1986 (8) TMI 421 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Government of India Forms Stores can be regarded as a "person" within the meaning of "dealer" under section 2(b) of the Central Sales Tax Act.
2. Whether the transactions of supply of forms by the assessee to various departments and undertakings of the Government can be regarded as "business" within the meaning of "dealer" under section 2(b) of the Central Sales Tax Act.
3. Whether the Tribunal was right in holding that the assessee is a "dealer" as defined by section 2(b) of the Central Sales Tax Act.
4. Whether the levy of sales tax on the assessee under the Central Sales Tax Act was without jurisdiction or illegal.

Issue-wise Detailed Analysis:

1. Personhood of the Assessee:
The Tribunal had rejected the contention that the Government of India Forms Stores was not a person and thus not a dealer under the Central Sales Tax Act. The Tribunal held that the term "dealer" included any person or government carrying on the business of buying or selling goods. However, the High Court refrained from answering this question as the subsequent questions disposed of the reference.

2. Business Definition:
The Tribunal had held that the supply of forms constituted business within the meaning of the Central Sales Tax Act, noting that the assessee charged for forms, packing, and a levy charge, suggesting an intent to profit. The High Court disagreed, emphasizing that the definition of "business" prior to 1976 required a profit motive. The Court found that the levy charge could cover other costs like storage and administration, not necessarily indicating a profit motive. Thus, the transactions did not constitute business under the Act.

3. Dealer Status:
The Tribunal had concluded that the assessee was a dealer because it registered under the Bengal Finance (Sales Tax) Act and filed returns, implying it carried on business. The High Court found this conclusion unwarranted, noting the assessee's consistent stance of non-profit motive and the Supreme Court's precedent that profit motive was essential for defining business. The Court held that the Tribunal's reliance on the Assam High Court decision, which was overturned by the Supreme Court, was misplaced. Therefore, the assessee was not a dealer under the Central Sales Tax Act.

4. Jurisdiction and Legality of Tax Levy:
The Tribunal had upheld the levy of sales tax, asserting that the assessee intended to make a profit. The High Court disagreed, citing the lack of evidence of profit motive and the Supreme Court's ruling that transactions without profit motive do not constitute business. Consequently, the levy of sales tax was deemed without jurisdiction and illegal.

Conclusion:
The High Court answered questions 2, 3, and 4 in the negative, favoring the assessee, and refrained from answering question 1. The Tribunal's findings were overturned, and the levy of sales tax was declared without jurisdiction and illegal. The reference was answered in the negative, with no order as to costs.