1978 (4) TMI 228 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of the term "dealer" under the Bengal Finance (Sales Tax) Act, 1941.
- Whether the applicant, Tata Aircraft Ltd., was engaged in the business of selling goods and thus liable to sales tax.

Analysis:
The judgment by the High Court of Calcutta revolved around the interpretation of the term "dealer" under the Bengal Finance (Sales Tax) Act, 1941, and whether Tata Aircraft Ltd. was conducting the business of selling goods, thereby being subject to sales tax. Tata Aircraft Ltd. claimed it was not a dealer as per the Act, as it was involved in disposing of surplus stores of the Government of India under an agreement. The Commercial Tax Officers assessed sales tax on the turnover of these surplus stores, which was contested through appeals and revisions up to the Board of Revenue.

The applicant contended that its activities did not constitute a business of selling goods, citing a Supreme Court case where the government's disposal of surplus war materials was deemed non-taxable as it was not conducted for profit but for capital realization. The Court noted the agreement between Tata Aircraft Ltd. and the Government of India, where Tata acted as the agent for the disposal of surplus stores, receiving service charges and selling fees. The Court also referred to precedents like the Council of Law Reporting case and the Food Corporation of India case to support the argument that even if profit was not the motive, engaging in activities akin to business could still qualify as trading.

The Court examined the clauses of the agreement, emphasizing that Tata Aircraft Ltd. acted as the agent for the Government in selling surplus war materials, akin to the situation in the Supreme Court case cited earlier. It was concluded that if the principal, the Government of India, was not engaged in the business of selling goods through such activities, then its agent could not be considered as conducting such business either. Therefore, the Court accepted the applicant's contentions, ruling in their favor and answering the question referred in the negative. The judgment was agreed upon by both judges, and the reference was answered in the negative.