1983 (10) TMI 231 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the sale of unserviceable goods worth Rs. 5,866 by the dealer is liable to tax under the Madhya Pradesh General Sales Tax Act, 1958.

Issue-wise Detailed Analysis:

1. Taxability of Unserviceable Goods:

The core issue is whether the sale of unserviceable goods by the dealer for Rs. 5,866 is liable to tax under the Madhya Pradesh General Sales Tax Act, 1958. The relevant assessment period is from April 1, 1967, to March 31, 1968. The Assistant Commissioner of Sales Tax included this amount in the taxable turnover of the assessee, which was upheld by the Appellate Deputy Commissioner. However, the Tribunal reversed this decision, stating that the sale of such unserviceable goods was not taxable.

2. Definition of "Business" under Section 2(bb) of the Act:

The interpretation of the term "business" as defined in section 2(bb) of the Act is crucial. The definition includes any trade, commerce, manufacture, or any transaction incidental or ancillary to the main business, regardless of profit motive. This extensive definition aims to cover various transactions, including those involving unserviceable goods, obsolete or discarded goods, and scrap materials.

3. Tribunal's Reasoning:

The Tribunal differentiated between the nature of the goods sold by the assessee and those in the cited case of State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. The Tribunal noted that the damaged wooden containers and drums sold by the assessee were not significant stock items but rather unserviceable scrap, thus not liable to tax.

4. Department's Argument:

The department argued that the sale of these containers and drums had a nexus with the business of the assessee and should be taxed under the broad definition of "business" provided in the Act. The department relied on the case of Commissioner of Sales Tax v. Ratlam Strawboard Mills to support its argument.

5. Assessee's Counterargument:

The assessee contended that for a transaction to be included within the definition of "business," there must be frequency, continuity, and regularity in the sale of the articles. The assessee relied on the Supreme Court's decision in Board of Revenue v. A.M. Ansari, which emphasized these elements. The assessee also argued that the Ratlam Strawboard Mills case could not be relied upon as it did not consider the Supreme Court's judgment in Ansari's case.

6. Court's Interpretation of "Business":

The court emphasized the extensive definition of "business" under section 2(bb) of the Act, which includes transactions incidental or ancillary to the main business. The court cited various cases to illustrate that even activities not directly part of the primary business but auxiliary to it could be considered "business."

7. Applicability of Ansari's Case:

The court distinguished the Ansari case, noting that it dealt with the principal business of selling forest produce by the Government of Andhra Pradesh and not with incidental transactions like the one at hand. The court concluded that the Ansari case could not be used to determine the current issue.

8. Comparison with Ratlam Strawboard Mills Case:

The court found that the Ratlam Strawboard Mills case was applicable, as it dealt with the sale of items incidental to the main business. The court reiterated that the sale of unserviceable goods by the assessee fell within the definition of "business" under the Act.

9. Distinction from Synthetics Limited's Case:

The court distinguished the Synthetics Limited case, where the purchase of building materials before the commencement of business was not considered as in the course of business. The court noted that the facts of the Synthetics Limited case were different, and it could not be applied to the current case.

Conclusion:

The court concluded that the sale of unserviceable goods worth Rs. 5,866 by the assessee was exigible to tax under the definition of "business" in section 2(bb)(ii) of the Act. The question referred was answered in favor of the department and against the assessee. The reference was answered accordingly, with no order as to costs.