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Commissioner of Sales Tax Vs. Mohammad Rasul of Panna - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 262 of 1968
Judge
Reported in1970MPLJ426; [1970]26STC202(MP)
AppellantCommissioner of Sales Tax
RespondentMohammad Rasul of Panna
Appellant AdvocateK.K. Dube, Government Adv.
Respondent AdvocateR.K. Tankha, Adv.
Cases ReferredSee New India Sugar Mills Ltd. v. The Commissioner of Sales Tax
Excerpt:
- .....it cannot, therefore, be said that the assessee was engaged in the business of discovery and sale of diamonds. 'dealer' is defined in section 2(d) of the act thus:'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....the expression 'carries on the business' connotes a continuous trade or occupation involving time and labour as also some investment which may be regarded as an independent trade or occupation. it involves continuity of buying or selling with the motive of profit-making. that word must be construed in the commercial sense and, when so construed, it means carrying on.....
Judgment:
ORDER

Shiv Dayal, J.

1.This is a reference under Section 44 of the M.P. General Sales Tax Act, 1958 (hereinafter called the Act), at the instance of the Commissioner of Sales Tax.

2. M/s. Mohammad Rasul of Panna (hereinafter referred to as the assessee) had taken a lease in Panna district for shallow mining. The lease was granted under the 'rules for the grant of annual licence for shallow mining for diamonds in Panna district'. The assessee was a lucky finder of a big diamond which has since come to be known as 'Vijay diamond'. It is said that next to koh-i-noor this was the biggest diamond ever found. When sold by public auction, it fetched Rs. 4,12,163. After deducting the royalty due to the Government under the rules, the balance was paid to the assessee. The sales tax authorities initiated proceedings for assessing sales tax. The assessee contended that he was not a 'dealer', nor was there any 'sale' of such a nature as to create the liability for payment of sales tax.

3. Both these contentions were not accepted by the assessing authority, nor by the first appellate authority. However, they found favour with the second appellate authority, that is, the Board of Revenue.

4. It was urged on behalf of the department that the assessee engaged himself in the business of discovering and selling diamonds when he took the aforesaid lease under the abovesaid rules. It was further argued that the diamond was sold on behalf of the assessee.

5. It is nobody's case that the assessee carries on the business of selling or purchasing diamonds. It is true that he took a lease but it was merely in the nature of an adventure. The discovery of a diamond was a chance. We shall presently deal with the question whether the auction of the diamond constituted sale, but assuming it was one, it was a single isolated and casual transaction. It cannot, therefore, be said that the assessee was engaged in the business of discovery and sale of diamonds. 'Dealer' is defined in Section 2(d) of the Act thus:

'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....

The expression 'carries on the business' connotes a continuous trade or occupation involving time and labour as also some investment which may be regarded as an independent trade or occupation. It involves continuity of buying or selling with the motive of profit-making. That word must be construed in the commercial sense and, when so construed, it means carrying on continuous trading operation with a view to earn profit. Unless the business of the assessee is of selling or supplying a particular commodity, sale of which is subject to tax, he cannot be regarded as a dealer in relation to that commodity and is not liable to be taxed under the Act for any sale of such commodity effected by him. There are no facts or circumstances on the record to show that the assessee was a dealer within the meaning of the above definition. Performance of a single act is not enough. It is a matter of common knowledge that a person may operate diamond mining for years together and may not be able to find a single diamond. The view we take finds support in State v. Bengal Nagpur Cotton Mills 1961 J.L.J. 12, Commissioner of Sales Tax, M.P. v. Mohanlal [1955] 6 S.T.C. 136 and Raja Bhairabendra v. Superintendent of Taxes A.I.R. 1957 Assam 179. We, therefore, uphold the view taken by the Board of Revenue in second appeal.

6. We shall now advert to the second question. Rules 10 and 11 of the said Rules read thus :

10. The diamonds found in such pits will be brought by the owner and the Government Sepoy on duty, to the Diamond Officer who shall arrange to have them tested, weighed and described and taken over in Government custody and a receipt in the prescribed form will be given to the owner.

11. The State royalty will be Rs. 20 per cent, on the sale value of the diamond. The balance will be paid to the owner. The highest bid recorded at the periodical auction sale of diamond will be the sale value of the diamond for purpose of assessing royalty. The owner of the diamond will have the liberty to bid for his own diamond.

The question is whether when a diamond is sold by public auction under the rules, it amounts to 'sale' within the meaning of the Sales Tax Act. The expression 'sale of goods' is a nomen juris. Its essential ingredients are an agreement to sell goods for a price and the property passing thereon pursuant to that agreement. A 'sale' for the purposes of the Sales Tax Act is a sale as denned in the Sale of Goods Act. A sale comprises of four essential elements:-(1) There must be parties competent to contract; (2) there must be mutual consent; (3) there must be a thing, the absolute or joint property in which is transferred from the seller to the buyer; and (4) there must be price in money paid or promised. A contract of sale thus postulates exercise of a volition on the part of the contracting parties. A transaction by which title to goods passes by compulsion is not a sale of goods as contemplated by the Sale of Goods Act. The mere use of the word 'sale' will not make it a sale for the purposes of the Sales Tax Act. It is necessary to look at the substance of the transaction and if it is found that there was no agreement between the parties, it is not a sale, although the price is payable for the goods delivered and although the property passes for valuable consideration. See New India Sugar Mills Ltd. v. The Commissioner of Sales Tax [1963] 14 S.T.C. 316.

7. Judged by these tests, it must be said that in the present case there was no sale of the diamond. The assessee had no independent volition in the sale of the diamond by public auction. Such sale was compulsory. The assessee had no choice either in the matter of selecting the purchaser or the price. It is also worthy of note that the assessee himself was free to offer his own bid at the auction. The second question must, therefore, be answered in the negative.

8. For the reasons stated above, we answer both the questions in favour of the assessee. The assessee will get his costs. Counsel's fee Rs. 150.


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