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TMI Blog1991 (4) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Tribunal Act, 1987. 2.. The applicant's case may be summed up thus. The first applicant is the principal officer of the Customs Department of the Government of India. That department is entrusted with the duties of preventing smuggling and collecting revenue for the public exchequer by way of import and export duties in terms of the Customs Act, 1962, at the prevailing rates as prescribed in relevant statutes or notifications. The department enjoys statutory power to recover duty and other charges in respect of goods imported or exported. There is no voluntary sale of any goods by that department, except sales under the provisions of the statute for the recovery of duties and other charges. The department does not carry on any business of selling or purchasing goods in West Bengal and, therefore, is not a "dealer". The sales under sections 48 and 150 of the Customs Act do not amount to sale of goods within the meaning of section 2(g) of the 1941 Act. Until goods mingle with or come into the ordinary course of trade or commerce for "home consumption", sales thereof cannot attract the provisions of the 1941 Act. Goods which are sold by the Customs Department are those on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(g). If the Amendment Act of 1987 intends to bring such statutory transfer into the fold of sales tax law, then it is ultra vires the Constitution. Even otherwise, allegedly the 1941 Act does not lay down the manner in which the statutory sales like those made by the Customs Department can be taxed. It has not laid down, for example, whether the tax would be levied on the entire sale proceeds or only on the amount retained by the applicants. The Amendment Act of 1987 is allegedly arbitrary and unconstitutional being violative of articles 14, 19 and 300A of the Constitution, on a further ground that tax is sought to be levied on unequal persons treating them as equal and also with retrospective effect. 3. The retrospective operation of the amendment of the definition of "dealer" is challenged as violative of articles 300A and 19(1)(g) of the Constitution. It is then alleged that prior to the 46th amendment of the Constitution the State Legislature had no competence to levy tax on sales made under a statute or by operation of law. The Collector of Customs never recovered and was never entitled to recover sales tax from the buyers, as be is not the owner or a mercantile agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds that it is merely clarificatory and that the State Legislature has competence to legislate with retrospective effect. The fact that tax was not collected from the buyers is said to be no consideration for permitting the applicants to avoid the liability to pay tax. In this connection reference is made to the decision of the Supreme Court in the case of Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1, wherein it was held that merely the fact that the dealer is prevented from collecting from purchasers the surcharge recovered from him does not affect the competence of the State Legislature. The allegations made in the writ application are all denied including those which concern the challenges under different provisions of the Constitution of India. 5.. The affidavit-in-reply of the applicants mostly contains denials of averments made by the respondents in their affidavit-in-opposition. 6.. At the hearing of the case Mr. N.C. Roy Chowdhury, learned Advocate for the applicants, did not advance any argument on the constitutional validity of any of the provisions including section 2(c) of the 1941 Act, as amended in 1987. He also did not press the challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary course of business, authority to sell goods belonging to principals is a dealer." With effect from June 1, 1987, the above definition was substituted by the following one by West Bengal Act 5 of 1987 with retrospective effect: "'dealer' means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under section 6D and includes- the Central or a State Government, a local authority, a statutory body, a trust or other body corporate which, or a liquidator or receiver appointed by a court in respect of a person defined as a dealer under this clause who, whether or not in the course of business sells, supplies or distributes directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration. Explanation 1.- A co-operative society or a club or any association which sells goods to its members is a dealer. Explanation 2.- A factor, a broker, a commission agent, a del credere agent, an auctioneer, an agent for handling or transporting of goods or handling of documents of title to goods or any other mercantile age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the customs frontiers of India. Mr. Roy Chowdhury agreed that such sale did not certainly occasion import of the goods. He pressed the second part of section 5(2) of the 1956 Act, namely, sale effected by a transfer of documents of title before the goods crossed the customs frontiers of India. Mr. S.N. Dutta, learned Advocate appearing for the respondents, opposed the submission of Mr. Roy Chowdhury and contended that the sales made by the Collector of Customs are not effected by transfer of documents of title, but are merely sales of goods as ordinarily made by delivery. It does not appear that there is any definition of the expression "customs frontiers" in