2003 (2) TMI 443 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the official liquidator can be treated as a registered dealer under section 2(viii) of the Kerala General Sales Tax Act, 1963.
2. Whether the official liquidator is legally obliged to collect sales tax during the sale of assets in winding up proceedings.

Detailed Analysis:

1. Status of Official Liquidator as a Registered Dealer:

The primary issue is whether the official liquidator qualifies as a "registered dealer" under section 2(viii) of the Kerala General Sales Tax Act, 1963 (KGST Act). The court examined the definition of "dealer" which includes any person who carries on the business of buying, selling, supplying, or distributing goods, and includes the Central or State Government if they engage in such activities. The court emphasized that the term "carries on the business" implies more than merely selling or buying; it requires an independent intention to conduct business. The court referenced the Supreme Court's decision in State of Tamil Nadu v. Board of Trustees of the Port of Madras, which clarified that entities not primarily engaged in business activities, but occasionally selling goods (e.g., scrap), do not qualify as dealers unless there is an independent intention to conduct business. This principle was reaffirmed in Commissioner of Sales Tax v. Sai Publication Fund, where the Supreme Court held that incidental activities do not constitute business unless there is a clear intention to engage in business.

2. Obligation to Collect Sales Tax:

The court analyzed whether the official liquidator is obliged to collect sales tax during the sale of assets in winding up proceedings. It was argued by the Special Government Pleader that the official liquidator, appointed by the Central Government, should be treated as a registered dealer and thus, legally entitled to collect tax. However, the court noted that the official liquidator's primary duty is to dispose of assets and realize maximum value for disbursement among creditors, not to conduct business. The court concluded that the official liquidator's sales are ancillary to his statutory duties and do not amount to carrying on a business. Therefore, the official liquidator is not bound to collect sales tax on the sale of assets. This conclusion aligns with the precedent set in the Madras Port Trust and Sai Publication Fund cases, which established that incidental sales activities do not constitute business unless there is a clear intention to conduct such business.

Conclusion:

The court held that the official liquidator does not fall within the definition of "dealer" under the KGST Act and is not obligated to collect sales tax on the sale of assets during winding up proceedings. The appeal was dismissed, affirming the decision of the learned company judge that the official liquidator is not bound to collect sales tax. The court found no reason to interfere with the order of the learned company judge, thus upholding the view that the official liquidator's sales activities are incidental to his statutory duties and do not constitute business activities under the KGST Act.