- (1.) The question in these appeals is whether the Board of Trustees of visakhapatnam Port Trust are liable to pay sales tax under the Andhra pradesh General Sales Tax Act on the sale of unserviceable material or surplus material (by auction or by inviting tenders, as the case may be) as well as on supply of some other goods to ships and others. Notice was given by the Department calling upon the respondents to show cause why it should not be subjected to tax in respect of Assessment Years 1970-71 to 1974-75. The appellant approached the High Court straight away by way of a writ petition contending that since it is not a "dealer" as defined in the said Act, it is not liable to pay sales tax. A Division Bench of the Andhra Pradesh High court upheld the said contention relying inter alia upon the two decisions of this Court, namely, State of Gujarat v. Raipur Manufacturing Co. Ltd. and state of T. N. v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. The reasoning in Raipur Manufacturing Co. is as follows: "We may now consider whether the turnover from the goods sold by the Company was taxable. The goods sold broadly fall, as already observed, under three heads: viz. old discarded machinery, stores and scrap and miscellaneous goods; coal; and by-products and subsidiary products such as 'kolsi' and waste caustic liquor, though not usable by the factory are goods regularly and continuously produced in its manufacturing processes. We are unable to hold that in disposing of miscellaneous old and discarded items such as stores, machinery, iron scrap, cans, boxes, cotton ropes, rags, etc. , the Company was carrying on business of selling those items of goods. These sales were frequent and the volume was large, but it cannot be presumed that when the goods were acquired there was an intention to carry on the business in those discarded materials; nor are the discarded goods, by-products or subsidiary products of or arising in the course of the manufacturing process. They are either fixed assets of the Company or are goods which are incidental to the acquisition or use of stores or commodities consumed in the factory. Those goods are sold by the Company for a price which goes into the profit and loss account of the business and may indirectly be said to reduce the cost of production of the principal item, but on that account disposal of those goods cannot be said to become part of or an incident of the main business of selling textiles. "again it was observed at STC p. 11 of the Report: "Mere sale of a commodity which a company requires for the purpose of its business and which has been purchased for use in that business will not justify an inference that a business of selling that commodity was intended, unless there are circumstances existing at the time when the commodity was purchased or which have come into existence later which establish such an intention. "
(2.) The reasoning in Burmah Shell is to the same effect. Both these decisions are rendered by Benches of three learned Judges each.
(3.) In District Controller of Stores, N. Rly. v. Asstt. Commercial Taxation officer a two-Judge Bench of this Court has taken an apparently inconsistent view. It was a case where the Northern Railway was disposing of unserviceable material and scrap from time to time. The question was whether it is a "dealer" and exigible to tax under the Rajasthan Sales Tax Act. Justice Mathew speaking for the Bench rejected the contention of the northern Railway on the following reasoning: "4.The contention of the appellant was that it was not carrying on the business of buying and selling and therefore the sale of unserviceable material and scrap iron etc. would not be a transaction in connection with or incidental or ancillary to 'such' trade, commerce, manufacture, adventure or concern. 5. We think that the activity of the appellant in the selling of unserviceable material and scrap iron etc. would be 'business' within clause (i) of the definition of the word 'business' introduced by the amending Act. The word 'business' according to clause (i) of that definition would include any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not it is carried on with a motive to make gain or profit. So even if it be assumed that the activity involved in selling unserviceable material and scrap iron etc. would not amount to carrying on business in the normal connotation of that term, it would be 'business' within clause (i) of that sub-clause as introduced by the amending Act. 6. We also think that there is no fallacy in thinking that the Railway since it is concerned in the activity of transportation is engaged in commerce within the meaning of clause (i) of the definition and that the sale of unserviceable materials and scrap iron etc. is transaction in connection with or ancillary to such commerce within clause (ii) of that definition. ";