Full Judgment Text
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CASE NO.:
Appeal (civil) 9445 of 1996
PETITIONER:
COMMISSIONER OF SALES TAX
Vs.
RESPONDENT:
SAI PUBLICATION FUND
DATE OF JUDGMENT: 22/03/2002
BENCH:
Shivaraj V. Patil & Bisheshwar Prasad Singh
JUDGMENT:
With
Civil Appeal No. 1716 of 1999
J U D G M E N T
Shivaraj V. Patil,J.
CIVIL APPEAL NO. 9445 OF 1996
In the light of the contentions raised and submissions made
on behalf of the parties, the issue that arises for consideration
and decision in this appeal is whether the Trust - Sai Publication
Fund, which has been set up by some devotees of Saibaba of Shridi
for spreading his message, can be held to be a "dealer" in
respect of sale of books, booklets, pamphlets, photos, stickers
and other publications containing message of Saibaba and the
turnover of such publication can be assessed to sales tax under
the Bombay Sales Tax Act, 1959 (for short ‘the Act’).
The relevant and material facts, leading to filing of this
appeal in brief, are that the assessee (the respondent herein) is
a Trust created by four devotees of Saibaba of Shridi under a
trust deed dated 6.8.1984. The object of the Trust is to spread
message of Saibaba of Shridi. In furtherance of and to accomplish
the said object, the assessee publishes books, pamphlets and other
literature containing the message of Saibaba under the aegis of
"Sai Publications" which are available to the devotees of Saibaba
on nominal charge to meet the cost. The sale proceeds of such
publication goes to the Trust and forms part of the property of
the Trust, which can be utilized only for advancement of the
objects of the Trust. There is a specific provision in the trust
deed that in the event of failure of the Trust to carry on its
aims and objects, the remaining fund in its hands would be handed
over to Sansthanam of Shridi.
In order to avoid any controversy relating to leviability of
sales tax on the amount received on sale of such publications, an
application was made by the Trust under Section 52(1)(a) of the
Act seeking determination of the questions whether the Trust could
be said to be carrying on "business’ as defined in Section 2(5A)
of the Act and whether it could be considered as a "dealer"
within the meaning of Section 2(11) of the Act. The Deputy
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Commissioner of Sales Tax by his order dated 28.9.1989 held that
the activity of publication and sale of books etc. amounted to
business falling within the ambit of Section 2(5A) and the Trust
was a "dealer" coming within the meaning of Section 2(11) of the
Act. Consequently, he held that the Trust was liable to pay sales
tax on the value of publications sold by it. What weighed with
the Deputy Commissioner in passing the said order was the
amendment of the definition of "business" in Section 2(5A) of the
Act by the Maharashtra Tax Laws (Levy, Amendment & Repeal) Act,
1989 with retrospective effect from 16.8.1985 to provide that even
without profit motive, it can still be "business".
In the appeal filed before the Maharashtra Sales Tax
Tribunal against the said order of the Deputy Commissioner, it was
contended on behalf of the Trust that it was not a "dealer"
within the meaning of Section 2(11) of the Act as it was not
engaged in any activity which amounted to "business" in view of
the object and activities of the Trust. The Revenue supported the
order of the Deputy Commissioner relying on the amendment of the
definition of "business" as a result of which profit motive was
immaterial. The Tribunal, after due consideration of rival
submissions looking to the object of the Trust and the nature of
its activities, concluded that the assessee could not be held to
be a "dealer" and as such no tax could be levied on the amount
received by it from the sale of its publications.
At the instance of the Revenue, reference was made under
Section 61(1) of the Act by the Tribunal to the High Court for its
opinion on the following question:-
"Whether on the facts and circumstances of the
case and correct interpretation of the
provisions of the Bombay Sales Tax Act, 1959, as
amended by Maharashtra Act No. 9 of 1989,
dispensing with the ‘profit motive’ from the
concept of the ’business’ was the Tribunal
justified in holding that the respondent is not
a ’dealer qua its activities’ of publication and
sale of books, booklets and allied publications
including photos and stickers?"
