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Commissioner of Sales Tax Vs. Ratlam Strawboard Mills Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case Number M.C.C. No. 129 of 1981
Judge
Reported in[1984]55STC194(MP)
AppellantCommissioner of Sales Tax
RespondentRatlam Strawboard Mills Private Ltd.
Appellant Advocate S.R. Joshi, Government Adv.
Respondent Advocate S.D. Sanghi and ; N.K. Sanghi, Advs.
Cases ReferredCementation Patel (Durgapur) v. Commissioner of Commercial Taxes
Excerpt:
- indian penal code, 1890.section 306 :[dalveer bhandari & harjit singh bedi,jj] abetment of suicide deceased, a married woman, committed suicide - allegation of abetment of suicide against appellant husband and in-laws - ocular evidence was sketchy - dying declaration recorded by tahsildar completely exonerated all accused in-laws of any misconduct dispelling any suspicion as to their involvement - letter of threat allegedly written by appellant to father of victim was concocted piece of evidence held, though presumption against appellant can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. .....the assessee, the transaction of sale of an old plant and its accessories is covered by the enlarged definition of 'business' under the act and such transaction has taken place in the course of the main business of the assessee. in our opinion therefore, the sale transactions in question are exigible to tax.8. for all these reasons, our answer to the two questions referred to us is in the negative and against the assessee. parties shall bear their own costs of these references.
Judgment:

G.G. Sohani, J.

1. The order in this case will also govern the disposal of Miscellaneous Civil Case No. 131 of 1981.

By these references under Section 44(1) of the M. P. General Sales Tax Act, 1958 (hereinafter referred to as the Act), the following questions of law have been referred to this Court for its opinion :

(1) Whether, under the facts- and circumstances of the case, the Tribunal was justified in holding that the plant sold for Rs. 6.5 lakhs in the financial year 1965-66 was not liable to sales tax ?

(2) Whether, under the facts and circumstances of the case, the Tribunal was justified in holding that the sale of spare parts and accessories sold at Rs. 41,312 during the year 1966-67 was not liable to sales tax ?

2. The material facts giving rise to these references briefly are as follows : The assessee is engaged in the manufacture and sale of strawboards. The assessee had two plants for the manufacture of strawboards. In the assessment year 1965-66, the assessee sold on account of shortage of raw materials, heavy excise duty and water scarcity, one of its plants for a sum of Rs. 6.5 lakhs and in the assessment year 1966-67, the assessee sold spare parts and accessories of that plant for a sum of Rs. 41,312. The Assistant Commissioner of Sales Tax included both these sale proceeds in the gross and taxable turnover of the assessee. On appeal by the assessee, the Deputy Commissioner of Sales Tax held that the transaction of sale of the old plant was not exigible to tax as it was not connected with the business of the assessee. The other transaction of sale of spare parts, etc., was, however, held to be taxable. The Additional Commissioner of Sales Tax took up the matter in revision and set aside the order passed by the Deputy Commissioner with regard to the transaction of sale of the old plant by the assessee. Aggrieved by a part of the order passed by the Deputy Commissioner and that passed by the Additional Commissioner, the assessee preferred appeals before the Tribunal. The Tribunal held that both the sales were not effected by the assessee in the course of its business and therefore, they were not exigible to tax. Hence, at the instance of the department, the Tribunal has referred the aforesaid questions of law to this Court for its opinion.

3. Shri Joshi, learned Government Advocate, contended that after the amendment of the definition of 'business' contained in Section 2(bb) of the Act by the amending Act of 1965, profit-motive has ceased to be an ingredient of business and that any transaction connected with, or incidental or ancillary to the main business of the assessee is also exigible to tax. Reliance was placed on the decisions in State of Tamil Nadu v. Burmah Shell Oil Storage & Distributing Company of India Ltd. [1973] 31 STC 426 (SC), Commissioner of Sales Tax, M.P. v. Straw Products Ltd., Bhopal [1982] 15 VKN 350, District Controller of Stores, Northern Railway, fodhpur v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC) and State of Tamil Nadu v. Binny Limited, Madras [1982] 49 STC 17 (SC).

