STATE OF TAMIL NADU Vs. BURMAH SHELL OIL STORAGE AND DISTRIBUTING CO OF INDIA LIMITED

JUDGEMENT

(1.) THESE are two appeals by appeals by special leave against the judgment of the Madras High Court. In appeal No. 2119/69 the chargeability to sales tax under the Madras General Sales Tax Act 1959 (hereinafter called the 'Act') as amended by Acts of 1961 and 1964 in respect of (1) advertisement materials (2) canteen sales (3) sale of scrap and (4) penalty have to be considered, while in Appeal No. 2120/1969 only the sales tax levied in respect of sales of scrap and penalty has been challenged. The respondents are oil companies and it appears in the first of the appeals the respondent under the Factories Act had to supply tea and edibles to its workmen for the canteen established by it. It also supplies to its agents at cost price or less than the cost price advertisement materials such as calendars, purses and key chains. Both the respondents also sell as scrap periodically unserviceable oil drums, rubber hoses, jerry cans, rims, unserviceable pipe fittings and old furniture. The amount of turnover in respect of each of the items in the respective appeals is not relevant, but what is relevant is that in both the appeals the year 1964-1965 for which assessment is made on the turnover of sales is dividend into two parts (i) 1st April to 31st August, 1964 and (ii) 1st September, 1964 to 31st March, 1965, the first part being governed by the 1959 Act while the second part is chargeable under the Act after its amendment in 1964. The definition of business, casual trader and dealer before and after the amendment is different and the question is, whether under the amended definition of the said terms on and after 1964 Act attracts sales tax on the above transactions. In the High Court is was contended that the Tribunal was wrong in holding that sales of publicity materials were chargeable to sales tax on the ground that (a) there was no sale at all by the assessee in the true sense and (b) even if there was it was not as a dealer. The High Court dealt with the latter aspect holding that the object of the respondent is not shown to be to engage itself in trade or commerce of publicity materials, and though it may be that the distribution of the publicity materials to the distributors is connected with the business of the assessee that will not be sufficient to make it a trade or an activity in a commercial sense. In this view it held that it was not a dealer nor is its business carried on as a dealer. The High Court also held that the sale of scrap and canteen sales were not liable to tax following its earlier judgment in Dy. Commr. of Commercial Taxes v. Thirumagal Mills Ltd., (1967) 20 STC 287 (Mad).

(2.) IT may be mentioned that in the original Act viz., the Madras Sales Tax Act, 1939 'dealer' was defined as meaning any person who carried on the business of buying and selling goods. In that Act there was no definition of a casual dealer nor of business. The 1959 Act defined these terms for the first time and by the Amending Act of 1964 the definition of business was substituted so as to do away with motive for making profit or the making of profit as elements in determining what constitutes a business. Even the definition of casual trader in the 1959 Act was substituted by the Amending Act in 1961. These definitions are given below one against the other for facility of comparison :- <FRM>JUDGEMENT_511_3_1973Html1.htm</FRM>

(3.) WITH respect of the second part of the turnover the question whether the amendments in 1964 to the definition of "business" and "casual trader" are directly applicable has to be considered. It will be observed that under the definition of "business" even commercial transactions carried on without a motive to make gain of profit, or whether or not any profit accrues from such activity are included in that definition. The amended sub-clause (ii) also includes with that definition transaction in connection with or incidental or ancillary to such trade, manufacture or adventure or concern. The question is, whether the word "such" in sub-clause (ii) of clause (d) of Section 2 refers to the trade etc. defined in sub-cl. (i). It was contended before the Madras High Court that it is not so and that incidental or ancillary activity must partake the nature of business in its generic sense. In (1967) 20 STC 287 (Mad) (supra) a Bench of that Court had held that notwithstanding the amendment the presence or absence of profit will not make any difference. According to it what has to be considered is that the activity should be of a commercial character and in the course of trade or commerce and accordingly the definition of "business" in the second clause was still one invested with commercial character inasmuch as the reference was to "any transaction in connection with or incidental or ancillary to any trade, commerce, manufacture, adventure or concern". It was observed that unless the transaction is connected with trade that is to say, it has something to do with trade or has the incidence or elements of trade or commerce it will not come within definition. The Court observed :