The High Court on consideration of the relevant provisions
of the Act, facts of the case and keeping in view the decisions
cited, answered the aforementioned question referred by the
Tribunal in the affirmative and in favour of the assessee. Hence,
the present appeal by the Revenue.
Shri S.K. Dholakia, learned Senior Counsel for the appellant
contended that the definition of "business" is wide and inclusive
definition. Despite the same, the High Court committed a serious
error of law in taking a view that business/activity must still be
one which in ordinary connotation is regarded as business; this is
clearly against the legislative intent. According to him, on the
facts that the Trust purchases necessary material and brings some
publications and sells the same when profit motive is immaterial
having regard to the amended definition of Section 2(5A) of the
Act. The learned Senior Counsel emphasized that the activity of
the Trust in bringing out publications and selling them is
regular, frequent, of sizeable volume and continuous. Hence, the
assessee was liable to pay sales tax on the amount realized by
such sale of its publications. Citing the decision of this Court
in Board of Revenue & Ors. Vs. A.M. Ansari & Ors. ((1976) 3 SCC
512) he submitted that all ingredients of "business" are
satisfied in the present case. He submitted that New Delhi
Municipal Council vs. State of Punjab & Ors. ((1997) 7 SCC 339)
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and State of T.N. & Anr. Vs. Board of Trustees of the Port of
Madras ((1999) 4 SCC 630) also come to his aid to support his
contention.
Shri Joseph Vellapally, learned Senior Counsel appearing for
the respondent in the connected Civil Appeal No. 1716/1999 argued
supporting the impugned judgment while adding that the controversy
raised in this appeal is fully covered by the recent judgment of
this Court in State of T.N. & Anr. vs. Board of Trustees of the
Port of Madras (supra), the very decision cited by the learned
Senior Counsel for the appellant. The learned counsel for the
respondent in this appeal, while adopting the arguments of Shri
Vellapally, made submissions supporting the impugned judgment.
At the outset, it is useful to notice few provisions of the
Act to the extent they are relevant in order to appreciate the
respective contentions relating to the controversy that has
arisen.
"S.2(5A)- "Business" includes 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 gain or profit accrues from such
trade, commerce, manufacture, adventure or
concern and any transaction in connection with,
or incidental or ancillary to, the commencement
or closure of such trade, commerce, manufacture,
adventure or concern;..............
................................................
..........."
"S.2(11):- "Dealer" means any person who
whether for commission, remuneration or
otherwise carries on the business of buying or
selling goods in the State, and includes the
Central Government, or any state Government
which carries on such business, and also any
society, club or other association of persons
which buys goods from or sells goods to its
members;........................................
................................................
......"
"S.2(19): "Person" includes any company or
association or body of individual whether
incorporated or not, and also a Hindu undivided
family, a firm and a local authority."
S.3 :"Incidence of tax (1) Every dealer whose
turnover either of all sales or of all
purchases, made during
(i) the year ending on the 31st day of March
1991 or,
(ii) the year commencing on the 1st day of
April 1981,
has exceeded or exceeds the relevant limit
specified in sub-section (4) shall until such
liability ceases under sub-section (3), be
liable to pay tax under this Act on his turnover
of sales, and on his turnover of purchases, made
on or after the notified
day;............................................
.........................."
