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TMI Blog1977 (6) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... wn spontaneously in its forests. These trees were dressed by the devaswom and sold as timber. The Sales Tax Officer initiated assessment proceedings and issued notice under section 17(3) of the Act, stating as follows: "On enquiries conducted by me it is understood that you have been conducting a business of selling timber (as the manager of Sree Pulpally Devaswom), which has been extracted from the forest lands owned by the devaswom in accordance with the clear-felling permits obtained from the District Collector, Kozhikode, under the M. P. P. F. Act since 1967-68 onwards. The trees from the forest lands owned by the devaswom had been cut and felled by the devaswom and they had been dressed and processed into timber logs and obtained property mark registration in the name of the devaswom. Then they had been stored in the stock-yard set apart for the purpose from where they had been sold in separate and distinct specie-war auctions conducted by you as the manager of the devaswom to the highest bidder, and they had been delivered to the purchaser or the purchasers lot by lot on receipt of the price thereof. The devaswom will, therefore, fall in the definition of 'dealer' as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its sales turnover of timber trees? 5.. We shall now read the definition of a "dealer " under the Act: "2. Definitions.-In this Act, unless the context otherwise requires,-..... (viii) 'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes-..... (b) a casual trader;..... (e) a person who sells goods produced by him by manufacture, agriculture, horticulture or otherwise. Explanation (i).A society (including a co-operative society), club or firm or an association which, whether or not in the course of business, buys, sells, supplies, or distributes goods from or to its members for cash or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act; Explanation (2).-The Central Government or a State Government, which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge or pledge" (italics supplied). Here again, the business aspect is emphasised: 7.. However, in explanations (1) and (2) to clause (viii) defining a "dealer" and explanations (1), (1A) and (2) to clause (xxi) defining a "sale", the business concept is specifically excluded. We have already read explanations (1) and (2) to clause (viii). These explanations provide that a society or an association or Government which buys, sells, supplies or distributes goods for valuable consideration would be deemed to be a dealer even if such transactions were not in the course of business. We shall now read explanation (1) to clause (xxi): "A transfer of the property In the following goods, namely, tea, coffee, rubber, cardamom or timber, whether in the course of trade or business or otherwise, for cash or for deferred payment or other valuable consideration, by a person who produces the same, shall be deemed to be a sale for the purposes of this Act" (italics supplied). It is only when property in these specified commodities is transferred by a person who has produced them, has the legislature excluded the business concept from the definition of "sale". Consequently, if property in ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be established that the assessee had an intention to carry on business in that commodity." Under the amended definition of "business" contained in the Act, it is not necessary that the activity should be carried on with a profitmotive. Even so, only such activities as are in the nature of trade, commerce or manufacture, qualify for the term "business". Although profitmotive is no longer relevant, the test suggested in the Raipur case' is still available. In the final analysis, the question whether these transactions are of a business character has to be determined on the basis of various factors such as the nature, volume, frequency, regularity, organisation, object, intention and the like: see State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd.[1973] 31 S.T.C. 426 (S.C.). and Board of Revenue v. A. M. Ansari[1976] 38 S.T.C. 577 (S.C.). 9.. Business is defined under the Act to include any trade, commerce or manufacture. "Trade" is not defined. Referring to the definition of "trade" in the Income Tax Act, 1952 (of England), which reads: "'trade' includes every trade, manufacture, adventure or concern in the nature of trade." Lord Reid states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court stated: "In our view, the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture." In Devi Dass Gopal Krishnan v. State of Punjab[1967] 20 S.T.C. 430 (S.C.)., the Supreme Court pointed out that the dictionary meaning of "manufacture" is to transform or fashion raw materials into a changed form for use. In Union of India v. Delhi Cloth and General Mills Co. Ltd1963 S.C. 791 at 795,794, para 14., the Supreme Court observed that "processing" cannot be equated to "manufacturing": "The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance' however minor in consequence the change may be." 12.. In Kuttirayin Co. v. State of Kerala[1976] 38 S.T.C. 282; 1976 K.L.T. 442., this court considered the meaning of the expression "manufacture" in section 5A(1)(a) of the Act and observed: "If timber logs are cut into sizes to facilitate transport, stacking, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, Quilon v. Travancore Rubber and Tea Co.[1967] 20 S.T.C. 520 at 526 (S.C.)., the Supreme Court held that if a person converted latex tapped from rubber trees into sheets to facilitate transport and marketing, it could not be concluded that he carried on the business of selling the sheets. The contention of the department that such a person was a dealer was rejected by the court. In Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Palampadam Plantations Ltd.[1969] 24 S.T.C. 231 (S.C.)., the Supreme Court, referring to section 2(viii)(e) of the Act, stated. "Now in order to fall within the definition of 'dealer', a person must sell goods produced by him by manufacture, agriculture, horticulture or 'otherwise'. Such trees which have grown spontaneously and without any plantation by that person cannot possibly be regarded as having been produced by him by agriculture or horticulture. The word 'otherwise' also cannot cover trees of spontaneous growth since the element of production must be present. The context in which the word produced' appeared in the definition can only mean 'to bring forth, bring into being or existence-to bring (a thing) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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