1988 (8) TMI 391 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Andhra Pradesh State Road Transport Corporation (APSRTC) is a "dealer" under the Andhra Pradesh General Sales Tax Act.
2. Whether the sale of scrapped vehicles, old tyres, tubes, tender forms, and other unserviceable material by APSRTC constitutes "business" and is therefore exigible to sales tax.

Detailed Analysis:

1. Whether APSRTC is a "dealer" under the Andhra Pradesh General Sales Tax Act:
The primary issue addressed is whether APSRTC qualifies as a "dealer" as defined under Section 2(1)(e) of the Andhra Pradesh General Sales Tax Act. The definition of "dealer" includes any person who carries on the business of buying, selling, supplying, or distributing goods. The court examined the nature of APSRTC's activities and concluded that APSRTC is not engaged in business activities as its primary objective is to provide road transport services.

The court referenced the case of Andhra Pradesh State Road Transport Corporation v. Commercial Tax Officer [1971] 27 STC 42, where it was determined that APSRTC, being primarily constituted for operating an efficient road transport service, could not be held to be carrying on the business of selling discarded vehicles and other scrap. This case was further supported by the Supreme Court in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 STC 426, which affirmed that APSRTC is not a dealer and thus not liable for sales tax on scrapped materials.

2. Whether the sale of scrapped materials constitutes "business" and is exigible to sales tax:
The court analyzed whether the sale of scrapped vehicles and other materials by APSRTC could be considered "business" under the definition provided in Section 2(bbb) of the Act. The definition includes any trade, commerce, or manufacture or any adventure in the nature of trade, commerce, or manufacture.

The court distinguished the case of District Controller of Stores v. Assistant Commercial Taxation Officer [1976] 37 STC 423, where the Supreme Court held that the sale of unserviceable material by the railways was considered business. The court noted that APSRTC's activities are fundamentally different as its primary objective is to provide road transport services, and the sale of scrap materials is incidental and not a primary business activity.

The court also referenced the Supreme Court's decision in Commissioner of Income-tax v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1, which emphasized that APSRTC's activities are of general public utility and charitable in nature, and thus not aimed at profit-making. The court reiterated that APSRTC's statutory duty to provide transport services does not include carrying on the business of selling scrapped materials.

The Tribunal's observations were upheld, stating that APSRTC's primary activity is to provide transport services, and the sale of unserviceable materials is incidental to this main activity. The court concluded that the volume, frequency, continuity, and regularity of the sale of scrap materials by APSRTC do not indicate an intention to carry on business in such sales.

Conclusion:
The court held that APSRTC is not a "dealer" under the Andhra Pradesh General Sales Tax Act and that the sale of scrapped materials does not constitute "business." Therefore, APSRTC is not liable to pay sales tax on the sale of scrapped vehicles, old tyres, tubes, tender forms, and other unserviceable materials. The order of the Tribunal was confirmed, and the petitions were dismissed without costs.