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Commissioner of Sales Tax Vs. Bajrang Glass Works - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberSales Tax Revision No. 815 of 1978
Judge
Reported in[1980]45STC270(All)
AppellantCommissioner of Sales Tax
RespondentBajrang Glass Works
Appellant AdvocateStanding Counsel
Respondent AdvocateM.C. Gupta, Adv.
DispositionPetition dismissed
Excerpt:
- - it follows that ordinarily the sale of another commodity will not be included in the total taxable turnover unless that person is carrying on the business of selling that commodity as well......it would be seen that under the act the aggregate of the price received or receivable by a person carrying on the business of selling goods is liable to be included in his taxable turnover. in order to attract the charging section, a person must be carrying on the business of selling a particular commodity. it follows that ordinarily the sale of another commodity will not be included in the total taxable turnover unless that person is carrying on the business of selling that commodity as well. thus, it is necessary that the dealer must carry on the business of selling a commodity before his turnover of sale of that commodity is taxable. in the instant case, it is admitted that the assessee is a manufacturer of glass bangles. the assessee purchased coal for manufacture of glass.....
Judgment:

R.R. Rastogi, J.

1. This reference was made under Section 11(3) of the U.P. Sales Tax Act, but, in view of the amendment made by the U.P. Taxation Laws (Amendment and Validation) Act, 1978, it would be treated as a revision under Section 11(1) of the Act.

2. The question for consideration in this revision is as to whether sales of coal-dust made by the assessee who carries on the business of manufacture of glass bangles are liable to tax. The assessment year involved is 1971-72. During this year, the assessee sold coal-dust worth Rs. 18,173. The claim of the assessee was that these sales were not liable to be taxed. The assessing authority did not accept this contention, but, on appeal, the Appellate Assistant Commissioner (Judicial), Sales Tax, accepted it. There was revision filed by the Commissioner of Sales Tax before the Additional Judge (Revisions), Sales Tax, Agra, who confirmed the order of the Appellate Assistant Commissioner (Judicial) and hence this further revision before this Court by the Commissioner of Sales Tax.

3. Section 3 of the Act imposes tax at the rates provided by order under Sections 3-A, 3-AB and 3-AA on the taxable turnover in respect of sale of goods upon every dealer. The expression 'dealer' is defined in Section 2(c) as meaning 'any person or association of persons carrying on the business of buying, selling, supplying or distributing goods in Uttar Pradesh, whether for commission, remuneration or otherwise....' Section 2(d) defines 'goods' as meaning 'every kind of movable property other than actionable claims, shares or securities, and includes growing crops, grass, trees and things attached to or fastened to anything permanently attached to the earth, but which, under the contract of sale, are agreed to be severed, and includes any class of goods'. Section 2(h) defines 'sale' as meaning 'within its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge'. The definition of the expression 'turnover' is given in Section 2(i), which may also be noted. According to this definition, 'turnover' means 'the aggregate amount for which goods are supplied or distributed by way of sale or are sold by a dealer, either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration'. The proviso and the explanation to this clause are not relevant for the present purpose.

4. It would be seen that under the Act the aggregate of the price received or receivable by a person carrying on the business of selling goods is liable to be included in his taxable turnover. In order to attract the charging section, a person must be carrying on the business of selling a particular commodity. It follows that ordinarily the sale of another commodity will not be included in the total taxable turnover unless that person is carrying on the business of selling that commodity as well. Thus, it is necessary that the dealer must carry on the business of selling a commodity before his turnover of sale of that commodity is taxable. In the instant case, it is admitted that the assessee is a manufacturer of glass bangles. The assessee purchased coal for manufacture of glass bangles. In other words, he is a dealer in glass bangles and not coal. Of course, the assessee sells coal-dust because it cannot be used for burning the raw material necessary for manufacture of glass bangles. The assessee is required to dispose of the coal-dust in the course of carrying on its business of manufacture of glass bangles because it is unserviceable.

5. A similar question came up for consideration before the Supreme Court in State of Gujarat v. Raipur Manufacturing Company Limited [1967] 19 S.T.C. 1 (S.C.). In that case, the assessee carried on the business of manufacturing and selling cotton textiles. In the accounting year 1953-54, besides selling cloth, the assessee sold coal and 25 different items of discarded or unserviceable goods and waste products from the factory. The sales tax authorities brought the turnover from sales of those commodities to tax under the Bombay Sales Tax Act, 1953. That order was confirmed in appeal by the Sales Tax Tribunal. On a reference, at the instance of the assessee, the High Court took a contrary view and held that the assessee was not liable to be taxed on the aforesaid turnover. The State of Gujarat went in appeal by special leave to the Supreme Court. Before adverting to the decision of the Supreme Court on this point, it may be noted that the definition of the expressions 'dealer', 'goods', 'sale' and 'turnover' as contained in the Bombay Sales Tax Act, 1953, are almost the same as contained in the U.P. Sales Tax Act. The Supreme Court referred to an earlier decision given by it in State of Andhra Pradesh v. Abdul Bakshi and Bros [1964] 15 S.T.C. 644 (S.C.), in which the view taken was that a person to be a dealer must be engaged in the business of buying, selling or supplying goods. The expression 'business' though extensively used in taxing statutes, 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. To regard an activity as business, there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive, and not for sport or pleasure. The court proceeds on to observe:

But where a person comes to own in the course of his business of manufacturing or selling a commodity some other commodity which is not a byproduct or a subsidiary product of that business and he sells that commodity, cogent evidence that he has intention to carry on business of selling that commodity would be required. Where a person in the course of carrying on a business is required to dispose of what may be called his fixed assets or his discarded goods acquired in the course of the business, an inference that he desired to carry on the business of selling his fixed assets or discarded goods would not ordinarily arise. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist. But no test is decisive of the intention to carry on the business in the light of all the circumstances an inference that a person desires to carry on the business of selling goods may be raised.

6. It would be seen that where a person in the course of his business of manufacturing or selling a commodity sells some other commodity which is in the nature of discarded or unserviceable goods or waste product from the factory, cogent evidence has to be given that he has intention to carry on business of selling that commodity. Further, in order to ensure that there is an intention to carry on business, it has to be shown that the volume, frequency, continuity and regularity of activity is such that it can lead to the only inference that a person desires to carry on business of selling such goods. On the undisputed facts of the present case, I do not think that any such inference can be drawn and, particularly, when the department has not brought on record any material to show that the assessee, in the course of carrying on the business of manufacturing and selling glass bangles, had any intention to carry on business in the sale of coal-dust. Agreeing with the revising authority, therefore, I hold that no tax can be levied on the sales of coal-dust.

7. The revision is hence dismissed with Rs. 200 as costs to the assessee.


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