2015 (4) TMI 936 - SC - VAT and Sales Tax

Taxability of Trust as a dealer under Kerala General Sales Tax Act, 1963 - Activities carried out by trust like dealing in scrap items etc., other than its statutory functions - Trust is a statutory authority constituted for rendering port services under the Major Port Trusts Act, 1963 - Held that - Since the definition of dealer is wide to include transactions conducted in the course of business or otherwise, to answer the question posed before us, we do not deem it necessary to examine the nature of activity carried out by the assessee-Port Trust in as much as whether it falls under the definition of business under the Act or not. In the Madras Port Trust case 1999 (3) TMI 500 - SUPREME COURT OF INDIA , this Court has laid emphasis on the expression carrying on business in the context of the TN Act, and it is in that context it has reached the conclusion that the Madras Port Trust is not engaged in any business which is a necessary prerequisite under the definition of a dealer under the TN Act. In the Act herein, the necessity of a person carrying on business to be placed under the definition of dealer is absent. The definition expressly includes the persons who whether in course of business or not engage in the sale or transfer of goods and thus, does not mandate the requirement of conducting business for a person to be exigible under the Act. The contradistinction between the definition of dealer under the TN Act and the Act makes it abundantly clear that the observations of this Court in Madras Port Trust case, which refer to the definition of TN Act and interprets it to reach the conclusion of the Trust not being exigible to tax, cannot be accepted in the instant case. It is further pertinent to notice that the TN Act was amended by Act 22 of 2002 whereby explanation (3) was added to definition clause 2(g) of the TN Act. By the said amendment the Madras Port Trust has now been declared as a dealer under the TN Act. Explanation (3) states that if the port trust disposes of any goods including unclaimed or confiscated or unserviceable or scrap surplus, old or obsolete goods or discarded material or waste products whether by auction or otherwise directly or through an agent for cash or for deferred payment or for any other valuable consideration, notwithstanding anything contained in the TNGST Act, it shall be deemed to be a dealer for the purpose of the Act. Therefore, by amendment act the legislature has specifically brought in Port Trust also within the definition of dealer under Section 2(g) of the Act and thus, the substratum of the judgment in Madras Port Trust case has been lost. In light of the foregoing discussions, we are of the considered opinion that the activities of the assessee in respect of buying, selling, supplying or distributing goods, executing works contract, transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, whether in course of business or not, would fall within the purview of Section 2(viii) of the Act. Hence, the assessee-Port Trust would fall within the meaning of dealer under Section 2(viii) of the Act and is consequently assessable to tax under the Act. - Decided against the appellant.

Issues Involved:
1. Whether the appellant-Trust is a "dealer" under the Kerala General Sales Tax Act, 1963.
2. Whether the activities of the appellant-Trust, specifically dealing in scrap items, attract sales tax under the Act.
3. Applicability of the Madras Port Trust case to the present case.

Issue-wise Detailed Analysis:

1. Whether the appellant-Trust is a "dealer" under the Kerala General Sales Tax Act, 1963:

The primary question was whether the appellant-Trust, a statutory authority constituted for rendering port services, qualifies as a "dealer" under the Kerala General Sales Tax Act, 1963 (the Act). The definition of "dealer" under Section 2(viii) of the Act is inclusive and wide-ranging, encompassing any person who carries on the business of buying, selling, supplying, or distributing goods, whether for cash, deferred payment, or other valuable consideration, and includes persons who sell goods whether in the course of business or not.

The appellant-Trust argued that it is not engaged in any trading activity and only discharges its statutory functions under the Major Port Trust Act, 1963. However, the Tribunal and the High Court held that the appellant-Trust is a "dealer" under the Act due to its activities involving the sale of scrap items, which fall within the broad definition of "dealer."

2. Whether the activities of the appellant-Trust, specifically dealing in scrap items, attract sales tax under the Act:

The appellant-Trust's activities included the sale of water to ships, tender forms, firewood, waste paper, and disposal of unserviceable equipment. The assessing authority raised demand notices for these activities for the assessment years 1990-91, 1994-95, and 1997-98. The appellant-Trust contended that these activities were incidental and auxiliary to its statutory functions and did not constitute "business" under the Act.

However, the Tribunal and the High Court found that the definition of "dealer" under the Act is broad and includes persons engaged in the sale of goods, whether in the course of business or not. Therefore, the appellant-Trust's activities fell within the ambit of "dealer," making it liable to pay sales tax under the Act.

3. Applicability of the Madras Port Trust case to the present case:

The appellant-Trust relied on the Supreme Court's decision in the Madras Port Trust case, where it was held that the Madras Port Trust, constituted under the Major Port Trust Act, 1963, was not a "dealer" under the Tamil Nadu General Sales Tax Act, 1959 (TN Act). The appellant-Trust argued that the provisions of the TN Act are pari materia with the Act, and therefore, the Madras Port Trust case should apply.

However, the Tribunal and the High Court distinguished the two cases, noting that the definition of "dealer" under the TN Act was narrower and required the person to be engaged in "carrying on business." In contrast, the definition under the Act includes persons engaged in the sale of goods, whether in the course of business or not. Therefore, the observations in the Madras Port Trust case were not applicable to the present case.

Conclusion:

The Supreme Court upheld the findings of the High Court and the Tribunal, concluding that the appellant-Trust falls within the definition of "dealer" under Section 2(viii) of the Act. The appellant-Trust's activities, including the sale of scrap items, attract sales tax under the Act, regardless of whether these activities were incidental to its statutory functions. The appeal was dismissed, and the judgment and order of the High Court were confirmed.

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