since the petitioner did not qualify as a dealer under the Act, the assessment and penalty were deemed to be without proper jurisdiction. The court held that the amount from the auction sale did not constitute assessable turnover that had escaped assessment. Consequently, the court allowed the writ petition, making the rule nisi absolute, and ruled in favor of the petitioner. The court also stated that there would be no order as to costs in this matter.