1996 (7) TMI 576 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the Delhi Transport Corporation (DTC) is rendering service and not carrying on a commercial activity in providing transport facilities.
2. Whether the sale of scrap, including old and unserviceable buses, spare parts, and other materials by DTC is not in the nature of business activity and thus not liable to sales tax.

Issue-wise Detailed Analysis:

Issue 1: Whether the Delhi Transport Corporation (DTC) is rendering service and not carrying on a commercial activity in providing transport facilities.

The Tribunal examined the provisions of the Delhi Sales Tax Act, particularly Section 2(c) defining 'business' and Section 2(e) defining 'dealer.' It concluded that DTC's primary objective is to provide transport services, not to engage in trade or commerce. The Tribunal referenced the Supreme Court's decision in State of Tamil Nadu Vs. Burmah Shell Oil Co. Ltd., which distinguished between primary business activities and incidental activities. The Tribunal held that DTC's activities of selling unserviceable goods were incidental to its main service-oriented activities and thus did not constitute 'business' under Section 2(c) of the Act. Consequently, DTC was not considered a 'dealer' and was not liable for sales tax on the sale proceeds of these items.

Issue 2: Whether the sale of scrap, including old and unserviceable buses, spare parts, and other materials by DTC is not in the nature of business activity and thus not liable to sales tax.

The Tribunal observed that DTC's sale of unserviceable goods, scrap, or junk was not the primary objective of DTC and thus did not fall within the definition of 'business.' The Tribunal noted that these sales were incidental to DTC's main activity of providing transport services. The Tribunal referred to the Supreme Court's decision in State of Gujarat Vs. Raipur Manufacturing Co. Ltd., which held that selling unserviceable goods does not constitute business unless there is an intention to carry on the business of selling those goods. The Tribunal also considered the decision in Andhra Pradesh Road Transport Corporation, Hyderabad Vs. Commercial Tax Officer, Hyderabad, where it was held that the sale of discarded vehicles and other scrap by a transport corporation did not constitute business activity.

The Tribunal further analyzed the Supreme Court's decision in Burmah Shell Oil Co. Ltd., which differentiated between sales connected with the primary business and incidental sales. The Tribunal concluded that DTC's sale of scrap and unserviceable items was incidental to its main service-oriented activities and did not constitute business under the Delhi Sales Tax Act.

Relevant Case Law:

1. State of Tamil Nadu Vs. Burmah Shell Oil Co. Ltd.: The Supreme Court held that incidental sales connected with the primary business activity could be considered business.
2. State of Gujarat Vs. Raipur Manufacturing Co. Ltd.: The Supreme Court held that selling unserviceable goods does not constitute business unless there is an intention to carry on the business of selling those goods.
3. Andhra Pradesh Road Transport Corporation, Hyderabad Vs. Commercial Tax Officer, Hyderabad: The High Court held that the sale of discarded vehicles and other scrap by a transport corporation did not constitute business activity.

Conclusion:

The High Court, after considering the Tribunal's findings and relevant case law, concluded that DTC's primary objective is to provide transport services, and the sale of unserviceable goods is incidental to this main activity. Therefore, DTC is not engaged in commercial activity and is not liable to pay sales tax on the sale proceeds of these items. The Court answered both questions in the affirmative, in favor of the assessee (DTC) and against the Revenue.