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The contention that the Trust in question is "dealer"
within the meaning of Section 2(11) read with Section 2(5A)
requires careful scrutiny. As is evident from Section 2(11),
every person is not "dealer" but only those persons "who carry
on the business" by buying or selling goods are regarded as
"dealers". From the very definition of dealer, it follows that a
person would not be a dealer in respect of the goods sold or
purchased by him unless he carries on the business of buying and
selling such goods. "Dealer" and "person" are separately
defined in Section 2(11) and Section 2(19) of the Act
respectively. "Person" means not only natural person but
includes any company or association or body of individuals whether
incorporated or not and also a Hindu Undivided Family, a firm or a
local authority; whereas "dealer" on the other hand means only
such persons who carry on the business of buying and selling of
goods in the State including those who are deemed to be dealers by
virtue of definition of "dealer" contained in Section 2(11) of
the Act. As rightly noticed by the High Court, it is clear from
charging Section 3 that every dealer, whose turnover of sale or
purchase during any year exceeds the limits specified therein, is
liable to payment of tax under the Act on his turnover of sales or
purchases. Although the Act provides for levy of tax on the sales
or purchases of certain goods in the State of Maharashtra, the
levy is restricted only to sales or purchases made by dealers. As
is manifest from Section 3 itself, the liability to pay sales tax
is only on the dealers. From the combined reading of Section 3,
2(5A) and 2(11) of the Act, it follows that the tax under the Act
is leviable on the sales or purchases of taxable goods by a dealer
and not by every person. From the facts of the present case, the
sole object of the assessee Trust is to spread the message of
Siababa of Shridi. It is also not disputed that the books and
literature etc. containing the message of Saibaba were distributed
by the Trust to the devotees of Saibaba at cost price. There is no
dispute that the primary and dominant activity of the Trust is to
spread the message of Saibaba. This main activity does not amount
to "business". The activity of publishing and selling
literature, books and other literature is obviously incidental or
ancillary to the main activity of spreading message of Saibaba and
not to any business as such even without profit motive and it is
in a way a means to achieve the object of the Trust through which
message of Saibaba is spread. It is clear from the Trust Deed and
objects contained therein that it was not established with an
intention of carrying on the business/occupation of selling or
supplying goods. This being the position, it cannot be said that
the Trust carries on the business of selling and supplying goods
so as to fall within the meaning of "dealer" under Section 2(11)
of the Act.
No doubt, the definition of "business" given in Section
2(5A) of the Act even without profit motive is wide enough to
include any trade, commerce or manufacture or any adventure or
concern in the nature of trade, commerce or manufacture and any
transaction in connection with or incidental or ancillary to the
commencement or closure of such trade, commerce, manufacture,
adventure or concern. If the main activity is not business, then
any transaction incidental or ancillary would not normally amount
to "business" unless an independent intention to carry on
"business" in the incidental or ancillary activity is
established. In such cases, the onus of proof of an independent
intention to carry on "business" connected with or incidental or
ancillary sales will rest on the Department. Thus, if the main
activity of a person is not trade, commerce etc., ordinarily
incidental or ancillary activity may not come within the meaning
of "business". To put it differently, the inclusion of
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incidental or ancillary activity in the definition of "business"
pre-supposes the existence of trade, commerce etc. The definition
of "dealer" contained in Section 2(11) of the Act clearly
indicates that in order to hold a person to be a "dealer", he
must ‘carry on business’ and then only he may also be deemed to be
carrying on business in respect of transaction incidental or
ancillary thereto. We have stated above that the main and
dominant activity of the Trust in furtherance of its object is to
spread message. Hence, such activity does not amount to
"business". Publication for the purpose of spreading message is
incidental to the main activity which the Trust does not carry as
business. In this view, the activity of the Trust in bringing out
publications and selling them at cost price to spread message of
Saibaba does not make it a dealer under Section 2(11) of the Act.
This Court in State of T.N. & Anr. vs. Board of Trustees of
the Port of Madras (supra), after referring to various decisions
in regard to "business" and "carrying on business" in paras 15
and 16 has stated thus:-
"15. Now the definition of "business"
in Section 2(d) and in most of the sales tax
statutes is an inclusive definition and includes
"trade or business or manufacture etc." This
itself shows that the legislature has recognized
that the word "business" is wider that the
words "trade, commerce or manufacture etc."
The word business though extensively used is a
word of indefinite import. In taxing statutes,
it is normally used in the sense of an
occupation, a profession which occupies time,
attention and labour of a person, normally with
a profit motive and 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 (State of
A.P. v. H.Abdul Bakhi & Bros. (AIR 1965 SC
531). Even if such profit motive is statutory
excluded from the definition of "business",
yet the person could be doing "business".
16. The words "carrying on business" require
something more than merely selling or buying
etc. Whether a person "carries a business" in
a particular commodity must depend upon the
volume, frequency, continuity and regularity of
transactions of purchase and sale in a class of
goods and the transactions must ordinarily be
entered into with a profit motive (Board of
Revenue v. A.M. Ansari (1976) 3 SCC 512).
