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TMI Blog2007 (2) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of running its business petitioner No. 1-company procured and/or came into possession of various materials like old office records, waste papers, cardboards, boxes, diaries, broken office furniture, books, pesticides, newspapers, etc. (hereinafter referred to as, disputed goods ). In order to clear the office premises from such accumulated unnecessary, unserviceable and unusable materials, company had to dispose of those articles/materials by making periodical casual sales not forming part of its business. The Bengal Finance (Sales Tax) Act, 1941 was amended in 1987 by introducing a modified definition of dealer with effect from the date of commencement of the 1941 Act, i.e., July 1, 1941. After aforesaid amendment of 1987 Directorate of Commercial Taxes published trade circular No. 1 of 1987 explaining the impact and implication of the amended definition of dealer and taking a stand that Government or any such body as covered by the amended definition would be treated as dealer even if sale, supply or distribution of any kind of goods was effected not in the course of business. On July 3, 1987 petitioner No. 1-company received a memo bearing No. 6090 dated July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which sells goods to its members is a dealer. Explanation 2. A factor, a broker, a commission agent, a del credere agent, an auctioneer or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of selling goods and who has, in the customary course of business, authority to sell goods belonging to principals is a dealer. By Amendment Act of 1987 the definition of dealer was amended with retrospective effect from the date of commencement of the 1941 Act. Relevant portion of the amended definition of dealer is quoted below: 'dealer' means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under section 6D and includes the Central or a State Government, a local authority, a statutory body, a trust or other body corporate which, or a liquidator or receiver appointed by a court in respect of a person defined as a dealer under this clause who, whether or not in the course of business sells, supplies or distributes directly or otherwise, for cash or for defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a taxing statute should be interpreted in the context of the provisions of the entire Act and not in isolation. He has submitted that in case more than one construction is possible, construction beneficial to the subject should be adopted. In support of his submission he has referred to the following observation of the Supreme Court in Reserve Bank of India v. Peerless General Finance and Investment Company Ltd. [1987] 61 Comp Cas 663; AIR 1987 SC 1023: 33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a of the oil companies and charged sales tax under the Madras General Sales Tax Act, on the sales of those unserviceable old materials, supply of tea and edibles to the workmen and supply of advertising materials to their agents. Definitions of dealer and business were amended in the Madras General Sales Tax Act. Amended definitions were almost similar to those in the 1941 Act. Oil companies disputed the said decision of the sales tax authorities. The dispute went up to the Supreme Court. Considering the amended definitions of dealer and business in the Madras General Sales Tax Act the Supreme Court ruled that after such amendment the disputed sales were exigible to sales tax as those sales were incidental to their main business. Similar disputes regarding the status of South Eastern Railway and Eastern Railway under the 1941 Act cropped up in West Bengal in or about 1957-58 long before amendment of 1987, when the definition of dealer was much narrower. The South Eastern Railways were disposing unclaimed goods in their possession on consideration. The Eastern Railway was also selling scrap and unserviceable materials. The commercial tax authorities of West Bengal tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 'such trade, commerce or concern' makes it clear that to be an incidental or ancillary transaction to come within the mischief of the amended definition, the transaction must be incidental to the business of selling goods. In fact, the adverb 'such' indicated that it must be a trade, as mentioned in clause (1a) and sub-clause (i) of clause (1a) of the amended section 2, which provides that the expanded definition of business must be of selling goods. . . The Board of Revenue went in appeal before the Supreme Court. The Supreme Court in a composite judgment in Member, Board of Revenue v. Controller of Stores, Eastern Railway, Calcutta reported in [1989] 74 STC 5 allowed the appeals and reversed the well-reasoned judgment of the Calcutta High Court. The Supreme Court stated (page 7): The High Court delivered judgment setting forth detailed reasons therefor in the case relating to the assessee, South Eastern Railway. It held that the disposal of the goods did not indicate that the railway concerned was carrying on business as a dealer liable to assessment under the Act. The