1986 (1) TMI 378 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sales turnover of machinery amounting to Rs. 9,51,689.69 is taxable under the Kerala General Sales Tax Act, 1963.
2. Whether the assessee, a public limited company engaged in the manufacture and sale of cycle tyres, tubes, and rubber goods, is liable to pay tax on the sale of surplus machinery.
3. Interpretation of the term "business" and "dealer" as per the Act.
4. Application of precedents regarding the taxability of sales of surplus machinery and incidental transactions.

Analysis:
The High Court of Kerala heard a revision filed by the State against the decision of the Kerala Sales Tax Appellate Tribunal, which directed the deletion of the sales turnover of machinery from the taxable turnover of the assessee for the year 1975-76. The assessee contended that the sale of machinery was not taxable as it was surplus and not part of their regular business dealings. However, the assessing authority and Deputy Commissioner of Sales Tax brought this turnover to tax, albeit at a reduced quantum. The Tribunal held that the assessee was not a dealer in machinery and the sale of surplus machinery was not part of their business, leading to the deletion of the turnover from taxable turnover. The State challenged this decision in revision.

The Tribunal considered the contention of the assessee that the machinery sold was surplus and not part of their regular business dealings. The Court analyzed the definition of "business" and "dealer" under the Act, emphasizing that the machinery was purchased for use in the factory for manufacturing goods in which the assessee dealt. The Court referred to precedents where sales of advertising materials, scrap, motor cars, and unserviceable vehicles were held to be connected with the business of the assessee and thus taxable. Based on these precedents, the Court concluded that the turnover from the sale of surplus machinery was exigible to tax and set aside the Tribunal's order, restoring that of the Deputy Commissioner of Sales Tax.

In conclusion, the Court allowed the petition, ruling in favor of the State and holding that the turnover from the sale of surplus machinery by the assessee was taxable under the Kerala General Sales Tax Act, 1963.