1986 (3) TMI 308 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner-company qualifies as a "dealer" under section 2(k) of the Karnataka Sales Tax Act.
2. Whether the business of general insurance constitutes "business" under section 2(f-2) of the Act.
3. Whether the sale of goods acquired through insurance settlements is incidental or ancillary to the business of the petitioner-company.
4. Whether the petitioner-company can be classified as a "casual trader" under the Act.

Issue-Wise Detailed Analysis:

1. Qualification as a "Dealer" under Section 2(k) of the Karnataka Sales Tax Act:
The petitioner argued that it does not qualify as a "dealer" as defined under section 2(k) of the Act because its primary business is general insurance, not buying and selling goods. The definition of "dealer" includes any person who carries on the business of buying, selling, supplying, or distributing goods, whether for cash, deferred payment, or other valuable consideration. The court examined whether the petitioner's activities fit this definition and concluded that the petitioner is indeed a dealer because the sale of goods acquired through insurance settlements constitutes an activity incidental to its primary business.

2. Business of General Insurance as "Business" under Section 2(f-2) of the Act:
The petitioner contended that its business of general insurance does not fall within the definition of "business" under section 2(f-2) of the Act. "Business" includes any trade, commerce, manufacture, or any adventure or concern in the nature of trade, commerce, or manufacture, whether or not carried on with a profit motive. The court held that the business of general insurance, which includes incidental transactions such as the sale of salvaged goods, fits within this broad definition of "business."

3. Sale of Goods Acquired Through Insurance Settlements:
The petitioner argued that the sale of goods acquired through insurance settlements is not part of its business and therefore should not be taxable. The court referred to several precedents, including the Supreme Court's decisions in Binny Ltd. [1982] 49 STC 17 (SC) and Burmah Shell [1973] 31 STC 426 (SC), which held that transactions incidental or ancillary to the main business are included within the scope of "business." The court concluded that the sale of salvaged goods is incidental to the petitioner's insurance business and therefore taxable.

4. Classification as a "Casual Trader":
The petitioner contended that it should not be classified as a "casual trader" under the Act. A "casual trader" is defined as a person who occasionally engages in the business of buying, selling, supplying, or distributing goods. The court found that the petitioner's activities of selling salvaged goods were not occasional but a regular part of its business operations, thereby disqualifying it from being considered a casual trader.

Conclusion:
The court upheld the order made by the Additional C.T.O. under section 10 of the Act, requiring the petitioner to register as a dealer. The sale of salvaged goods was deemed incidental to the petitioner's business of general insurance, making it liable to be taxed under the Karnataka Sales Tax Act. The writ petition was dismissed, and the rule issued was discharged.

Writ petition dismissed.