2016 (8) TMI 670 - HC - VAT and Sales Tax

Scope of the term Dealer - a public charitable trust running and maintaining a public hospital - Held that - Since the appellant being a charitable trust, is doing the activity of purchasing, selling and supplying medicines to patients in order to achieve its avowed objects, it is not engaged in business activity and therefore, the appellant is not a dealer within the meaning of Exception (iii) to section 2(10) of the Act. In that view of the matter, we answer the question in favour of the appellant and against respondent.

Summary

Issues involved:
1. Whether the appellant is a 'dealer' within the meaning of section 2(10) of the Gujarat Value Added Tax Act, 2003.
2. Whether the appellant, a public charitable trust running a public hospital, is entitled to exemption from the definition of 'dealer' under Exception (iii) of section 2(10) of the Act.

Analysis:

Issue 1:
The appellant challenged the order of the Gujarat Value Added Tax Tribunal, claiming they are not a 'dealer' as per section 2(10) of the Act. The Tribunal had held the appellant as a 'dealer.' The appellant contended that being a charitable trust engaged in providing free/subsidized medicines services, they do not fall under the definition of 'dealer.' The appellant relied on Exception (iii) of section 2(10), which exempts charitable institutions engaged in activities for achieving their charitable objectives from being deemed as 'dealers.' The Hon'ble High Court analyzed the evidence and held that since the appellant, as a charitable trust, was providing medicines to patients to achieve its avowed charitable objectives, it was not engaged in business activities and thus not considered a 'dealer' under the Act.

Issue 2:
The appellant further argued that as a charitable trust primarily involved in hospital activities, their pharmaceutical activities were carried out at concessional rates, resulting in losses. The appellant cited a Supreme Court decision to support their claim that their main activity of spreading the message of a spiritual figure did not amount to 'business,' and thus, they should not be considered a 'dealer.' The High Court agreed with the appellant's contentions, emphasizing that the appellant's core activity was charitable in nature and not commercial. Therefore, the Court held that the appellant was not a 'dealer' within the meaning of the Act and was entitled to the exemption under Exception (iii) of section 2(10).

Conclusion:
The High Court allowed all the appeals, ruling in favor of the appellant in each case. The Court held that the appellant, being a charitable trust engaged in providing medicines to achieve charitable objectives, did not qualify as a 'dealer' under the Act. The Court's decision was based on the interpretation of Exception (iii) of section 2(10) and the nature of the appellant's activities, emphasizing their charitable and non-commercial character.