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TMI Blog1965 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of old looms and machinery was Rs. 2,10,275. The assessee recovered sales tax from the purchasers in respect of all these sales on the assumption that the assessee would in its turn be liable to pay sales tax to the State. Whether these sales were taxable or not formed one of the points in dispute before the Revenue Authorities assessing the assessee to sales tax for the relevant assessment period. The second point in dispute between the parties arose out of certain sales of cotton waste effected by the assessee during the relevant assessment period. According to the assessee the sales of cotton waste fell within entry 1 of Schedule B to the Bombay Sales Tax Act, 1953, while according to the Revenue Authorities they fell within the residuary entry 80 of Schedule B. The last point in controversy related to the purchases of certain raw materials and stores effected by the assessee during the relevant assessment period. The assessee contended that the purchases were casual purchases not in the course of business and were, therefore, not liable to purchase tax under section 10 of the Act whereas the stand taken by the Revenue was that the purchases were in the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " for the opinion of the Court. The first two questions relate to the sales of stores, materials and other goods and old looms and machinery, the third question relates to the sales of cotton waste and the last question relates to the purchases of raw materials and stores. So far as the first question is concerned, the point it raises is whether the sales of stores, materials and other goods and old looms and machinery effected by the assessee during the relevant assessment period were taxable under the provisions of the Act. Now it is settled by the decision of this Court in Ambica Mills Ltd. v. State of Gujarat[1964] 15 S.T.C. 367., that the sales which are amenable to tax under the Act are not all sales but only those sales which can be said to have been effected as part of the business of the assessee or in the course of a business activity. Now the word "business" is a word of wide connotation covering a vast and indefinite field of activity and it is therefore not possible to lay down any hard and fast rule or any straight-jacket formula applicable in all cases for the purpose of determining whether a particular sale made by the assessee can be said to be a sale in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manufacture of cotton textile goods and not selling at a profit at some future time, this test would break down for it would not furnish any indication of a profit-making motive behind the sales. The profitmaking motive would be excluded by the nature of the commodity and the initial or original intention at the time of purchase. Moreover, in the present case the evidence shows that the sales were effected not from any profit-motive but because the old looms and machinery as also the stores, materials and other goods sold by the assessee had become old, useless, and unserviceable and were no longer required by the assessee. The sales of these articles were, therefore, not part of the business of the assessee nor were they effected by way of business activity. It is no doubt true that the assessee collected sales tax from the purchasers in respect of the sales of these articles, but that circumstance cannot be determinative of the character of the sales since the sales tax might have been collected by the assessee on an erroneous assumption that the assessee in its turn might be held liable to pay sales tax to the State. All these circumstances relied on by the Revenue were pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of raw materials and consumable stores, manufacturing cotton textile goods out of raw materials by using consumable stores in the process of manufacture and selling cotton textile goods so manufactured with the object of making profit. It was essential in the carrying on of the business of the assessee that raw materials and consumable stores should be purchased and the purchases of raw materials and consumable stores made by the assessee were, therefore, clearly in the course of the business of the assessee. This view which we are inclined to take on principle is amply supported by the decision of the Supreme Court in State of Andhra Pradesh v. Abdul Bakshi Bros.[1964] 15 S.T.C. 644. The question that arose in the case was whether a dealer who carried on the business of tanning hides and skins and selling the tanned skins could be said to be carrying on the business of buying tanning bark required in the tannery for the purpose of business of tanning. The argument on behalf of the assessee which was accepted by the Andhra Pradesh High Court was that a purchaser was liable to pay tax under the relevant rules framed under the Hyderabad General Sale Tax Act only when he was buying an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tanning bark made by the assessee were purchases in the course of the assessee's business. The principle formulated and applied by the Supreme Court in this case must apply equally in the determination of the problem before us. The raw materials and consumable stores having been purchased by the assessee for use in manufacturing cotton textile goods for sale, they must be held to have been purchased in the course of the business of the assessee. Mr. Kaji, who appears for the assessee in another reference which is on our Board today and whom we allowed to intervene since the point involved in his reference is an identical one, submitted that the decision of the Supreme Court in Abdul Bakshi's case[1964] 15 S.T.C. 644. must be limited to the facts of that case where the purchases made by the assessee were of raw materials and should not be extended to a case of purchases of consumable stores. Where consumable stores are purchased by the assessee, he argued, it cannot be said that the purchases are made in the course of the business of the assessee, for consumable stores do not go in the making up of the manufactured article. We do not see any reason for making the distinction sug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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