9911796707
TMI Blog1964 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners also purchased from Bombay at about the same time a cooling plant at the cost of Rs 24,375. The doubling plants and the cooling plant were to be installed along with the mercerizing plant, but after import it was found that the mercerizing plant was not suitable for the requirement of the petitioners and the petitioners, therefore, sold off the mercerizing plant and along with the mercerizing plant also the doubling plants and the cooling plant to Rohit Mills Limited, a sister concern, under five different bills bearing dates between 16th October, 1955, and 25th December, 1955. The aggregate price realised by the petitioners was Rs. 4,82,740 as against the total cost of Rs. 5,03,909, incurred by the petitioners and the petitioners thus incurred a loss of about Rs. 21,000. In the assessment of the petitioners to sales tax for the assessment period 1st April, 1955, to 4th March, 1956, the Sales Tax Officer included the price received by the petitioners on these sales in the turnover of the petitioners and assessed these sales to tax under the provisions of the Act. The petitioners preferred an appeal against the order of the Sales Tax Officer to the Assistant Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or any earlier law, has in respect of any year escaped assessment, or has been under-assessed or assessed at a lower rate, or that any deductions have been wrongly made, then the Commissioner may,- (a) .............................................. (b) where he has reason to believe that the dealer has concealed such sales or purchases or any material particular relating thereto, or has knowingly furnished incorrect returns, at any time within eight years, and (c) in any other case, at any time within five years, of the end of that year, serve on the dealer liable to pay tax in respect of such turnover, a notice containing all or any of the requisitions which may be included in a notice under sub-section (3) of section 33 and may proceed to assess or reassess the amount of the tax due from such dealer; and accordingly, the other provisions of this Act shall apply as if the notice were a notice served under that subsection: .......... " It would be seen that section 35 empowered the Commissioner to assess or reassess the amount of tax due from a dealer where it was found that the turnover of the dealer had escaped assessment or had been under-assessed or assessed at a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. Before the Tribunal a contention of a preliminary nature was raised on behalf of the petitioners. The contention was that since the saving of the operation of the provisions of the Bombay Sales Tax Act, 1953, under section 77 of the Bombay Sales Tax Act, 1959, was subject to section 35 of the Bombay Sales Tax Act, 1959, wherever a case relating to any period prior to the coming into force of the Bombay Sales Tax Act, 1959, was covered by section 35 of the Bombay Sales Tax Act, 1959, action in relation to such case could be taken only under that provision and not under any provision of the Bombay Sales Tax Act, 1953, and the present case being a case of that nature, the proceedings taken by the Commissioner of Sales Tax under section 31 of the Bombay Sales Tax Act, 1953, were misconceived. This contention was accepted by the Tribunal and the Tribunal held that "..........after the coming into force of the Act of 1959 it is obligatory on the Commissioner to act under section 35 if he wishes to assess or reassess a dealer's turnover under the circumstances mentioned in section 35, even where the turnover escaping assessment, etc., is in respect of the period prior to the commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) clause (a); (iii) in the first proviso, the words "or as the case may be, any earlier law"; (iv) in the second proviso, the words "or the relevant earlier law": Provided that any notice issued, or any proceedings commenced, or continued or completed under the provisions of section 35 of the Bombay Sales Tax Act, 1959, before the commencement of the Bombay Sales Tax (Gujarat Amendment) Act, 1962 (Guj. 25 of 1962), in respect of any turnover of sales or turnover of purchases of any goods chargeable to tax under any earlier law shall be valid and effectual as if issued, commenced, continued or completed under the earlier law applicable thereto, and no such notice or proceedings and no assessment, reassessment, collection, refund, set-off, drawback or penalty made, given, granted or imposed thereunder shall be called in question in any court or tribunal or before any authority on the ground that the notices should have been issued or the proceedings should have been commenced or continued or completed within the period of limitation prescribed in the said section 35 and not under the provisions of the relevant earlier law. (2) In section 77 of the principal Act, in clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as it proceeded upon an error of law. On the petition being admitted a rule was issued and in opposition to the rule, an affidavit was filed by the Sales Tax Officer on behalf of the respondents. It may be pointed out here that in addition to the State and the Sales Tax Officer who were respondents Nos. 1 and 4, the members of the Tribunal were joined as respondent No. 2 and the Commissioner of Sales Tax was joined as respondent No. 3, inasmuch as the alternative reliefs were directed against them. When the hearing of the petition commenced, Mr. I.M. Nanavati, learned Advocate appearing on behalf of the petitioners, urged three contentions in support of the petition. They were as follows: (1) Having regard to the order of the Tribunal setting aside the order of the Commissioner of Sales Tax and directing refund of the tax paid by the petitioners, respondents Nos. 1, 3 and 4 were under an obligation to refund to the petitioners the tax paid by the petitioners pursuant to the order of the Commissioner of Sales Tax and inasmuch as respondents Nos. 1, 3 and 4 had failed to carry out this obligation, the petitioners were entitled to a writ of mandamus or other appropriate writ requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which one would inevitably come would be that the sales were casual sales not attracting the charge of tax. (3) Even if the order of the Commissioner of Sales Tax could not be successfully challenged on the ground that it disclosed an error of law apparent on the face of the record, the petitioners were yet entitled to impugn the validity of the order of the Tribunal. The Tribunal held that the proceedings taken by the Commissioner of Sales Tax under section 31 of the Bombay Sales Tax Act, 1953, were misconceived since in its opinion, by reason of sections 35 and 77 of the Bombay Sales Tax Act, 1959, the proceedings could, if at all, be taken only under the provisions of section 35 of the Bombay Sales Tax Act, 1959. Now that undoubtedly was the position according to sections 35 and 77 of the Bombay Sales Tax Act, 1959, as they stood prior to their amendment but as a result of the amendment, the overriding effect of section 35 of the Bombay Sales Tax Act, 1959, was done away with and the Commissioner of Sales Tax was entitled to take proceedings under section 31 of the Bombay Sales Tax Act, 1953, in regard to any period prior to the commencement of the Bombay Sales Tax Act, 1959. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the conclusion that the sales were in the course of business and were part of the business activity of the petitioners. Another test which he applied was based on the circumstance that the petitioners had collected from the purchaser amounts by way of sales tax and had also taken from the purchasers certificates in "L" Form in respect of general sales tax and this circumstance, in his opinion, clearly showed that the petitioners themselves regarded these sales as constituting business activity of the petitioners. It was contended on behalf of the petitioners that inasmuch as the items of machinery sold by the petitioners were imported on actual user's licence there could be no intention to resell the same and the profit-motive was, therefore, clearly absent which was essential in order to constitute the sales a business. This contention was answered by the Commissioner of Sales Tax by saying that though it was undoubtedly true that the items of machinery were imported against actual user's licence, it was surprising that the petitioners were able to decide upon the suitability of the items of machinery without even installing them. The Commissioner of Sales Tax found it impossibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, spreading over a vast and an indefinite field of activity, the Courts have to apply different tests to different types of sales involving a variety of articles or goods in order to ascertain whether they fall under the category of sales effected in the course of business. In the nature of things, therefore, it would be impossible to lay down a hard and fast rule which would uniformly or in a symmetry govern all cases. Therefore, though different tests governing different sets of circumstances have been laid down, such as volume and degree of frequency, continuity and regularity of transactions, the nature of the goods sold, the initial intention at the time of their manufacture or purchase, etc., each test so laid down must be taken as governing the facts to which it was applied, and at best, is an indication which however would be liable to be offset by other circumstances existing in a given case." In these observations we pointed out that the test of volume and frequency was only one of many different tests which might in a given set of circumstances help in the determination of the question but it could not be elevated to the position of a conclusive or determinative test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of frequency in the present case cannot be treated as a determinative factor, nor is it possible to hold that sales were made with any profit-motive. The fact that sales tax was charged and collected by the mills from their purchasers also cannot be held to be conclusive. Even the learned Advocate-General conceded that that fact was only an indication that the mills themselves regarded the sales as having been effected in the course of business. It is possible, however, that the mills might have charged and collected sales tax either as and by way of abundant caution or through a mistaken belief that the sales would be liable to tax. In either event, it cannot be said to amount to estoppel or an intention clearly indicative of their having made these sales in the course of business, or their having treated them as a business activity." These latter observations also answer the second point made by the Commissioner of Sales Tax, namely, that the fact that the petitioners collected from the purchaser amounts by way of sales tax and also took from the purchaser certificates in "L" Form in respect of general sales tax, showed that the petitioners themselves regarded the sales as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption for manufacturing an article to be sold by him. According to this argument, if a dealer buys any commodity for consumption in his business and not for sale, he would not be regarded as engaged in the business of buying that commodity and the price paid for buying that commodity would not be liable to tax. This argument was, however, negatived by the Supreme Court and Shah, J., delivering the judgment of the Supreme Court made the following observations which are strongly relied on on behalf of the revenue: "....A person to be a dealer must be engaged in the business of buying or selling or supplying goods. 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. But to be a dealer a person need not follow the activity of buying, selling and supplying the same commodity. Mere buying for personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther salable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such salable commodity". But these words must be read in the context of the facts of the case and the observations which precede them and so read, they cannot be construed to mean that even where an assessee purchases items of machinery to be used in aid of a manufacturing process, the assessee would be said to be carrying on business of buying machinery. Such a construction would lead to this absurdity that every manufacturer would be a dealer carrying on business of buying machinery. It must be remembered that the case before Supreme Court was a case where tanning barks in the nature of raw materials were being bought by the assessee and it was in the context of those facts that these words were used by the Supreme Court. Here we have a case where items of machinery which are in the nature of capital assets were purchased by the petitioners and subsequently sold and again the question is not whether the petitioners carried on business of buying those items of machinery but whether they carried on the business of selling those items of machinery. This decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the petitioners inasmuch as it was impossible for the petitioners to have found them to be unsuitable before installing them and it was common ground between the parties that the items of machinery were not installed by the petitioners before they were sold to Rohit Mills Limited. But this premise itself is in our opinion incorrect and there is no basis for it. One does not have to install a machine in order to be able to find out that it is unsuitable for one's requirements. Now apart from this ground the Commissioner of Sales Tax had no reason to disbelieve the statement of the petitioners that they sold off the items of machinery to Rohit Mills Limited because the items of machinery were not suitable for their requirements and as a matter of fact this statement receives considerable support from the fact that they sold off the items of machinery at a loss of about Rs. 21,000 which one can reasonably assume no prudent owner would do unless the items of machinery were not required by him or were unsuitable for his requirements. It is, therefore, clear that the items of machinery were sold by the petitioners not with any profit-motive but because they were not suitable for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