4. In reply, Shri Sanghi, learned counsel for the assessee, contended that in order that receipts from sale of a commodity might be included in the taxable turnover, it must be established that the assessee was carrying on business in that particular commodity. It was urged that even under the amended definition of 'business', a transaction could be held exigible to tax only if that transaction was effected in the course of business of the assessee and that sale of an old plant and its accessories could not be held to have been effected in the course of the business of the assessee. Reliance was placed on the decisions reported in K.N. Krishnaiah Setty & Sons v. Deputy Commercial Tax Officer, Hindupur (sic) Obviously refers to State of Gujarat v. Raipur . [1967] 19 STC 1 (SC), State of M.P. through Sales Tax Commissioner v. Bengal Nagpur Cotton Mills Limited, Rajnandgaon 1961 MPLJ 129, Commissioner of Sales Tax, M.P. v. L. Vasudeo Rao [1981] 48 STC 447, Bachhraj Factory Private Limited v. Commissioner of Sales Tax, M. P. [1978] 11 VKN 44 and Cementation Patel (Durgapur) v. Commissioner of Commercial Taxes, West Bengal, Calcutta [1981] 47 STC 385.

5. Before we proceed to appreciate the contentions urged on behalf of the parties, it would be useful to note the facts found by the Tribunal. The assessee is a dealer carrying on the business of manufacture and sale of strawboards. The old plant, its spares and accessories were acquired by the assessee for the business of manufacture and sale of strawboards. The assessee has not closed its business on a particular line of its business. Prior to and subsequent to the sale of its old plant and accessories, the business carried on by the assessee is the same. The decision in Commissioner of Sales Tax, M. P. v. L. Vasudeo Rao [1981] 48 STC 447 is therefore distinguishable on facts. In that case, the assessee had sold his fixed assets on the closure of his business and it was in that context that it was held that the sale proceeds of that transaction were not exigible to tax. In the instant case, the short question for consideration is whether the sale of an old plant with its accessories by an assessee, who continues to carry on the business in connection with which the old plant and its accessories were acquired, is exigible to tax.

6. Now Section 2(bb) of the Act, which was in force at the relevant time, defined 'business' as follows :

2(bb) 'Business' includes-

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce manufacture, adventure or concern.

In view of the aforesaid definition, not only profit-motive has ceased to be an ingredient of business but any transaction of sale or purchase of goods in connection with or incidental or ancillary to the main business of the assessee is also covered by the definition. As held by two Division Bench decisions of this Court in Commissioner of Sales Tax, Madhya Pradesh v. Project Automobiles [1978] 42 STC 279 and Commissioner of Sales Tax, M. P. v. Straw Products Ltd., Bhopal [1982] 15 VKN 350, on account of the enlarged definition of 'business' by the amending Act of 1965, the decision of the Supreme Court in State of Gujarat v. Raipur . [1967] 19 STC 1 (SC) and other decisions referred to by the learned counsel for the assessee have ceased to be applicable and the decisions of the Supreme Court, which are relevant are State of Tamil Nadu v. Burmah Shell Oil Storage & Distributing Co. Ltd. [1973] 31 STC 426 (SC) and District Controller of Stores, Northern Railway, fodhpur v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC). In view of the enlarged definition of 'business' under the Act, it is not, in our opinion, necessary for rendering a sale exigible to tax to show that the sale was of a commodity in which the assessee was carrying on business. If the sale is connected with or incidental to or ancillary to the main business of the assessee, then such transaction is 'business' within the definition of that expression in Section 2(bb) of the Act. The decision in Cementation Patel (Durgapur) v. Commissioner of Commercial Taxes, West Bengal, Calcutta [1981] 47 STC 385 is distinguishable on facts. In that case, it has been held that if the main business of a person is such that he cannot be held to be a 'dealer' in respect of such business, then the transactions connected with or ancillary to such business, though in the nature of sale, will not make the person concerned a 'dealer'.

7. As already observed, in the instant case, the assessee has not ceased to carry on its business of manufacture and sale of strawboards. The old plant and its accessories were acquired by the assessee for that business, and therefore, though sale of plants and their accessories is not the business of the assessee, the transaction of sale of an old plant and its accessories is covered by the enlarged definition of 'business' under the Act and such transaction has taken place in the course of the main business of the assessee. In our opinion therefore, the sale transactions in question are exigible to tax.

8. For all these reasons, our answer to the two questions referred to us is in the negative and against the assessee. Parties shall bear their own costs of these references.


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