Full Judgment Text
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PETITIONER:
GOVERNMENT MEDICAL STORE DEPOT, KARNAL
Vs.
RESPONDENT:
STATE OF HARYANA AND ANOTHER
DATE OF JUDGMENT05/08/1986
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
MUKHARJI, SABYASACHI (J)
CITATION:
1986 AIR 1902 1986 SCR (3) 450
1986 SCC (3) 669 JT 1986 62
1986 SCALE (2)155
CITATOR INFO :
F 1991 SC1059 (4)
ACT:
Punjab General Sales Tax Act, 1948, s. 2(d)-Dealer-Who
is-Existence of profit motive-Whether an immaterial factor-
Government Medical Store Depot-Whether a ’dealer’.
HEADNOTE:
Pursuant to s. 88 of the Punjab Reorganisation Act,
1966, the Punjab General Sales Tax Act, 1948 continued as
the law in force on and from Nov. 1, 1966 even in those
territories which now comprise the State of Haryana. The
Punjab Act was repealed by the enactment of the Haryana
General Sales Tax Act 1973 which came into effect from May
5, 1973. Some Provisions of the Haryana Act came into force
from an earlier date, among being them the definition of
’dealer’ set-forth in s. 2(c) of that Act which operated
retrospectively with effect from Sept. 7, 1955.
The appellant, Government Medical Store Depot, Karnal,
set up by the Central Government, used to purchase medical
stores and hospital equipment and supplied them only to
Government hospitals, Government institutions, health
centres, dispensaries and primary health clinics located in
northern India on a ’no profit no loss’ basis.
On August 21, 1968, the Excise and Taxation officer
Karnal, after giving an opportunity to the appellant, held
that the appellant was a dealer under the Punjab Act and
proceeded to make assessment orders for the years 1364-65
and 1365-66, and also passed penalty orders for each year.
He also initiated assessment proceedings for the years 1966-
67 to 1968-69. The appellant’s writ petitions in the High
Court challenging the aforesaid assessment proceedings were
dismissed.
Allowing the appeals by the appellant,
^
HELD: l.(i) The existence or absence of a profit motive
is irrelevant when identifying a ’dealer’ under the Haryana
Act. No such
451
statement of immateriality is contained in the definition of
the word ’dealer’ under the Punjab Act as applied to the
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State of Haryana. The definition of the word ’dealer’ in the
Haryana Act has been framed only for the purpose of the
provisions of that Act. The opening words of the definition
under s. 2 make it clear that the expressions defined by
that section are the expressions as used in the Haryana Act.
Wherever the word ’dealer’ is used in the Haryana Act, one
must turn to the definition contained in s. 2(c) of that
Act. Now, except for a few specified provisions, the Haryana
General Sales Tax Act came into force on May 5, 1973.
Section 6, its charging provisions, commenced to operate
from that date. Section 6(1) of the Haryana Act declares
that the first year of which the turnover is liable to tax
under that Act is the year "Immediately preceding the
commencement of this Act." It is obvious that s. 6 does not
govern the assessment years which are the subject of these
appeals. Therefore, it is immaterial as to whether the
definition of the word ’dealer’ under the Haryana Act has to
be read retrospectively with effect from Sept. 7, 1955.
Section 2(c) relates to the word ’dealer’ contained in the
provisions of the Haryana Act, and the charging provision of
the Haryana Act did not operate during the assessment years
with which these appeals are concerned. These appeals will
be governed by the Punjab General Sales Tax Act, and it is
s. 2(d) of that Act which must be looked to for ascertaining
the definition of the word ’dealer’ in that Act. [455H;
456A-D]
1(ii) The definition of the word ’dealer’ under s. 2(d)
of the Punjab Act does not treat the existence of the profit
motive in the business as an immaterial factor and the
burden is on the revenue to show that the transactions
carried on by the appellant were carried on with a profit
motive. The assessment proceedings which are the subject of
these appeals are therefore quashed. Having regard to the
lapse of time, it is not right to remand the cases for fresh
assessment proceedings. [457D-E]
2. Section 65 of the Haryana General Sales Tax Act
repealed the Punjab General Sales Tax Act. Section 65
contains a proviso that such repeal will not affect the
previous operation of the repealed Act or any right, title,
obligation or liability already acquired, accrued or
incurred thereunder. The liability incurred by a dealer in
respect of the years under consideration in these appeals is
a liability incurred under the charging provision, s. 4 of
the Punjab General Sales Tax. To ascertain who such dealer
is one must read the definition of the word ’dealer’ in the
Punjab General Sales Tax Act. No reference is permissible
for that purpose to the definition in the Haryana General
Sales Tax Act. No doubt the further language in the proviso
to s. 65 of the Haryana
452
General Sales Tax Act provides that anything done or any
action taken in respect of the liability incurred under the
Punjab General Tax Act will be deemed to have been done or
taken in the exercise of the powers conferred by or under
the provisions of the Haryana Act as if that Act was in
force on the date on which such thing was done or action
taken. This merely refers to the provisions enacted for the
purpose of enforcing the liability and realising the tax,
and does not affect the position that the charge is under s.