the Customs Act, 1962. But "customs area" has been defined in section 2(11) of the Customs Act as the area of a customs station including any area in which imported goods or export goods are ordinarily kept before clearance by customs authorities. Therefore, in a way it may perhaps be said that the goods in the hands of the customs authorities by way of confiscation or otherwise under the provisions of the Customs Act are goods which have not yet crossed the customs frontiers of India. As soon as those goods are sold away, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle by transfer of which title to the goods can be transferred. Therefore, the money receipt or cash-memo which is granted by customs authorities in favour of the buyer at the time of sale may, if at all, become a document of the buyer's title to the goods and therefore the buyer alone may possibly use the same for future transfer of title to the goods. Consequently the customs authorities cannot effect sales by transfer of documents of title by simply issuing a cash-memo or money receipt, because the document was never a document of their own title to the goods. Moreover, prior to the impugned sales these did not exist. If the customs authorities want to transfer any document of title, the document must be a proof of the fact of vesting of possession and control of the goods with the customs authorities or of the fact that they have the authority to transfer or receive the goods represented in the particular document of title. A cash-memo or money receipt granted by customs authorities themselves does not amount to that and, therefore, the sales in question are not sales effected by transfer of documents of title. Accordingly, the contention of Mr. Roy Chowdhury on this point mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry duties and do not thereby carry on any business. By referring to some of the provisions of the 1941 Act such as sections 7(2), 16, 17, 22(1)(b), 22(2) proviso, 22A and the explanation 2 to section 2(c), Mr. Roy Chowdhury contended that one cannot be a "dealer" without carrying on a business. Mr. S.N. Dutta, the learned Advocate, appearing for the respondents, argued that the applicants really carry on a "business" within the definition in section 2(1a) of the 1941 Act which runs as follows: "'business' includes- (i) any trade, commerce or manufacture or execution of works contract or any adventure or concern in the nature of trade, commerce or manufacture or execution of works contract, whether or not such trade, commerce, manufacture, execution of works contract, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, execution of works contract, adventure or concern; and (ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, execution of works contract, adventure or concern;" He further argued that the Collector is a "dealer" wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of "business" should be held to have retained the ordinary meaning and at the same time to extend the meaning of the term. The term "business" came up for interpretation by courts in the context of taxing laws. Many such interpretations were given when the definition "business" included profit and profit-motive. In the State of Andhra Pradesh v. H. Abdul Bakshi and Bros. [1964] 15 STC 644 (SC) the Supreme Court held: "The expression 'business' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business, there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive, and not for sport or pleasure." In Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1954] 26 ITR 765 the Supreme Court held: "The word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose." Thus, the foregoing interpretations provide an idea as to what is ordinarily unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those definitions are almost similar to those of the definitions in the Bengal Finance (Sales Tax) Act, 1941. The Supreme Court held in that case that sales of unserviceable materials and scrap by the Northern Railway, Jodhpur, were exigible to sales tax, and that the activity would be "business" within the definition in the Rajasthan Act. The decision in [1976] 37 STC 423 (SC) (District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer) was followed in the case of Member, Board of Revenue, West Bengal v. Controller of Stores, Eastern Railway, Calcutta, reported in [1989] 74 STC 5 (SC). It is a judgment covering two cases, one involving the South Eastern Railway and the other involving the Eastern Railway. Those were cases under the Bengal Finance (Sales Tax) Act, 1941. The definitions of "dealer" and "sale" under the 1941 Act, which have already been extracted in this judgment, were considered in connection with those cases. It may be noted that sales by the South Eastern Railway were of unclaimed and unconnected goods under section 56 of the Indian Railways Act. The Supreme Court held: "The railway was a carrier of the goods and if at the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arriving at the above decision, the Supreme Court laid down that a transaction which is effected in compliance with the obligatory terms of a statute may nevertheless be a sale in the eye of law. Compulsory acquisition of property would exclude the element of mutual assent, which is vital to a sale, but so long as mutual assent, express or implied, is not totally excluded in a transaction, it will amount to a sale. The court further held at page 47 of the report: "In other words, the effect of the construction