1977 (6) TMI 87 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner-devaswom is a dealer within the meaning of section 2(viii) of the Kerala General Sales Tax Act, 1963.

Detailed Analysis:

Issue 1: Definition of Dealer
The primary issue revolves around whether the petitioner-devaswom qualifies as a "dealer" under section 2(viii) of the Kerala General Sales Tax Act, 1963 (the Act). The Act defines a dealer as "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 for commission, remuneration or other valuable consideration." This definition includes casual traders and those who sell goods produced by them through manufacture, agriculture, horticulture, or otherwise.

Tribunal's Findings
The Tribunal held that since the appellant sold timber after cutting and converting standing trees into timber, it produced the goods sold and thus falls within the definition of a dealer under the Act. The Tribunal's conclusion was based on the activities of felling, dressing, and selling the trees.

Business Nature Requirement
The Court emphasized that merely buying, selling, supplying, or distributing goods does not make one a dealer unless these activities are carried out in the course of business. The definition of a dealer includes the business aspect, which involves periodicity, continuity, and profit-motive. The Court referred to previous judgments to reinforce that transactions must be of a business nature to qualify someone as a dealer.

Exclusion of Business Concept
The Court noted that explanations (1) and (2) to clause (viii) and explanations (1), (1A), and (2) to clause (xxi) of section 2 exclude the business concept for certain entities, such as societies or governments, which would be deemed dealers even if their transactions were not in the course of business. However, this exclusion did not apply to the petitioner-devaswom.

Definition of Business
The term "business" includes trade, commerce, manufacture, or any adventure in the nature of trade, commerce, or manufacture. The Court cited the Supreme Court's interpretation, indicating that business involves a course of dealings with a profit motive, and the nature, volume, frequency, regularity, organization, and intention of transactions are relevant factors.

Manufacture and Production
The Court examined whether the activities of the devaswom constituted manufacture. To manufacture is to change the commercial identity of an article, resulting in a transformation. The Court found that the devaswom's activities of felling and dressing trees did not constitute manufacturing, as no new commodity emerged with a distinct commercial identity.

Spontaneously Grown Trees
The Court emphasized that the devaswom sold spontaneously grown trees and did not produce them through manufacture, agriculture, horticulture, or otherwise. The sale of such trees did not qualify the devaswom as a dealer under the Act.

Precedent Cases
The Court referred to several precedent cases to support its conclusions. In Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co., the Supreme Court held that converting latex into sheets did not make the seller a dealer. Similarly, in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Palampadam Plantations Ltd., the Supreme Court stated that spontaneously grown trees could not be regarded as produced by the seller.

Conclusion
The Court concluded that the petitioner-devaswom did not engage in any transaction of a business nature and did not sell goods produced by it through manufacture, agriculture, horticulture, or otherwise. Therefore, the devaswom was not a dealer as defined under the Act.

Judgment
The tax revision cases were allowed with costs. The petitioner-devaswom was not considered a dealer under the Kerala General Sales Tax Act, 1963. The petitions were allowed, and counsel's fee was set at Rs. 150.