4 of the Punjab General Sales Tax Act, and that to
appreciate who the ’dealer’ mentioned therein is, one must
turn to s. 2(d) of the Punjab Act. [456E-H; 457A]
Deputy Commercial Tax Officer, Saidapet, Madras v.
Enfield India Ltd. Co-operative Canteen, [1968] 21 STC 317
and Government Medical Store Depot, Gauhati v. The Supdt. of
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Taxes. Gauhati & Ors., [1985] 2 Scale 600, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2815-
2819(NT) of 1977
From the Judgment and Order dated 18.10.1976 of the
Punjab & Haryana High Court in Civil Writ Nos. 1183, 1184,
1795, 1796 and 1797 of 1970.
O.P. Sharma, L.K. Gupta and Miss A. Subhashini for the
Appellant.
S.T. Desai, J.D. Jain and Ms. Kawaljit Kochar for the
Respondents.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by special leave are directed
against the judgment and order of the High Court of Punjab
and Haryana dismissing the writ petitions filed by the
appellant against proceedings for the assessment of sales
tax.
The appellant, the Government Medical Store Depot,
Karnal, is a Depot functioning under the Assistant Director
General (Stores) who is in charge of the Medical Stores
Organisation in the country under the Directorate General of
Health Services, Ministry of Health, Government of India,
New Delhi. It is a department of the Central Government and
supplies medicines and hospital equipment manufactured in
India or imported from abroad to Government hospitals,
453
Government institutions, Health Centres, Dispensaries and
Primary Health Units located in northern India, some of
which are run by local bodies such as Panchayats, Panchayat
Samitis, Zila Parishads and Municipalities. It does not deal
with private hospitals and individuals. The organisation
works as a public utility service on a ’no profit, no loss’
basis. The medical stores and hospital equipment are
purchased by the appellant and supplied to the hospitals and
medical institutions, after adding a service charge of 10
per cent on the cost of the indented stores.
During the year 1956-57, a question arose whether the
activities of the appellant brought it within the definition
of the expression ’dealer’ as defined in s. 2(d) of the
Punjab General Sales Tax Act, 1948. The Excise and Taxation
authorities took the view that the appellant was not a
dealer because the transactions conducted by it did not
include an element of profit. By a letter dated July 15,
1957, the appellant was informed by the Excise and Taxation
Commissioner, Punjab, that it need not be registered under
the Punjab General Sales Tax Act.
On August 21, 1968, the Excise and Taxation Officer,
Karnal took note of a decision of this Court in Deputy
Commercial Tax Officer, Saidapet, Madras v. Enfield India
Ltd. Co-operative Canteen, [1968] 21 S.T.C. 317 and called
upon the appellant to produce its account books for the
years 1965-66, 1966-67 and 1967-68 for the purpose of
assessment to sales tax on the Medical Stores and equipment
supplied by it. The appellant was also directed to get
itself registered as a dealer under the Act. The appellant
replied on August 24, 1968 that it did not fall within the
scope of the definition of ’dealer’, and it seems that the
Government of India in the Ministry of Health also
intervened in the matter. The Excise and Taxation Officer,
however, continued to maintain that the appellant was a
dealer within the meaning of the Act.
The Excise and Taxation Officer then issued formal
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notices to the appellant for the production of its account
books for the years 1964-65 to 1968-69, and after giving an
opportunity to the appellant to be heard, he proceeded to
make assessment orders dated March 25, 1970 for the years
1964-65 and 1965-66, and also passed penalty orders for each
year under the Punjab General Sales Tax Act as well as under
the Central Sales Tax Act. He also initiated assessment
proceedings for the years 1966-67, 1967-68 and 1968-69.