which the court put on the words of entry 48 in Gannon Dunkerley [1958] 9 STC 353 (SC) is that a sale is necessarily a consensual transaction and, if the parties have no volition or option to bargain, there can be no sale. For the present purposes, this view may be assumed to reflect the correct legal position, but even so, the transactions which are the subject-matter of these appeals will amount to sales." When the ratio of the decision reported in [1978] 42 STC 31 (SC) [Vishnu Agencies (pvt.) Ltd. v. Commercial Tax Officer] is applied to the instant case, there can be no doubt that the sales of both confiscated and non- confiscated goods by the Collector are consensua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning bark and other materials required in their tannery. On those facts, a three-Judge Bench of the Court held, inter alia, as follows: "But to be a dealer a person need not follow the activity of buying, selling and supplying the same commodity. Mere buying for personal consumption, i.e., without a profit-motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer." The court finally held that these dealers were liable to pay tax on the price of tanning bark bought for consumption in the tannery. It may be noted that the provision of law on which this decision was based was a provision wherefrom the profit-motive had not yet been excluded. Therefore, this decision does not appear to be applicable to the instant case on the question whether the Collector is a "dealer" within the meaning of section 2(c) of the 1941 Act. 15.. It follows from the above discussion that the Collector is a "dealer" within the meaning of the definition in section 2(c) of the 1941 Act. We hold that the Collector is a person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant portion of the decision of the Supreme Court, reported in [1990] 79 STC 437 (State of Punjab v. Union of India), is reproduced below: "There is no dispute that the Union of India is the owner of the Northern Railway Departmental Catering, Railway Station, Pathankot. The goods were purchased by the railways and were sold by the railways. The tax was imposed on the sale of goods. At the time of the sale, the goods belonged to the railways. In view of the provisions of article 285(1) of the Constitution, such sales were immune from taxation under the State law. That was also the view of the High Court. The appeal, therefore, is dismissed, but no order as to costs". By this decision, the Supreme Court upheld the decision of the Punjab and Haryana High Court reported in [1974] 34 STC 394 (Union of India v. State of Punjab). 18.. Having regard to the facts of the instant case, Mr. S.N. Dutta, learned Advocate for the respondents, submitted that the Central Government does not become the owner of the non-confiscated goods which are sold under section 150 of the Customs Act, 1962. Such goods do not vest in the Central Government. Mr. N.C. Roy Chowdhury, appearing for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the majority view that both article 289 and article 285 envisage immunity only from direct tax and not from indirect tax like excise duty or sales tax. At page 1774 of the report the Court held: "We are, therefore, of opinion reading article 289 and its complementary article 285 together that the intention of the Constitution-makers was that article 285 would exempt all property of the Union from all taxes on property levied by a State or by any authority within the State while article 289 contemplates that all property of the States would be exempt from all taxes on property which may be leviable by the Union. Both the articles in our opinion are concerned with taxes directly either on income or on property and not with taxes which may indirectly affect income or property. The contention therefore on behalf of the Union that these two articles should be read in the restricted sense of exempting the property or income of a State in one case and the property of the Union in the other from taxes directly either on property or on income as the case may be, is correct." At page 1776 of the report the court further held: "This will show that the taxable event in the case of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a AIR 1980 SC 1382 at page 1405. 21.. The position being as above, we feel that we are bound by the majority view of the Supreme Court in Sea Customs Act [1878], Sec. 20(2), In re, reported in AIR 1963 SC 1760. Although the opinion sought for was particularly with reference to article 289(1), to us, the majority view is equally operative and binding in respect of article 285. The ratio of the majority view is that sales tax is an indirect tax and, therefore, is not a tax on property and accordingly the Union of India does not enjoy immunity from sales tax imposed by a State on sales of goods. 22.. In this connection we like to refer to the proviso to article 298. Read with articles 73 and 162, that proviso seems to indicate that trade or business, conducted by the Union will be subject to appropriate State legislation. Since we have already held that the Collector is engaged in the trade or business of selling goods, the business will be subject to the relevant State legislation, which, in the facts of the present case, means the Bengal Finance (Sales Tax) Act, 1941. It is also not without significance that articles 285, 289 and 298 appear in the same part, i.e., Part XII of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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