Such profit motive may, however, be statutorily
excluded from the definition of "business" but
still the person may be "carrying on
business."
Further in para 30 of the same judgment, it is stated thus:-
"30. In our view, if the main activity
was not "business", then the connected,
incidental or ancillary activities of sales
would not normally amount to "business" unless
an independent intention to conduct "business"
in these connected, incidental or ancillary
activities is established by the Revenue. It
will then be necessary to find out whether the
transactions which are connected, incidental or
ancillary are only an infinitesimal or small
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part of the main activities. In other words,
the presumption will be that these connected,
incidental or ancillary activities of sale are
not "business" and the onus of proof of an
independent intention to do "business" in
these connected, incidental and ancillary sales
will rest on the Department. If, for example,
these connected, incidental or ancillary
transactions are so large as to render the main
activity infinitesimal or very small, then of
course the case would fall under the first
category referred to earlier."
(Emphasis supplied)
In the case on hand, the Revenue neither contended nor
proved that in sale of publications the Trust had an independent
intention to do business as incidental or as an ancillary
activity.
This Court in the aforementioned judgment further examined
the cases to find out if the main activity was not "business".
In para 32, reference is made to the case of Bombay High Court in
State of Bombay Vs. Ahmedabad Education Society [1956 7 STC 497
(Bom)]. In that case, the educational society was entrusted with
the task of founding a college and for that purpose it was to
construct buildings therefor. It was held that it could not be
said to be "carrying on business" merely because for the above
purposes, it established a brick kiln and sold surplus bricks and
scrap at cost price without intending to make profit or gain.
Having regard to main activities and its objects, it was held that
the educational society was not established "to carry on
business" and the sale of bricks was held not excisable to sales
tax. Chagla C.J. pointed out that it was not merely the act of
selling or buying etc. that constituted a person a "dealer" but
the "object" of the person who carried on the activities was
important. It was further stated that it was not every activity or
any repeated activity resulting in sale or supply of goods that
would attract sales tax. If legislature intended to tax every
sale or purchase irrespective of the object of the activities out
of which the transaction arose, then it was unnecessary to state
that the person must "carry on business" of selling, buying etc.
In para 33 of the same judgment, this Court has referred to
various decisions to consider whether one is a "dealer" or
carries on "business" and the nature and object of activity. The
said para reads thus:-
"In Girdharilal Jiwanlal vs. CST [(1957) 8 STC
732 (Bom)], the Bombay High Court held that an
agriculturist did not necessarily fall within
the definition of a "dealer" under Section
2(c) of the C.P. & Berar Sales Tax Act (Act 21
of 1967), merely because he sold or supplied
commodities. It must be shown that he was
carrying on a business. It was held that it
must be established that his primary intention
in engaging himself in such activities must be
to carry on the business of sale or supply of
agricultural produce. This High Court held that
there was
"nothing to show that the
petitioner acquired these lands with
a view to doing ’the business of
selling or supplying’ agricultural
produce. According to [the
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assessee] he [was] principally an
agriculturist who also deals in
cotton, coal, oilseeds and
groundnuts".
(emphasis supplied).
He was having agriculture for the purpose of
earning income from the fields but there was
nothing to show that he acquired the lands with
the primary intention of doing business of
selling or buying agricultural produce. This
decision was approved by this Court in Dy.
