1995 (10) TMI 212 - HC - VAT and Sales Tax

Summary

Issues:
Whether unserviceable items of stores, like scrap, dyes, chemicals, broken iron hoops, obsolete machinery, coal-ash, etc., are exigible to tax under the State Sales Tax Act and the Central Sales Tax Act.

Detailed Analysis:

1. The applicant, a public limited company engaged in the manufacture of cloth and yarn, was assessed for sales tax by the Assistant Commissioner of Sales Tax for various years. The assessing authority found that the company made sales of discarded items like machineries, colors, chemicals, iron hoops, and other materials. The company contended that these sales were not part of its business and were casual, thus not liable for tax. However, the assessing authority held the transactions taxable. The company appealed to the Deputy Commissioner of Sales Tax, who dismissed the appeals. Further appeals to the Tribunal were also dismissed.

2. The Board of Revenue referred the question of law regarding the taxability of unserviceable items of stores to the High Court. The department argued that the items were exigible to tax. The Court noted the definitions of "business" under the M.P. General Sales Tax Act and the Central Sales Tax Act, emphasizing that transactions incidental to trade or commerce are included in the definition.

3. The Court referred to previous judgments, such as Commissioner of Sales Tax v. Ratlam Strawboard Mills Private Ltd., where it was held that even the sale of old plant and accessories, though not the primary business, fell under the definition of business for tax purposes. The Court also cited M.P. State Road Transport Corporation v. Commissioner of Sales Tax, where sales of unserviceable materials were deemed taxable.

4. The Court emphasized that the actual accrual of gain or profit is not the determining factor for tax liability. It held that the sale of unserviceable items of stores, including scrap, dyes, chemicals, etc., constituted sales in the course of business and were liable for tax under the relevant Acts.

5. Concluding that the issue was not a pure question of law and was covered by previous decisions, the Court answered the reference in favor of the Revenue and against the assessee. The reference was disposed of with no orders as to costs, and a copy of the order was to be transmitted to the Appellate Tribunal.

6. In summary, the Court held that sales of unserviceable items of stores were taxable under the State Sales Tax Act and the Central Sales Tax Act, as they fell within the definition of business transactions and were not casual sales. The Court relied on previous judgments and statutory definitions to support its decision, ultimately ruling in favor of tax liability for such sales.