High Court disposed of the other case on the same basis as found favour with it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(c) of the 1941 Act. We hold that the Collector is a person who carries on the business of selling goods in West Bengal. That he is an officer representing the Central Government does not alter the position. There was no contention before us that the Collector is not a 'person'. In any case, the word 'person' has not been defined in the 1941 Act. In section 3(32) of the Bengal General Clauses Act, 1899 (Bengal Act 1 of 1899) an inclusive definition of the expression is given as below: ' Person shall include any company or association or body of individuals, whether incorporated or not'. The aim of the inclusive definition being expansive, the Collector is clearly a person, having regard to the facts of this case. (See Corporation of Calcutta v. Director of Rationing and Distribution AIR 1955 Cal 282). 16.. Apart from the main part of the definition of 'dealer' in clause (c) of section 2 of the 1941 Act, there is an inclusive part, which specifically applies, inter alia, to the Central Government. The Collector represents the Central Government, which is applicant No. 2 in this case. An inclusive definition is often intended to expa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same cannot be said of an activity like that undertaken by the Collector of Customs whose primary duty as a statutory functionary is the prevention of smuggling activities and/or evasion of payment of customs duties. I am unable to agree for more than one reason. Explanation 2 to the definition of 'dealer' in section 2(vii) of the KGST Act creates a fiction that the Central and State Governments which buy, sell, supply or distribute goods directly or otherwise and whether or not in the course of business shall be deemed to be dealers for the purposes of the Act. Section 5 imposes the charge on such a dealer to pay tax on the sales effected by him. This fiction has to be given its full effect and we cannot impose limitations or conditions which are not found therein. The fiction has dispensed with the business element in the activity of buying, selling, supplying or distribution of goods indulged in by the Central and State Governments, to make them statutorily dealers under the Act. All that is required is a sale by the Central or a State Government either for cash or for deferred payment or for commission, remuneration or other valuable consideration. The further elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause and added Explanation II to the original definition of dealer in the M.P. Sales Tax Act to expand the meaning of 'dealer'. Relevant part of the post-amendment definition of 'dealer' in the M.P. Sales Tax Act is reproduced below: (d) '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 (i) a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business. Explanation I. . . . Explanation II. The Central or a State Government or any of their departments or offices 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 for other valuable consideration, shall be deemed to be a dealer for the purposes of this Act. Aforementioned amendment made in 1971 was given retrospective effect from April 1, 1959, the date of commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the levy of tax under the M.P. Sales Tax Act whether the Central Government or a State Government or any of their departments or offices have bought or sold goods in the course of business. There is, therefore, no substance in the above contention and it must accordingly be rejected. An exactly similar question as raised by the petitioner herein arose before the Karnataka High Court. United India Insurance Co. Ltd. contended therein that as its main activity was one of service and not of any business of buying and selling goods, it could not be a dealer and sale of insured goods as scrap, not being incidental or ancillary to any business of buying or selling goods, were not exigible to sales tax under the Karnataka Sales Tax Act, 1957. Single Bench in United India Insurance Co. Ltd. v. Commissioner of Commercial Taxes [1986] 63 STC 252 (Karn) as well as the Division Bench of the Karnataka High Court in United India Insurance Co. Ltd. v. Commissioner of Commercial Taxes [1990] 78 STC 99, followed the decisions of the Supreme Court in Member, Board of Revenue, West Bengal [1989] 74 STC 5 and held (at page 103 of 78 STC): . . . Even though the activities carried on by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 valuable consideration, shall be deemed to be a dealer for the purposes of this Act; The above-quoted definition of dealer was materially different from the definition in the 1941 Act inasmuch as even in the inclusive part in sub-clauses (i) and (iii) the requirement was carrying on business . Explanation (2) to the above definition is akin to the inclusive part of the definition in the 1941 Act. Explanation (2) dealt with Central or State Government and not with any undertaking or statutory authority. The Supreme Court in Board of Trustees of the Port of Madras [1999] 114 STC 520 (SC) did not consider Explanation (2) and was mainly concerned with sub-clauses (i) and (ii) of section 2(g) in determining whether the Madras Port Trust could be said to be a dealer or not. In the said decision the Supreme Court held that Port Trust was not carrying on any business and laid down following principles (at page 535 of STC): 28. In our view, if the main activity was not 'business', then the connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illary activity. As Sai Publication Fund was not involved in any kind of business/commercial activity, primary or incidental, it was not held to be dealer within the meaning of the Bombay Sales Tax Act. In the Bombay Act also business activity of buying or selling goods was one of the ingredients to become a dealer. These two decisions, therefore, cannot help the petitioner in this case as the petitioner is admittedly a business enterprise engaged in commercial activity and definition of dealer in the 1941 Act was different. Indeed there are some decisions containing observations apparently in favour of the plea raised by the petitioner in the present case. A single Bench of the Allahabad High Court in Oriental Fire and General Insurance Company Limited v. Commissioner of Sales Tax [1986] 63 STC 246 distinguished the decision of the Supreme Court in District Controller of Stores, Northern Railway [1976] 37 STC 423 and on the basis of the definitions of dealer and business in the U.P. Sales Tax Act, 1948. The learned judge observed (at page 250 of 63 STC): The aforesaid observation of the Supreme Court clearly indicates that while determining whether the railway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . A comparison between the definition in the 1941 Act and the U.P. Act clearly indicates vital difference between those definitions and inapplicability of the aforesaid decision to the present case. The words 'which carries on such business' in the inclusive part of the U.P. Act made business activity one of the elements whereas Bengal Act intended to do away with the requirement of business by including the words whether or not in course of business . The Madras High Court (Single Bench) in New India Assurance Co. Ltd. v. Deputy Commercial Tax Officer, Esplanade Division I, Madras [1972] 29 STC 539, took similar view regarding business of insurance company. It was held therein (at page 540 of STC): . . . In the instant case, the main commercial activity of the petitioner is general assurance business. They do not buy or sell or supply or distribute goods either for cash or for deferred payment or for any other valuable consideration. Occasionally, when in the course of their activity they come into possession of a damaged vehicle over which they settle their claims under the insurance policy taken for the purpose and if in order to get rid of the damaged vehi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously and a harmonious construction indicates that inclusive part intended to cover even those sales, supplies or distributions not made in ordinary course of the principal business activity but as incidental or ancillary to the principal business of selling or purchasing goods. Mr. Bose has further submitted that in the context of the purpose of the sales tax laws and all other provisions of the 1941 Act it could not be the intention of the Legislature to tax sales not connected with the business of selling or purchasing goods. The Supreme Court in Hiralal Ratan Lal v. Sales Tax Officer, Section III, Kanpur [1973] 31 STC 178; AIR 1973 SC 1304 has laid down rules for construing a statutory provision. It was observed: . . . In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that, we have to see at the very outset is what does that provision say? If the provision is unambiguous and if from that provision, the legislative intent is clear, we need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1941 Act reveals that although the main opening part covered only those who carried on the business of selling or purchasing goods in West Bengal, the inclusive part extended the coverage to some other specified bodies or organizations which might not be engaged in any kind of commercial activity but sold goods within the meaning of sale of goods under the 1941 Act. Inclusion of Central Government and State Government which do not normally carry on any business or commercial activity supports the aforementioned construction. If the intention of the Legislature was to cover, only those organizations or bodies or persons which/who were carrying on business of selling or purchasing goods in West Bengal then inclusive part needed not have included a body corporate or local authority or trust or statutory body as the expression person used in the main part was sufficient to cover all persons/natural, legal or artificial. As person was not defined in the 1941 Act, definition given in the General Clauses Act was applicable. Thus if a body corporate like the petitioner was engaged in business of buying or selling goods it would have been a dealer under the main part and there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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