Commissioner of Agricultural Income Tax & Sales
Tax v. Travancore Rubber & Tea Co. [(1967) 20
STC 520 (SC)] and it was held that where the
only facts established were that the assessee
converted latex tapped from rubber trees into
sheets and effected a sale of those sheets to
its customers, the conversion of latex into
sheets being a process essential for transport
and marketing of the produce, the Department had
failed to prove that "the assessee was formed"
with a commercial purpose. The Allahabad High
in Swadeshi Cotton Mills Co. Ltd. V. STO [(1964)
15 STC 505 (All)] was dealing with a batch of
cases where different bodies were running
canteens. One of the cases concerned Aligarh
Muslim University which was maintaining dining
halls where it was serving food and refreshments
to its resident-students. It was held,
referring to observations of this Court in
University of Delhi v. Ram Nath [AIR 1963 SC
1873] that it was incongruous to call
educational activities of the University as
amounting to "carrying on business". The
activity of serving food in the dining hall was
a minor part of the overall activity of the
university. Education was more a mission and
avocation rather than a profession or trade or
business. The aim of education was the creation
of a well-educated, healthy, young generation
imbued with a rational and progressive outlook
of life. On this reasoning, it was held that
Aligarh University was not "carrying on
business" and the sale of food at the dining
halls was not liable to tax. Likewise after the
amendment of the definition of "business’
question arose in Indian Institute of Technology
v. State of U.P. [(1976) 38 STC 428 (All)] with
respect to the visitors’ hostel maintained by
the Indian Institute of Technology where lodging
and boarding facilities were provided to persons
who would come to the Institute in connection
with education and the academic activities of
the Institute. It was observed that the
statutory obligation of maintenance of the
hostel which involved supply and sale of food
was an integral part of the objects of the
Institute. Nor could the running of the hostel
be treated as the principal activity of the
Institute. The Institute could not be held to
be doing business. Similarly, in the case of a
research organization, in Dy. Commissioner
(C.T.) v. South India Textile Research Assn.
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[(1978) 41 STC 197 (Mad)] which was purchasing
cotton and selling the cotton yarn/cotton waste
resulting from the research activities, it was
held that the Institute was solely and
exclusively constituted for the purposes of
research and was not carrying on "business"
and these sales and purchases above-mentioned
could not be subjected to sales tax. Likewise,
in State of T.N. v. Cement Research Institute of
India [(1992) 86 STC 124 (Mad)] it was held that
the Institute was an organistion the objects of
which were to promote research and other
scientific work that the laboratories and
workshops were maintained by the organization
for conducting experiments and that though the
cement manufactured as a result of research was
sold, it could not be considered to be a trading
activity within Section 2(d) of the Tamil Nadu
General Sales Tax Act, 1959. Again in Tirumala
Tirupati Devasthanam v. State of Madras [(1972)
29 STC 266 (Mad)] the disputes arose with regard
to the sales of silverware etc. which are
customarily deposited in the hundis by devotees.
It was held by the Madras High Court that the
Devasthanam’s main activities were religious in
nature and these sales were not liable to tax.
(No doubt, the case related to a period where
the profit motive was not excluded by statute).
We are of the view that all these decisions
involve the general principle that the main
activity must be "business" and these rulings
do support the case of the respondent-Port
Trust."
(Emphasis supplied)
This decision is directly on the point supporting the case
of the respondent after noticing number of decisions on the point
including the decisions cited by the learned counsel before us.
It may be stated that the question of profit motive or no profit
move would be relevant only where person carries on trade,
commerce, manufacture or adventure in the nature of trade,
commerce etc. On the facts and in the circumstances of the
present case irrespective of the profit motive, it could not be
said that the Trust either was "dealer" or was carrying on trade,
commerce etc. The Trust is not carrying on trade, commerce etc.,
in the sense of occupation to be a "dealer" as its main object is
to spread message of Saibaba of Shridi as already noticed above.
Having regard to all aspects of the matter, the High Court was
right in answering the question referred by the Tribunal in the
affirmative and in favour of the respondent-assessee. We must
however add here that whether a particular person is a "dealer"
and whether he carries on "business", are the matters to be
decided on facts and in the circumstances of each case.
For what is stated above, we answer the question set out in
the beginning in the negative and in favour of the respondent-
assessee and dismiss the appeal finding no merit in it but with no
order as to costs.
Civil Appeal No. 1716 of 1999
The impugned order was passed by the Tribunal relying on the
judgment of the Bombay High Court in the case of Sai Publication
Fund impugned in abovementioned C.A. No. 9445/96. The learned
counsel also submitted that the result of this appeal depended on
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the decision in said C.A. No. 9445/96 as the facts and
circumstances of both the cases are similar. Consequently, in
view of the dismissal of the C.A. No. 9445/96, this appeal is also
dismissed. No costs.
........................J
(SHIVRAJ V. PATIL)
........................J
(BISHESHWAR PRASAD SINGH)
March 22, 2002.