454
The appellant filed five writ petitions in the High
Court of Punjab and Haryana, challenging the assessment
proceedings pertaining to the assessment years 1964-65 to
1968-69 respectively taken under the Punjab General Sales
Tax Act and the Central Sales Tax Act. The writ petitions
were dismissed by the High Court by a common judgment and
order dated October 18, 1976. The High Court held that the
appellant was a dealer notwithstanding that it was not
carrying on a business for earning profit.
Learned counsel for the appellant contends that the
appellant is not a dealer because the activity carried on by
it is pursued without any motive of earning profit and,
therefore, it cannot be described as a business. It is
pointed out that the definition of the word ’dealer’ in s.
2(d) of the Punjab General Sales Tax Act is different from
the definition of that word in s. 2(c) of the Haryana
General Sales Tax Act. While the Haryana Act states that a
person is a dealer whether or not he is inspired by a profit
motive in carrying on his business, no such statement is
contained in the definition under the Punjab Act. It is
urged that these appeals are governed by the Punjab General
Sales Tax Act and not by the Haryana General Sales Tax Act.
When the Punjab General Sales Tax Act, 1948, was
enacted it applied to the territories of the State of Punjab
as that State was constituted on the partition of India on
August 15, 1947. The State of Punjab so constituted
continued in existence until it was again partitioned under
the Punjab Reorganisation Act, 1966 with effect from the
appointed day, November 1, 1966. The Punjab General Sales
Tax Act, which had operated in the territories constituting
the original State of Punjab up to October 31, 1966
continued as the law in force on and from November 1, 1966
even in those territories which now comprised the State of
Haryana. This was pursuant to s. 88, of the Punjab
Reorganisation Act, 1966. Its continuance was subject to any
change in the law effected by the Haryana Legislature. The
Haryana Legislature could permit the Punjab General Sales
Tax Act to continue in force subject to legislative
modifications made by it in that law. Alternatively, it
could supersede and repeal the Punjab Act by enacting an
independent Haryana Act to replace it. The Haryana
Legislature amended the Punjab Act from time to time. It did
so, for instance, by the Punjab General Sales Tax (Haryana
Amendment and Validation) Act, 1969. Later, the entire
Punjab Act was repealed by the enactment of the Haryana
General Sales Tax Act, 1973, which came into effect from May
5, 1973. Some provisions of the Haryana Act came into
455
force from an earlier date, among being them the definition
of ’dealer’ set forth in s. 2(c) of that Act which operated
retrospectively with effect from September 7, 1955.
The present appeals are concerned with the assessment
years 1964-65 to 1968-69, and the question is whether they
are governed by the definition of the word ’dealer’ in s.
2(d) of the Punjab Act or by s. 2(c) of the Haryana Act.
During that period s. 2(d) of the Punjab Act, in its
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application to the State of Haryana, defined the word
’dealer’ as follows:
S.2(d). "Dealer" means any person including a
Department of Government who in the normal course
of trade sells or purchases goods that are
actually delivered for the purpose of consumption
in the State of Haryana irrespective of the fact
that the main place of business of such person is
out side the said State, and where the main place
of business of any such person is not in the said
State, ’dealer’ includes the local manager or
agent of such person in Haryana in respect of such
business."
Section 2(c) of the Haryana General Sales Tax Act,
however, defines the word ’dealer’ in the following terms:
S. 2(c). "dealer" means any person including a
department of Government who carries on, whether
regularly or otherwise, trade whether with or
without a profit motive, directly or otherwise,
whether for cash, deferred payment, commission,
remuneration or other valuable consideration, of
purchasing, selling, supplying or distributing any
goods in the State, or importing into, or
exporting out of the State any goods, irrespective
of the fact that the main place of business of
such person is outside the State and where the
main place of business of such person is not in
the State, includes the local manager or agent of
such person in the State in respect of such
business."
It is apparent that the existence or absence of a profit
motive is irrelevant when identifying a ’dealer’ under the
Haryana Act. No such statement of immateriality is contained
in the definition of the word ’dealer’ under the Punjab Act
as applied to the State of Haryana.
