1995 (2) TMI 386 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 2(5A) of the Bombay Sales Tax Act, 1959 regarding the definition of "business" and its application to transactions post-closure of business.

Detailed Analysis:

Background and Facts:
The case involved M/s. Steel Suppliers Pvt. Ltd., which transitioned from manufacturing iron and steel to warehousing in May 1981. The dispute arose when the assessee sold machinery post-closure, leading to tax assessments under the Bombay Sales Tax Act and the Central Sales Tax Act. The question revolved around the applicability of the amended definition of "business" under section 2(5A) of the Act to sales post-closure.

Contentions and Arguments:
The Revenue contended that sales post-closure are taxable if falling under the definition of "business" at the time of the transaction, regardless of the closure date. In contrast, the assessee argued that the amended definition of "business" applies only if closure occurred after July 1, 1981, to avoid further retrospective application.

Legal Provisions and Amendments:
The definition of "business" in section 2(5A) was amended by Maharashtra Act 9 of 1988 to include transactions related to the commencement or closure of business. This change broadened the scope to cover such transactions, aligning with the legislative intent to tax sales connected with business activities.

Court's Analysis and Decision:
The Court examined the legislative history and the impact of the amended definition. It clarified that tax liability is based on sales transactions, not business closure dates. The date of the transaction determines tax applicability, as per the prevailing law. The Court emphasized that the amended definition applies to all sales post-July 1, 1981, irrespective of the closure date, rejecting the assessee's argument.

Precedent and Relevance:
The Court distinguished a prior decision from the Madhya Pradesh High Court, highlighting the specific inclusion of post-closure transactions in the Bombay Act's definition of "business." This distinction reinforced the applicability of the amended definition to the case at hand, emphasizing the legislative intent behind the amendment.

Conclusion:
The Court ruled in favor of the Revenue, stating that the amended definition of "business" applies to all sales post-July 1, 1981, irrespective of the business closure date. The decision clarified that tax liability is tied to sales transactions and not business closure events. As a result, the reference was answered in the negative, with no order as to costs, settling the dispute regarding taxability of post-closure sales under the Bombay Sales Tax Act.