2015 (4) TMI 458 - HC - VAT and Sales Tax

Dealer or not - Charitable trust - Whether Tribunal was justified in holding that the appellant's activity of manufacture and sale of sweetmeats and farsan is integral and incidental to his main charitable activity, and that therefore the appellant is not a 'dealer' and does not carry on 'business' qua its activity of manufacture and sale of sweetmeats and farsan - Held that - trust was formed with an object of providing pure drinking water to the needy, to provide food; either free of charge or at concessional rate to the needy and deserving and as such according to the assessee, the activity of manufacturing of farsan and sweetmeats is taken up. Though it is claimed by the assessee that the sweetmeats and farsan are made available to the devotees at concessional rate, no material is brought on record to demonstrate that the said activities of sale of sweetmeats and farsan, etc. are restricted to the persons interested, whereas it is part of the orders passed by the Revenue, from time to time, that the sweetmeats and farsan are sold to the general public. - From the conduct of the assessee, it appears that the very activity of manufacture and sale of farsan and sweetmeats, is also not ancillary to the main object of the trust, but the same activity is carried out as purely business activity and that too on large basis continuously and having sizable volume. It is nowhere provided in the object of the trust to manufacture farsan and sweetmeats and to sell the same in open market, that too on large scale, in sizable volume with a continuous and regular activity. The profit earned out of the said activity is said to have been used for the purpose of achieving the object of the trust, however, the said activity of preparation of sweetmeats and farsan and selling the same, in no way could be termed as an activity ancillary to the main object of the trust, i.e. providing medical aid, education, manage Pyaus, to manage and run Ganesh Bhandar and to provide food, sweetmeats and other delicious food free of charge or at concessional rate. This is not a sale of literature or other material having any bearing on the teaching and message of somebody as revered as Saibaba. It is a proper commercial activity and aimed at garnering revenue. It is now established and is in place under the distinctive name and style. The sale of sweetmeats, farsan to general public cannot be equalled with a activity noticed by the Hon'ble Supreme Court 2002 (3) TMI 45 - SUPREME Court and associated with Saibaba and his followers. It is also required to be noted that even if the main object of the trust in the present case is not a business, the connected incidental or ancillary activity of manufacture of farsan and sweetmeats, could not normally be termed as 'business', unless the very conduct of the assessee if analyzed independently, the intention that could be gathered is to conduct the business in carrying out the incidental or ancillary activity. In our opinion, the Revenue has rightly discharged its burden by bringing on record from the observations made herein above, that the activity of the assessee trust is not incidental or ancillary to the main object of the trust, hence termed as 'business' having regard to its nature, viz. continuity, voluminous, etc. - Court is alive to the fact that the profit motive will have hardly any bearing over declaring the said activity as 'business' activity, however, it is required to be noted that the regularity of the transaction of manufacture and sale in the said class of goods, that too with a motive of carrying on business and making available the same not only to restricted persons or beneficiaries of the trust, but to public at large, has to be termed as the 'business' activity covered under the Bombay Act and assessee trust is liable for tax under the Bombay Act. - Decided in favour of Revenue.

Issues Involved:
1. Whether the trust's activity of manufacturing and selling sweetmeats and farsan qualifies as "business" under the Bombay Sales Tax Act, 1959.
2. Whether the trust is a "dealer" under the Bombay Sales Tax Act, 1959.
3. The applicability of the judgment in Commissioner of Sales Tax vs. Sai Publication Fund.
4. The relevance of the Karnataka High Court's judgment in M/s Manipal University vs. State of Karnataka.
5. The constitutional validity of sub-clause (iv-a) to the explanation of clause (8) of section 2 of the Bombay Sales Tax Act.

Detailed Analysis:

1. Whether the trust's activity of manufacturing and selling sweetmeats and farsan qualifies as "business" under the Bombay Sales Tax Act, 1959:
The court analyzed the definitions of "business" and "dealer" under sections 2(5A) and 2(11) of the Bombay Sales Tax Act, 1959. The term "business" includes any trade, commerce, or manufacture, irrespective of profit motive. The trust's activity of preparing and selling sweetmeats and farsan was found to be a continuous, regular, and sizable operation, thus qualifying as a commercial activity. The court concluded that the trust's activity is a "business" within the meaning of section 2(5A) of the Bombay Act.

2. Whether the trust is a "dealer" under the Bombay Sales Tax Act, 1959:
The court examined whether the trust's activity of selling sweetmeats and farsan made it a "dealer" as defined in section 2(11) of the Bombay Act. The trust's substantial income from sales, compared to donations and interest, indicated a business operation. The court held that the trust must register as a "dealer" and is liable for tax under the Act.

3. The applicability of the judgment in Commissioner of Sales Tax vs. Sai Publication Fund:
The trust argued that its case was similar to the Sai Publication Fund case, where the Supreme Court held that the sale of literature by a trust was not a business activity. However, the court distinguished the present case, noting that the trust's activity of selling sweetmeats and farsan was not ancillary to its main charitable objectives. Unlike the Sai Publication Fund case, the trust's activity was a substantial commercial enterprise.

4. The relevance of the Karnataka High Court's judgment in M/s Manipal University vs. State of Karnataka:
The court found support in the Karnataka High Court's judgment, which held that the sale of prospectuses by a university constituted a business activity due to its volume, frequency, and regularity. Similarly, the trust's continuous and large-scale sale of sweetmeats and farsan was deemed a business activity.

5. The constitutional validity of sub-clause (iv-a) to the explanation of clause (8) of section 2 of the Bombay Sales Tax Act:
The court noted the presumption of constitutional validity of legislative provisions. The trust failed to demonstrate that the provision was ultra vires the Constitution. The court refrained from addressing this issue in detail, given its decision on the primary issues.

Conclusion:
The court answered the reference in favor of the Revenue, holding that the trust's activity of manufacturing and selling sweetmeats and farsan is a "business" under section 2(5A) of the Bombay Sales Tax Act, 1959, and the trust is a "dealer" liable for registration and tax. The writ petition was dismissed with no order as to costs.

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