1973 (5) TMI 76 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the assessee becomes a "dealer" under the Central Sales Tax Act.
2. The effect of issuing 'D' forms on the assessee's liability as a dealer.

Issue-Wise Detailed Analysis:

1. Whether the assessee becomes a "dealer" under the Central Sales Tax Act

The primary question referred to the court was whether the assessee, in this case, the Divisional Forest Officers (DFOs) of Karanjia, Keonjhar, and Balliguda, could be considered "dealers" under the Central Sales Tax Act. The relevant facts indicate that the Indian Railways required sleepers for track maintenance, which were supplied by the forest department of Orissa through an arrangement where the DFOs purchased sleepers from contractors and then sold them to the railways.

The court noted that the forest officers were deemed dealers under the Orissa Sales Tax Act for intra-State sales. However, the issue at hand was their status under the Central Sales Tax Act. The Tribunal had previously determined that the DFOs were not dealers, which led to the State of Orissa making these references.

The court examined the arrangement between the forest department and the railways, where the transactions were conducted on a "no profit and no loss basis." The intention was to serve the national interest by ensuring timely and quality supplies of sleepers to the railways, not to engage in business for profit. The court emphasized that the definition of "dealer" under Section 2(b) of the Central Act includes any person carrying on the business of buying or selling goods, including the government. However, the term "business" was not statutorily defined and generally implies an occupation with a profit motive.

The court referenced several precedents, including the Supreme Court's decision in State of Andhra Pradesh v. Abdul Bakshi and Bros., which stated that business usually involves a profit motive. In Hindustan Steel Ltd. v. State of Orissa, the Supreme Court held that transactions without a profit motive do not constitute business, even if they involve time, attention, and labor.

The court concluded that the DFOs were not carrying on the business of buying and selling sleepers to the railways, as the transactions were intended to be on a no-profit basis for fulfilling an obligation to the Central Government. Therefore, the DFOs did not qualify as dealers under the Central Sales Tax Act.

2. The effect of issuing 'D' forms on the assessee's liability as a dealer

The second question addressed the impact of issuing 'D' forms by the railway administration on the assessee's liability as a dealer. The court noted that statutory liability for tax cannot be inferred merely from the conduct of issuing 'D' forms if there is no underlying liability under the Act.

The court held that once it was established that the assessee was not a dealer, the issuance of 'D' forms by the railways did not change this status. The Tribunal was correct in holding that the assessee-opponent was not a dealer merely because 'D' form declarations had been obtained to claim a concessional rate of tax in inter-State transactions.

Additional Observations

The court observed that the case represented inter-departmental rivalry, where the tax would ultimately be paid by one government department to another. The court expressed regret that the matter had not been resolved administratively, avoiding the lengthy legal process.

The court also addressed an application by the railways to intervene in the reference application, which was not allowed. However, the railways' counsel was heard amicus curiae to assist the court.

Conclusion

The court answered both questions in favor of the assessee, concluding that the Divisional Forest Officers did not become dealers under the Central Sales Tax Act and that the issuance of 'D' forms did not affect their non-dealer status. The reference was answered accordingly.

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