1984 (3) TMI 357 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of sales of old newspapers.
2. Taxability of sales of damaged newsprint.

Detailed Analysis:

1. Taxability of Sales of Old Newspapers:

The Tribunal concluded that the sales of old newspapers, which had remained unsold and were disposed of as waste paper, could not be regarded as a by-product or subsidiary product of the assessee's business. The Tribunal held that these sales were not in the course of the assessee's business and were not liable for sales tax. The High Court supported this view, noting that old newspapers, if considered as newspapers, are excluded from the definition of "goods" under the Bombay Sales Tax Act, 1959. If regarded as discarded goods, they are not by-products or subsidiary products. Consequently, the sales of old newspapers were not liable to sales tax.

2. Taxability of Sales of Damaged Newsprint:

The Tribunal held that the waste newsprint, obtained due to damage in transit or the printing process, was not intended for business purposes when the newsprint was purchased. The High Court referred to the Supreme Court's decision in State of Gujarat v. Raipur Manufacturing Co. Ltd., which established that for an activity to be considered a business, there must be a course of dealings with a profit motive. The High Court found that waste newsprint was more akin to unserviceable goods rather than a by-product or subsidiary product. Therefore, the sales of waste newsprint were not taxable.

Relevant Provisions and Precedents:

The High Court referred to Section 2 of the Bombay Sales Tax Act, 1959, defining "dealer" and "goods," and emphasized that newspapers are excluded from the definition of "goods." The principles from the Supreme Court's decision in Raipur Manufacturing Co. Ltd. were applied, highlighting that the intention to carry on business in the sold commodity must be established for taxability.

Conclusion:

The High Court concluded that both the sales of old newspapers and damaged newsprint were not liable to sales tax under the Bombay Sales Tax Act, 1959. The question referred to the court was answered in the affirmative, favoring the assessee, and the applicant was ordered to pay the costs of the reference.