1963 (4) TMI 94 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the applicants are dealers as defined in section 2(6) of the Bombay Sales Tax Act, 1953, and liable to registration.

Detailed Analysis:
The case involved the applicants, a concern engaged in ginning and pressing cotton, who purchased hessian and iron hoops for their business. The turnover of these purchases exceeded the prescribed limit of Rs. 25,000 per year. The applicants sought a determination from the Additional Collector of Sales Tax regarding their status as dealers and liability for registration. The Additional Collector found them liable, leading to an appeal before the Tribunal, which upheld the decision. The Sales Tax Tribunal then referred the case to the High Court, raising two questions for consideration.

The first question was whether the applicants could be considered as carrying on the business of buying and selling hessian and iron hoops, making them liable for registration when the turnover exceeded the limit. The second question was whether these transactions constituted purchases and sales as defined in the Sales Tax Act and if they were part of the applicants' business activity. The applicants' counsel conceded that the second question was encompassed within the first and did not require a separate analysis.

The applicants argued that they were not engaged in the business of purchasing hessian and iron hoops but rather in providing services, contending that the goods purchased were consumed in their business activities, not for resale. However, the Court referenced a previous Division Bench decision that established the applicants' business activity involved selling hessian and iron hoops to customers. This previous case had a similar factual scenario, and the Court had determined that such transactions constituted sales of goods, making the assessee a dealer under the Act.

The applicants' counsel raised the argument that a subsequent Supreme Court decision altered the interpretation of service contracts involving the sale of materials. However, the High Court clarified that the Supreme Court decision did not impact the earlier ruling, emphasizing that in the applicants' business transactions, there was a distinct sale of materials involved. The Court reiterated that even service contracts could involve divisible components, including separate contracts for material transfer and service remuneration.

Ultimately, the High Court affirmed that the applicants qualified as dealers under the Sales Tax Act due to the sale of hessian and iron hoops in their business activities. The Court concluded that the applicants' argument regarding the nature of their purchases was unnecessary given the established sales aspect of their transactions. Consequently, the Court answered the first question in the affirmative, with no need to address the second question separately, and directed the applicants to bear the costs of the Department.