456
What is important to note is that the definition of the
word ’dealer’ in the Haryana Act has been framed only for
the purpose of the provisions of that Act. The opening words
of the definition section, s. 2, make it clear that the
expressions defined by that section are the expressions as
used in the Haryana Act. Wherever, the word ’dealer’ is used
in the Haryana Act, one must turn to the definition
contained in s. 2(c) of that Act. Now, except for a few
specified provisions, the Haryana General Sales Tax Act came
into force on May 5, 1973. Section 6, its charging
provision, commenced to operate from that date. Section 6(1)
of the Haryana Act declares that the first year of which the
turnover is liable to tax under that Act is the year
"immediately preceding the commencement of this Act." It is
obvious that s. 6 does not govern the assessment years which
are the subject of these appeals. Therefore, it is
immaterial for our purposes that the definition of the word
’dealer’ under the Haryana Act has to be read
retrospectively with effect from September 7, 1955. Because,
as we have pointed out, s. 2(c) relates to the word ’dealer’
contained in the provisions of the Haryana Act and the
charging provision of the Haryana Act did not operate during
the assessment years with which these appeals are concerned.
These appeals will be governed by the Punjab General Sales
Tax Act, and it is s. 2(d) of that Act which must be looked
to for ascertaining the definition of the word ’dealer’ in
that Act.
It may be mentioned that s. 65 of the Haryana General
Sales Tax Act repealed the Punjab General Sales Tax Act.
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Section 65 contains a proviso that such repeal will not
affect the previous operation of the repealed Act or any
right, title, obligation or liability already acquired,
accrued or incurred thereunder. The liability incurred by a
dealer in respect of the years under consideration in these
appeals is a liability incurred under the charging
provision, s. 4, of the Punjab General Sales Tax. To
ascertain who such dealer is one must read the definition of
the word ’dealer’ in the Punjab General Sales Tax Act. No
reference is permissible for that purpose to the definition
in the Haryana General Sales Tax Act. No doubt the further
language in the proviso to s. 65 of the Haryana General
Sales Tax Act provides that anything done or any action
taken in respect of the liability incurred under the Punjab
General Sales Tax Act will be deemed to have been done or
taken in the exercise of the powers conferred by or under
the provisions of the Haryana Act as if that Act was in
force on the date on which such thing was done or action
taken. This merely refers to the provisions enacted for the
purpose of enforcing the liability and realising the tax and
does not affect the position that the charge is under s. 4
of the Punjab General Sales Tax Act, and to appreciate who
the
457
’dealer’ mentioned therein is, one must turn to s. 2(d) of
the Punjab Act.
It will be noticed that the definition of the word
’dealer’ in s. 2(d) of the Punjab Act does not treat the
existence of a profit motive in the business as an
immaterial factor. In Govt. Medical Store Depot, Gauhati v.
The Supdt. of Taxes, Gauhati & Ors, [1985] 2 SCALE 600, the
question was whether a Government Medical Store Depot set up
at Gauhati by the Central Government in the Ministry of
Health, Family Planning and Urban Development, for the
purpose of procuring and supplying medical stores to Central
and State Government institutions could be made liable to
sales tax under the Assan Finance (Sales Tax) Act, 1956 and
under the Central Sales Tax Act, 1956. The appellant, the
Government Medical Store Depot, took the stand that the
supply of medical stores to the Government institutions were
without any profit motive, on the basis of "no loss, no
profit", and unless it was found that the transactions had
been carried on with a view to making a profit the appellant
could not be held to be a ’dealer’ liable to tax. This Court
observed that in the definition of ’business’ the profit
motive had not been omitted, and therefore without anything
more it could not be said that the person carrying on those
transactions was a dealer. The Court rested the burden on
the Revenue to show that the transactions carried on by the
appellant were carried on with a profit motive. In the end,
inasmuch as the appeals before it were concerned with the
years 1965-66 to 1967-68 having regard to the lapse of time
the Court, while allowing the appeals and quashing the
assessments, did not think it fit to remand the cases for
fresh assessment proceedings.
We think we should do likewise. Accordingly, the
appeals are allowed, the judgment and order of the High
Court are set aside and the assessment proceedings which are
the subject of these appeals are quashed. In the
circumstances of the case, there is no order as to costs.
M.L.A. Appeals allowed.
458