1978 (12) TMI 169 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the sale of positive film by the respondents was in the course of their business.
2. Whether the respondents were dealers and manufacturers under the Bombay Sales Tax Act, 1959.
3. The applicability of the Supreme Court's decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. to the present case.
4. The interpretation of "dealer" and "business" under the Bombay Sales Tax Act, 1959.

Detailed Analysis:

1. Whether the sale of positive film by the respondents was in the course of their business:
The primary issue was whether the sale of 50,000 feet of positive film by the respondents to their customer for Rs. 8,868 on 3rd August 1971 was a transaction made in the course of their business. The respondents, a public limited company, engaged in processing films and taking prints on raw or unexposed positive film supplied by their customers, sold the leftover portions of the extra film they received from their customers. The Tribunal held that this sale was a casual sale and not part of the respondents' business activities. The High Court upheld this view, stating that the disposal of such portions of unexposed positive film given to the respondents by their customers cannot be said to have a close connection or be akin to the normal course of the respondents' business.

2. Whether the respondents were dealers and manufacturers under the Bombay Sales Tax Act, 1959:
The respondents had previously applied to the Commissioner of Sales Tax to determine if they were dealers and manufacturers. The Deputy Commissioner of Sales Tax initially held that they were dealers and manufacturers, leading to their registration under the Act. However, in a related case, Famous Cine Laboratory and Studio Ltd. v. State of Maharashtra, the court held that the respondents were not dealers in respect of purchases made for the maintenance of their studio or for making film sets. They were, however, considered dealers in purchasing chemicals and other processing materials for processing their customers' films.

3. The applicability of the Supreme Court's decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. to the present case:
Both the Deputy Commissioner and the Tribunal based their decisions on the Supreme Court's ruling in State of Gujarat v. Raipur Manufacturing Co. Ltd. The Supreme Court had held that to be a dealer, a person must carry on the business of selling the goods in question. The Court emphasized the necessity of a profit motive and a course of dealings with continuity and regularity. The High Court in the present case found that the respondents did not purchase unexposed positive film for resale but only processed the film supplied by their customers. The sale of leftover film portions was not part of their business activities but a casual disposal of surplus material.

4. The interpretation of "dealer" and "business" under the Bombay Sales Tax Act, 1959:
The High Court reiterated the principles laid down by the Supreme Court, stating that for an activity to be considered a business, there must be a profit motive and continuity in transactions. The respondents' sale of leftover film portions did not meet these criteria, as the sales were neither regular nor intended as a business activity. The court also noted that the respondents' intention in taking extra film from their customers was to account for wastage and contingencies, not for resale.

Conclusion:
The High Court concluded that the sale of the positive film was not in the course of the respondents' business and answered the reference in the negative. The respondents were not liable to be taxed for this sale as it was not part of their regular business activities. The court emphasized that the intention to carry on a business of selling the commodity must be established, which was not the case here. The decision was based on the interpretation of "dealer" and "business" under the Bombay Sales Tax Act, 1959, and the principles laid down by the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd.

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