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TMI Blog1968 (1) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... is retained by the applicants themselves, including the copyright. The applicants buy raw films in the required quantities for the purpose of producing motion pictures and make purchases as and when required for that purpose. It is not disputed that motion pictures are produced by the applicants with the ultimate object of making profit by exhibition of the pictures produced by them. It seems to have also been admitted that the turnover of the purchases made by the applicants exceeds Rs. 30,000 a year. The Deputy Commissioner who dealt with the application in the first instance found, in view of the nature of the business done by the applicants, that it was not possible to hold that there is any sale of the film by the applicants and that, if there is no sale, there is no business of sale. The next question that was addressed was whether the applicants, in their capacity as film producers, could be said to be carrying on the business of buying goods. The purchase of raw film was not of a casual character. Raw films were purchased regularly so that they could be used in the production of films. On the view that the word "business" bears a liberal connotation as interpreted in judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artistes for producing the stories which they have in view and ultimately getting them printed ready for being distributed and exhibited. The Tribunal also rejected the contention of the appellants that what was produced by the film producers and their activity of producing films was not a business activity, as the term is popularly understood in the commercial sense, but that what was produced by them was a work of art. It seems to have been argued before the Tribunal that the profession of film producers could not be characterised as a business and was, therefore, not liable to taxation. We may point out that this line of argument as to the nature of the activity carried on by the film producers not being a business is not relied upon before us in support of the contention of the applicants, though it is urged that what the applicants are producing are not goods or a commodity but a work of art, or something in which they have copyrights within the meaning of the Copyright Act. Ultimately, the Tribunal came to the conclusion that, in so far as purchases of raw films are concerned, since the film producer distributes the films, when ready, with a view to earn profit, it was clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utes a person a dealer. It must be mentioned that, in the Act of 1946, the definition of "dealer" meant a person who carried on the business of selling or supplying goods in the State. There was no reference to buying of goods in the definition of "dealer" then. It was further observed that the activity which the person must indulge in is not merely the activity of selling in the sense of transferring property in goods, but it must be the activity of carrying on the business of selling or supplying goods, and that what the Legislature has emphasised is not the act or activity of selling but the act or activity of carrying on the business. At page 500 of the report, the learned Chief justice observed that the expression "carrying on business" must be given a restricted meaning. It was also pointed out by the Court that although the activity may be continuous, unless it assumes the characteristics of a business, it is not an activity which can come within the ambit of the definition of "dealer" under section 2 (c) of that Act. The next decision referred to is the decision of the Nagpur Bench of this Court in Girdharilal Jiwanlal v. The Assistant Commissioner of Sales Tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton from other parties, and when the imported cotton arrived they sold the cotton imported by them. The question was whether the sale of this cotton by the mills would attract the liability for payment of sales tax. At page 107, their Lordships observed as to what is the consensus of opinion regarding what constitutes business. They stated that the word "business" had to be construed in a commercial sense, that the initial intention or object with which the goods in question were purchased is a relevant factor in deciding whether the sale thereof was a part of the business or a business activity of the assessee, and that if the initial intention in purchasing the goods in question was to use the goods in the business of the assessee, such as manufacturing goods or articles, then, . unless that factor was offset by circumstances showing that the assessee intended to indulge in a business activity by entering into transactions of sale, the mere fact that the assessee sold the goods so purchased would not render him a dealer in that article. This view taken by the Gujarat High Court from which an appeal was taken to the Supreme Court at the instance of the department seems to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of something else, which it is their business to produce? This fact also cannot be disputed that the applicants have necessarily to engage themselves in purchasing raw films on a commercial scale in order that they may be used for producing cinematograph films. It is at this stage that the parties join the issue. According to the applicants, the bare fact that raw films are required to be purchased by them in order that they may produce cinematograph films, does not mean that they are engaged in the business of purchasing raw films, because they are not putting raw films to use in the production of a commercial product or commodity. They are undoubtedly using raw films as a base, as it were, but they are used in producing an article which is a work of art. It has been vehemently argued by the applicants that cinematograph films produced by them are not sold, and what they do with the cinematograph films produced by them is merely to enter into agreements with exhibitors and distributors, so that their work of art may be exhibited, though undoubtedly for a profit, by the exhibitors and distributors according to the terms of agreements entered into between the applicants on the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Legislature has not made sale of the very article bought by a person a condition for treating him as a dealer: the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The commodity may itself be converted into another saleable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such saleable commodity." In the penultimate paragraph, the Supreme Court also approved of the decision of the Madras High Court on a similar provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Bombay Sales Tax Act, 1959, as it originally stood before that section was substituted in 1965, will be of some relevance. * * * And it is with reference to this section that we are called upon to answer the reference. It will be seen that under this section, which is a charging section for the purpose of levying of a purchase tax, a dealer becomes liable to a tax in respect of purchase of goods specified in the appropriate Schedule, if such goods are purchased from an unregistered dealer and are not resold by the dealer within a period of three months or such other extended period as may be prescribed by the Government. Thus, the underlying idea is to correlate the purchase of the goods with the sale of the goods, either in their original form or in an altered form. Thus, if the goods are of such a character as are capable of being used in the manufacture of some other type of goods, then the goods in this altered form, in the making or manufacture of which the goods originally purchased are used, must be such as are capable of being sold. In other words, the goods manufactured or altered must be a marketable commodity. In our opinion, the observations in the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that the decision of the Supreme Court in Abdul Bakshi's case[1964] 15 S.T.C. 644. was pronounced on the 8th of April, 1964, while the decision in Fiaz Ahmed Co.'s case(1) was given on the 7th of November, 1963, but there is no reference to this later case of the Madras High Court in the Supreme Court judgment. In Fiaz Ahmed Co.'s case(1), the Division Bench has interpreted the decision of the Madras High Court in L.M.S. Sadak Thamby and Co. v. State of Madras(2) as tantamount to laying down the principle that a buying activity, even though without a counterpart of a selling activity, in the course of a business, whether it be as a dealer in hides or carrying on of the tannery with a profit motive, would be adequate to bring the turnover of purchase price of tanning materials to tax under the Act. In Fiaz Ahmed Co.'s case(1), the person required to pay the tax was engaged in the business of tanning hides and skins for certain specified charges. They did not buy hides or skins or sell them after tanning. For the purpose of tanning, however, they necessarily purchased tanning materials, and the question was whether the purchase price of such materials was liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Deputy Commissioner as well as the Tribunal have held in this case that the applicants do not sell the films produced by them, but it is also contended on behalf of the applicants that not only films produced by them are not sold, but they are not saleable. In other words, what is urged is that cinematograph films produced by persons like the applicants are not a saleable commodity. Whether this is so or not has not been decided by the authorities below because such a contention does not seem to have been raised before them. If it is found that the cinematograph films produced by the applicants are not a saleable commodity, then, on the view we have taken of the provisions of the Act, they cannot be considered to be dealers. If, on the other hand, it is found that the cinematograph films produced by them are a saleable or marketable commodity, then, in view of the answer we propose to give, they will have to be held to be dealers under the Act. Inasmuch as the question whether the films produced by the applicants are or are not a saleable commodity has not been decided, that question will have to be decided by the authorities on the material placed before them, before it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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