1982 (3) TMI 227 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the opponent society is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, and is liable to registration and payment of tax.
2. Whether the Tribunal is justified in holding that the period of limitation under section 35 of the Bombay Sales Tax Act, 1959, should be five years and not eight years prior to the issue of assessment notice.

Issue-Wise Detailed Analysis:

Issue 1: Dealer Status of the Opponent Society

Facts and Arguments:
- The opponent-society is a co-operative society registered under the Bombay Co-operative Societies Act with 62 members. It was formed to safeguard the interests of laborers (vanjaras) engaged in extracting minor minerals from the riverbed and selling them.
- The Sales Tax Officer determined that the society should be liable for registration and tax from April 1, 1964, and assessed it for the periods 1964-65 to 1967-68.
- The society contended it was not a dealer as it was not engaged in business in a commercial sense but was formed to provide employment to its members.

Tribunal's Findings:
- The Tribunal held that the society was not a dealer as its primary objective was to safeguard laborers' interests and provide employment, not to carry on business with a profit motive.
- The Tribunal emphasized that the mere activity of buying or selling does not constitute business unless it is commercial in nature.

Court's Analysis:
- The definition of "dealer" under section 2(11) of the Bombay Sales Tax Act includes any person who carries on the business of buying or selling goods.
- The Court referred to several precedents, including State of Bombay v. Ahmedabad Education Society and State of Gujarat v. Raipur Manufacturing Co. Ltd., to determine the meaning of "business" and "dealer."
- The Court noted that "business" implies a systematic and organized course of activity with a profit motive, which was not evident in the opponent-society's activities.
- The Court concluded that the society's activities were primarily aimed at protecting its members' interests and ensuring reasonable wages, rather than carrying on a commercial business.

Conclusion:
- The Court agreed with the Tribunal that the opponent-society was not a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act and was not liable for registration and payment of tax.

Issue 2: Period of Limitation for Assessment

Facts and Arguments:
- The Tribunal held that the period of limitation for assessment under section 35 should be five years, not eight years, since there was no concealment by the society.
- The Sales Tax Officer had issued fresh notices on March 6, 1973, after the initial consolidated notice for four years was declared void.

Court's Analysis:
- Section 35(1) of the Bombay Sales Tax Act allows reassessment within five years if there is no concealment, and within eight years if there is concealment.
- It was established that there was no concealment or knowingly furnished incorrect returns by the society.
- The Court noted that the sales tax department waived the liability from April 1, 1962, indicating no wilful default or concealment.
- The Court concluded that the reassessment should be limited to five years preceding the notice issued on March 6, 1973.

Conclusion:
- The Court affirmed that the period of limitation for reassessment should be five years, making assessments for periods prior to April 1, 1968, time-barred.

Final Judgment:
- The Court answered both questions in the affirmative, in favor of the assessee and against the revenue.
- The opponent-society was not considered a dealer, and the reassessment period was limited to five years.