1. In this reference under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, read with Section 23(1) of the Central Provinces and Berar Sales Tax Act, 1947, the question which we have been asked to answer is-
Whether under the facts and circumstances of the case, the nonapplicant can be regarded as a dealer under Section 2(c) of the C.P. and Berar Sales Tax Act, 1947, in respect of the sales of used up motor vehicles and used up parts like tyres and tubes ?
2. Ramdulare Balkishan and Brothers of Balaghat are bus operators and carry on the business of providing transport. They own several buses and trucks. During the period from 1st January, 1957, to 31st March, 1959, the assessee sold unserviceable cars, trucks, tyres, and other used motor accessories to various persons. The value of all these sales amounted to Rs. 6,154-12-0. The Assistant Sales Tax Officer, Chhindwara, held that the assessee was a 'dealer' as defined in Section 2(c) of the Act of 1947 and accordingly assessed Ramdulare Balkishan and Brothers to sales tax on these sales. The assessee unsuccessfully appealed to the Appellate Assistant Commissioner of Sales Tax, Jabalpur. Thereupon a second appeal was preferred before the Board of Revenue by the assessee which was allowed and it was held that the assessee was not liable to pay any sales tax on the value of the sales of unserviceable material. The present reference is at the instance of the Sales Tax Commissioner.
3. The reference must be answered in the light of our decision in State of M.P. v. Bengal Nagpur Cotton Mills Ltd.  12 S.T.C. 333. In that case, after referring to the definitions of 'dealer' and 'sale' given in Section 2 of the Act of 1947, we pointed out that under Section 5 of the Act sales tax was payable by a dealer on his taxable turnover of the goods specified in the Schedule as liable to tax ; that the Act did not impose sales tax on all goods but only on those goods specified in Schedules I and II; that it did not, impose the tax on the mere sale or purchase of the goods specified in the Schedules; and that what was taxable under the Act was the sale of those goods effected by a dealer. We further said that according to the definition of 'dealer' every seller of a commodity was not a dealer ; that in order to constitute a person a 'dealer', he must be engaged, whether as principal or agent, in the business of selling or supplying goods; that for the purpose of the Act the transfer of property in the goods from one person to another should be in the course of business of selling or supplying the goods ; and that for the imposition of tax under the Act on the sale transaction of a commodity, it was not sufficient that the sale should be by a 'dealer' carrying on the business of selling or supplying some commodity but that the business of the dealer must be the selling or supplying the particular commodity sought to be taxed. We further said-
Merely because an activity is continuous or repeated, it does not follow that it is a business activity as understood in a commercial sense. The expression 'carries on the business of selling or supplying goods' in the definition of 'dealer' must be construed in its commercial sense. So construed, it means the carrying on of continuous trading operations with a view to earn profit. A person engaged in continuous trading operations may not actually obtain profit. He may incur a loss. But if he engages himself in those operations with the object of earning profit, then he is carrying on a business. The test is, therefore, the object with which the activity is carried on, and not whether he actually gets profit or loss, which is material.
4. In the present case, the business of the assessee is not of selling unserviceable or second-hand motor-cars, trucks or motor accessories. The business of Ramdulare Balkishan and Brothers is of providing transport, and operating buses. For this business the assessee has to keep a number of buses and trucks. Some of the vehicles naturally become unserviceable after some years. The tyres, batteries and other motor accessories also become unserviceable after sometime. These vehicles and motor accessories were obtained by the assessee for their own use. They were not obtained with the object of selling them to anyone at profit. Indeed in the sale of this unserviceable and secondhand material, there could be no question of earning any profit. Such vehicles and motor accessories are generally sold for whatever price that is obtainable and the value obtained only minimises the expenses which a person engaged in the business of providing transport has to incur in replacing and reconditioning his unserviceable vehicles. The sale of unserviceable material belonging to the assessee might have been on a large scale and might have been fairly regular. But from that it cannot follow that the assessee was engaged in the business activity, as understood in the commercial sense, of selling unserviceable cars, trucks and motor accessories. On the principles laid down in State of M.P. v. Bengal Nagpur Cotton Mills Ltd.  12 S.T.C. 333, there can be no doubt that the assessee's sales of unserviceable vehicles and motor accessories were not sales by a dealer in the course of his business of selling or supplying these goods.
