9911796707
TMI Blog1986 (3) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... ad entered into a contract of insurance with M/s. Plascom Industries in the year 1977-78 whereunder the petitioner has insured plastic powder for risk in transit. In the course of such transit the insured goods had suffered extensive damage and therefore taken over by the petitioner after settling the claim of the owner for Rs. 58,800. The said goods was disposed of by the petitioner in a salvage sale conducted during the said year, for a price of Rs. 58,800. The Additional C.T.O., 17th Circle, Bangalore, issued a notice under section 10(1) of the Karnataka Sales Tax Act ("the Act") and called upon the petitioner to register itself as a dealer under section 2(k)(i) of the Act. A copy of the notice dated 22nd April, 1982, is produced as annexure A to the petition. The petitioner replied to the said notice by its letter dated 28th May, 1982, annexure B, and contended that it was not carrying on any business of buying and selling as contemplated under the Act and was therefore not liable to register itself as a dealer under the Act. Since the department did not agree with the contention of the petitioner, this writ petition is filed raising, inter alia, among other grounds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person may carry on business as defined under the Act, but for attracting the charging provision, namely, section 5, he should be a "dealer" under the Act. It is, therefore, contended that there is intricate connection or nexus between the definitions of the terms "business" and "dealer" and the petitioner-company though carries on business in general insurance, cannot be treated as a "dealer" under the Act. "Dealer" for the purpose of the Act means, a person who carries on the business of buying, selling, supplying or distributing the goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes "casual trader". It is argued on behalf of the petitioner that the department has erred in treating the salvage sale of the goods in question as forming part of the business of the company and the company as a "casual trader" and that therefore is liable to pay tax on the realisation from the said sale. The contention of the petitionercompany is that in order to satisfy the definition of a "dealer", it must, in the first instance, be found carrying on trade, commerce or manufacture and should be carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 539 (Mad.). Where a company carrying on general assurance business comes into possession of a damaged vehicle in the course of settling the claims under the insurance policy, the vehicle is sold by the company, they (company) cannot be characterised as casual dealers coming within the definition of a "dealer" in section 2(g) of the Madras General Sales Tax Act, 1959, and the sale of the vehicle cannot be subjected to sales tax. Their Lordships proceeded on the basis that the commercial activity of the petitioner is general assurance business. They do not buy or sell or supply or distribute goods either for cash or deferred payment or for any other consideration. Occasionally, therefore, when they come into possession of damaged vehicle and dispose of the same in a salvage sale, it cannot amount to casual trade. The Madras High Court applied the decision of the Supreme Court in the case of Raipur Manufacturing Co. [1967] 19 STC 1 (SC). But this was a decision rendered before section 2(g) of the Madras Act was amended with effect from 1964, to include any transaction in connection with or incidental or ancillary to such trade, commerce or manufacture, etc. (3) State of Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be included in the assessee's turnover liable to tax. (8) State of Madras v. Trustees of the Port of Madras [1974] 34 STC 135 (Mad.). Sale of unclaimed and unserviceable goods by the Madras Port Trust: The question was whether the Port Trust was a dealer liable under the Tamil Nadu General Sales Tax Act even after amendment of "business". Held, that the Port Trust, a statutory body bad disposed of the unserviceable goods in the course of the exercise of its statutory duties and not as a dealer and were therefore not liable to pay sales tax. (9) State of Gujarat v. Raipur Manufacturing Company [1967] 19 STC 1 (SC). This was a case in which the interpretation of the term "business" in the said Act before its amendment came up for interpretation. The assessee-company was a manufacturer of cotton textiles. In the course of its business it had disposed of goods which were unserviceable or unsuitable. The Supreme Court held, that it was not the intention of the assesseecompany therein to deal in goods which were discarded, surplus or unserviceable, but was essentially a manufacturer of cotton textiles. On the facts of the said case, the Supreme Court held, the burden was on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative Sugar Mills Ltd. [1974] 34 STC 543 (Mad.). The assessee, a co-operative sugar mills, regularly purchased fertilisers of different kinds and supplied the mixture thereof to the cane-growers who were members of the society which owned the mills. It was held, that the transactions of supply of fertilisers by the mills to the cane-growers amounted to sales and by reason of the decision of the Supreme Court in Stage of Tamil Nadu v. Burmah Shell [1973] 31 STC 426 (SC), the sales were taxable transactions. (4) National Insurance Co. v. Union of India, Delhi [1978] 41 STC 30 (Delhi). "Sales" of goods which were damaged and rendered unuseable which came into the custody of the petitioner-company after making payment, were sought to be dealt by the sales tax authorities as constituting business activity of the petitioner-company. The insurance-company had challenged the constitutional validity of the proceedings initiated under the Sales Tax Act. The court, while dismissing the writ petition, upheld the validity of the proceedings against the insurance company. (5) Commissioner of Sales Tax, M.P. v. Project Automobiles [1978] 42 STC 279 (MP). The assessee, a distributor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bakshi and Bros. [1964] 15 STC 644 (SC). Dealing with the expression "business" (Sri Shah, J.) held that, "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. It was held on facts, that a registered dealer carrying on the business of tanning hides and skins and of selling the tanned hides and skins is liable to pay tax under rule 5(2) of the Hyderabad General Sales Tax Rules. Many of the decisions relied upon by the petitioner-company dealt with the definition of "business" before its amendment in the various sales tax legislations. They are: (i) [1981] 48 STC 33 (Kar) [Divisonal Superintendent (Works), Southern Railway, Mysore]. Sale of cinder ash and scrap by the railways was held not liable to tax under the KST Act prior to the amendment of "business" in 1976. By the said amendment, business includes, any transaction in connection or incidental or ancillary to such trade, commerce, manufacture, adventure or concern. (ii) [1972] 29 STC 539 (Mad.) (New India Assurance Co. Ltd.) (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations made by the Supreme Court in the case of Burmah Shell [1973] 31 STC 426 (SC). In the latter case, the sale of advertisement material, scrap and the canteen sales by the Burmah Shell was held to be business (after amendment) and was, therefore, liable to sales tax. Sri Jaganmohan Reddy, J., while allowing the appeals of the State of Tamil Nadu partly held, that the sale of scrap by Burmah Shell was certainly connected with the business of the company and the turnover in respect of the said sale was also liable to tax. The Supreme Court disagreed with the view taken by the Madras High Court and distinguished its earlier decision in Raipur Company [1967] 19 STC 1 (SC) relied upon by the assessee. The other decisions relied upon by the learned High Court Government Pleader are of the Madras High Court in [1974] 34 STC 135 (State of Madras v. Trustees of the Port of Madras), Punjab and Haryana High Court in [1979] 43 STC 158 (Birla Cotton Spinning and Weaving Mills Ltd. v. State of Haryana), M.P. High Court in [1978] 42 STC 279 (Commissioner of Sales Tax v. Project Automobiles) and Delhi High Court in [1978] 41 STC 30 (National Insurance Co. Ltd. v. Union of India) sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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