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2013 (8) TMI 679 - HC - VAT and Sales TaxWhether sale of DEPB license constitute business and liable to VAT / Sales Tax - Whether the assesse was carrying out any Business - The assesse effected sale of DEPB license in the course of the trade or commerce and sold them locally during the assessment years 1999-2000 and 2000-2001. The assesse claimed that the sale of DEPB license was not liable to be included in the turnover, there being no business carried on in that line - there was no sale of goods; consequently, the same was not assessable under the provisions of the Act Held that - For all purposes or for substantive part of the definition business , there must be frequency, continuity and regularity in the transactions and the said activity would qualify to be termed under the definition of business , the incidental or ancillary activity to the main business does not call for such interpretation - By use of the expression any transaction in connection with the business , one can hold that the Act itself does not contemplate the frequency or regularity or continuity of the transactions, as has been done in the substantive part in sub clause (1) of sub section (d) of Section 2 of the Act. As far as the contention of the assessee that it does not purchase DEPB licence was concerned, going by the scheme of DEPB and the purpose and the background in which the same was issued and the value at which it was assigned to the petitioner there was no justifiable ground to accept the case of the assessee that he was not a dealer dealing in DEPB licence - The issue raised that the assessee was carrying business in DEPB licence was raised only before this Court and not before the authorities below where the question was whether DEPB licence would be liable to tax - it being a question of law the same be rejected - Decided against the assessee.
Issues Involved:
1. Whether the sale of DEPB licences by the assessee constitutes "business" under the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act. 2. Whether the DEPB licences are considered "goods" and thus subject to sales tax. 3. Applicability of the amendments to the definitions of "dealer" and "business" under the relevant Acts. 4. Relevance of various Supreme Court decisions cited by the assessee. Issue-wise Detailed Analysis: 1. Whether the sale of DEPB licences by the assessee constitutes "business" under the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act: The assessee contended that the sale of DEPB (Duty Entitlement Pass Book) licences was not part of their regular business activities and thus should not be included in the turnover for tax purposes. They argued that the sale of these licences did not constitute "business" as defined under the Act, citing the need for regularity, frequency, and continuity in transactions to qualify as business activities. The court, however, disagreed with the assessee's interpretation. The definition of "business" under Section 2(d) of the Tamil Nadu General Sales Tax Act includes "any trade, or commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit." It also includes "any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern." The court emphasized that the definition of "business" encompasses transactions that are incidental or ancillary to the main business activities. Therefore, even if the sale of DEPB licences was not the primary business of the assessee, it was still incidental to their main business of exporting finished leather. Thus, the sale of DEPB licences falls within the scope of "business" under the Act. 2. Whether the DEPB licences are considered "goods" and thus subject to sales tax: The court referred to the Supreme Court decision in Vikas Sales Corporation Vs. Commissioner of Commercial Taxes, which held that DEPB licences are "goods" for the purposes of the Act and are thus subject to sales tax. The Tribunal had also pointed out that the assessee sold DEPB licences both locally and on an inter-State basis, and these transactions were not reported in the respective tax returns. Given this precedent, the court upheld that DEPB licences are indeed "goods" and their sale is exigible to sales tax under the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act. 3. Applicability of the amendments to the definitions of "dealer" and "business" under the relevant Acts: The court noted the amendments to the definitions of "dealer" under Section 2(g) of the Tamil Nadu General Sales Tax Act and Section 2(b) of the Central Sales Tax Act. These amendments expanded the scope of what constitutes a "dealer" and "business," thus including transactions that are incidental or ancillary to the main business activities. The court highlighted that the amended definitions contrast with the earlier, more restrictive definitions. The amendments were intended to broaden the tax base by including incidental transactions within the ambit of taxable activities. Therefore, the sale of DEPB licences, being incidental to the assessee's main business, is taxable. 4. Relevance of various Supreme Court decisions cited by the assessee: The assessee cited several Supreme Court decisions to support their contention that the sale of DEPB licences should not be considered "business." These included: - The State of Gujarat Vs. Raipur Manufacturing Co. Ltd. - The State of Madras Vs. K.C.P. Ltd. - State of Tamil Nadu Vs. Burmah Shell Oil Storage and Distributing Co. of India Ltd. - Board of Revenue Vs. Ansari - Commissioner of Sales Tax Vs. Sai Publication Fund The court analyzed these decisions and found that they were either rendered under unamended provisions or were distinguishable on facts. For instance, the decision in Raipur Manufacturing Co. Ltd. was based on the unamended definition of "business," which required an intention to carry on business with regularity, frequency, and continuity. However, the amended definition includes incidental transactions, which does not require such regularity. Similarly, the decisions in K.C.P. Ltd. and Burmah Shell Oil Storage were distinguished based on the facts and the timing of the amendments. The court concluded that these decisions did not support the assessee's case under the amended definitions. Conclusion: The court dismissed the Tax Case Revision and upheld the Tribunal's order, concluding that the sale of DEPB licences by the assessee constitutes "business" under the amended definitions of the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act. Consequently, DEPB licences are "goods" and their sale is subject to sales tax. The court found no merit in the assessee's reliance on the cited Supreme Court decisions, as they were either based on unamended provisions or distinguishable on facts.
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