5. The view we have taken is fully supported by the decisions in Deputy Commissioner of Commercial Taxes v. Sri Lakshmi Saraswathi Motor Service A.I.R.1954 Mad. 954. Commissioner of Sales Tax v. Mohanlal Ramkisan Nathani  6 S.T.C. 136, Girdharilal Jiwanlal v. Assistant Commissioner, Sales Tax (Appeals) 1957 N.L.J. 307 and State of Bombay v. Ahmedabad Education Society A.I.R. 1956 Bom. 673. In Nathani's case  6 S.T.C. 136, it has been held that a person can be regarded as a dealer within the meaning of Section 2(c) of the Act only in relation to the goods which it is his business to sell or supply; and so, where a person, though a dealer in respect of certain commodities, effects a sale of a commodity which it is not his business to sell, he is not liable to be taxed under the Act. A similar view has been expressed in Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax 1957 N.L.J. 307 In the Bombay case, State of Bombay v. Ahmedabad Education Society A.I.R. 1956 Bom. 673, Chagla, C. J., had occasion to construe the definitions of 'dealer' and 'sale' given in the Bombay Sales Tax Act, 1946, and which definitions were similar to those given in the C.P. and Berar Sales Tax Act, 1947. He said-
It is clear from the definition of a dealer that it is not merely the act of selling as defined in the Act which constitutes a person a dealer. The activity which the person must indulge in is not merely the activity of selling in the sense of transferring property in goods, but it must be the activity of carrying on the business of selling or supplying goods. What the Legislature has emphasised is not the act or activity of selling but the act or activity of carrying on the business.
In Deputy Commissioner of Commercial Taxes v. Sri Lakshmi Saraswathi Motor Service A.I.R. 1954 Mad. 954, it was held that a transport company whose only business was to provide transport could not be treated as dealers in buses merely because when the buses became unserviceable or useless the company sold them as old buses or scrap.
6. Learned Government Advocate referred us to a Full Bench decision of the Kerala High Court in Gosri Dairy v. State of Kerala  12 S.T.C. 683, and to Aryodaya Spinning and Weaving Company Ltd. v. The State of Bombay 3, and contended that the frequency, regularity and the volume of sales effected by the assessee in the present case were such that the sales could be regarded as in the course of the business of the assessee. In the Kerala case, the assessee-firm was a dealer in dairy products. It sold away a part of its livestock annually and replaced the same by fresh yielding stock. It was held that the frequency, regularity and the volume of sales of cattle by the assessee-firm were such that they could be regarded as 'an activity in the course of the business of the assessee' and, therefore, the assessee's sales of cattle were part of its business constituting it a dealer within the meaning of the relevant Sales Tax Act. The learned Judges of the Kerala High Court reached the conclusion that they did solely on applying the test of volume, regularity and frequency of sales for determining whether the assessee was or was not a 'dealer'. But they overlooked the fact that an activity, though continuous, serious and large, could not assume the characteristics of a business unless it was an activity coming within the definition of 'dealer' given in the Act. As we have said, the true test is not whether the selling activity is continuous or repeated; but it is whether the carrying on of continuous operations is with a view to earn profit. The case of Aryodaya Spinning and Weaving Company Ltd.  11 S.T.C. 141 is clearly distinguishable on facts. In that case, the assessee was carrying on the business of manufacturing cotton textiles and yarns. It also sold subsidiary products such as cotton, cotton waste etc. It was held by the Bombay High Court that though the normal business of the assessee was the manufacture of yarn and cloth, cotton waste, which was a subsidiary product, was normally sold and, in the circumstances, an intention to carry on business of selling the subsidiary product as a part or an incident of the business of the assessee could be inferred. Here there is no material whatsoever to hold that when the assessee purchased new vehicles it was with the object of selling them to anyone at profit after some use. On the other hand, the fact that the vehicles and motor accessories, which the assessee sold, were unserviceable only indicates a complete absence of the profit motive in the sale of those goods.
7. For these reasons, our answer to the question referred is that the assessee cannot be regarded as a 'dealer' under Section 2(c) of the C.P. and Berar Sales Tax Act, 1947, in regard to the sales of 'used up motor vehicles and used up parts like tyres and tubes.' The assessee shall have costs of this reference. Counsel's fee is fixed at Rs. 100.