1995 (1) TMI 330 - HC - VAT and Sales Tax

Summary

Issues:
Whether the Tribunal was justified in holding the Corporation as a 'dealer' assessable to sales tax and if the sales of unserviceable materials like tyres, tubes, spare parts, etc., constitute a transaction of trade or commerce under the M.P. General Sales Tax Act, 1958.

Analysis:
The judgment pertains to a reference made by the Appellate Tribunal regarding the liability of the Madhya Pradesh State Road Transport Corporation (referred to as the Corporation) to pay sales tax on the sale of unserviceable spare parts like tyres, tubes, etc. The Tribunal had to determine if the Corporation qualifies as a 'dealer' under the M.P. General Sales Tax Act, 1958, and if the sales of unserviceable materials constitute a transaction of trade or commerce. The Corporation argued that it is not a dealer in such spare parts and, therefore, not liable to pay sales tax.

The definition of 'dealer' under the Act includes a person engaged in buying, selling, supplying, or distributing goods. The term 'business' was not originally defined in the Act but was later incorporated with an expansive definition under section 2(bb) to encompass various activities related to trade, commerce, or manufacture, irrespective of profit motive. The definition clarifies that any transaction in connection with or incidental to the main business activity would amount to 'business', thereby making it taxable.

The Court considered precedents, including decisions from the Andhra Pradesh High Court, the Supreme Court, and a Division Bench of the Madhya Pradesh High Court. These cases emphasized that the presence or absence of profit-motive is not relevant in determining business activities for tax purposes. The Court also referred to judgments from other states, such as Tamil Nadu and Rajasthan, where sales of unserviceable materials were held to be subject to sales tax, further supporting the position that the disputed sales in the present case are indeed taxable.

Ultimately, the Court answered the reference in the affirmative, ruling in favor of the Revenue and against the assessee, i.e., the Corporation. The judgment concluded by directing the transmission of a copy of the decision to the Appellate Tribunal, disposing of the reference without costs. The decision reaffirmed the applicability of sales tax to transactions involving unserviceable materials by entities engaged in trade or commerce, as per the provisions of the M.P. General Sales Tax Act, 1958.

This comprehensive analysis of the judgment highlights the key legal principles applied by the Court in determining the tax liability of the Corporation and provides a detailed overview of the reasoning behind the decision.