2013 (4) TMI 497 - HC - VAT and Sales Tax

Vat tax on sale of forms not paid - U.P. VAT Act, 2008 - The petitioner, a University, established under the provisions of U.P. State Universities Act, 1973 - whether the petitioner is a dealer within the meaning of section 2(h) and is carrying on the business within the meaning of section 2(e), of the Act - Held that - If the main activity of the petitioner is business or not, is the decisive factor to answer the question whether the person is dealer for incidental or ancillary activity. Imparting education is a mission. Right to education, in the context of Articles 45, 41 means (a) every child/citizen of this country has a right to free education until he completes the age of fourteen years and (b) if a child or citizen completes the age of 14 years the State shall make effective provision or securing the right to work and education within the limits of its economic capacity and development. The aims of education has been recognized by the Indian Courts from time to time. Education is perhaps most important function of State and Local Self Governments. It is unthinkable and beyond imagination to treat the imparting of education as business. The relationship in between teacher and one taught is not a business relation. The idea and purpose of imparting education is to develop personality of the students to carry the nation forward and in right direction. Considering the case of Commissioner Of Sales Tax Versus Sai Publication Fund 2002 (3) TMI 45 - SUPREME Court if the main activity is non-business and activity of buying and selling which forms part of an integral part of the non-business activity then also the party will not be a dealer. Thus the petitioner is not a dealer within the meaning of section 2(h) & its activity of printing and selling of admission forms to the students does not amount to business within the meaning of section 2(e) of the Act. In the result, the writ petition succeeds - In favour of assessee.

Issues Involved:
1. Whether the petitioner University is a "dealer" under Section 2(h) of the U.P. VAT Act, 2008.
2. Whether the University's activity of printing and selling admission forms constitutes "business" under Section 2(e) of the U.P. VAT Act, 2008.

Issue-wise Detailed Analysis:

1. Whether the petitioner University is a "dealer" under Section 2(h) of the U.P. VAT Act, 2008:

The petitioner, a University established under the U.P. State Universities Act, 1973, challenged a notice issued by the Deputy Commissioner, Commercial Tax, Varanasi, requiring it to produce account books for the sale of forms worth Rs. 8,05,400/- without paying VAT. The primary contention was whether the University qualifies as a "dealer" as defined in Section 2(h) of the U.P. VAT Act. The University argued that its primary function is to impart education, not to engage in business activities. The respondents countered that the University's activity of printing and selling admission forms constitutes business, making it a dealer under the Act.

The Court examined the definition of "dealer" in Section 2(h) of the Act, which includes any person engaged in the business of buying, selling, supplying, or distributing goods. The Court referenced previous judgments, such as Swadeshi Cotton Mills Co. Limited Vs. Sales Tax Officer, where it was held that incidental activities related to the main business could be taxed. However, in the context of educational institutions, the Court noted that providing meals to students or selling admission forms are minor and subordinate activities that do not transform the institution into a business entity.

2. Whether the University's activity of printing and selling admission forms constitutes "business" under Section 2(e) of the U.P. VAT Act, 2008:

The Court analyzed whether the University's activity of printing and selling admission forms could be classified as "business" under Section 2(e) of the Act, which defines business as any trade, commerce, or manufacture. The Court referred to the case of Commissioner of Sales Tax Vs. Sai Publication Fund, where it was held that if the main activity is not business, incidental activities do not amount to business unless there is an independent intention to carry on business.

The Court observed that the University's primary function is to impart education, and the sale of admission forms is a minor, incidental activity necessary for its smooth functioning. The Court emphasized that education is a mission and not a business. It cited the case of M/S Scholors Home Senior Secondary School Vs State Of Uttarakhand, where it was held that supplying food to residential students does not amount to business, as the main activity is education.

The Court concluded that the University's activity of printing and selling admission forms does not constitute business under the Act. Therefore, the University is not a dealer within the meaning of Section 2(h) of the U.P. VAT Act, and its activities do not fall under the purview of the Act.

Conclusion:

The Court held that the petitioner University is not a dealer under Section 2(h) of the U.P. VAT Act, and its activity of printing and selling admission forms does not amount to business under Section 2(e) of the Act. Consequently, the University is not liable to obtain registration under the U.P. VAT Act or produce its account books before the respondents. The impugned notice and orders issued by the Authorities under the U.P. VAT Act were declared illegal and without jurisdiction, and the writ petition was allowed in terms of the reliefs claimed. No order as to costs was made.

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