Orissa Vs. M/S. Orissa Road Transport Co.
Ltd., Chief Accounts Officer  INSC 692 (28 August 1997)
SEN, B. N. KIRPAL, K. T. THOMAS
28TH DAY OF AUGUST, 1997 Present:
Mr. Justice S.C. Sen Hon'ble Mr. Justice B.N. Kirpal Hon'ble Mr. Justice K.T.
Thomas (Raj Kumar Mehta,) Adv. for G.S. Chatterjee, Raj Kumar Mehta, P.N. Misra,
Mrs. Kirti Mishra, Advs. for the appearing Parties.
following Judgment of the Court was delivered:
W I T
H CIVIL APPEAL NOS. 6579-80 of 1995 AND Civil Appeal No.6582 of 1995 KIRPAL, J.
these appeals by special leave what arises for consideration is whether the
respondent is liable to pay sales tax and to be registered as a dealer under
the relevant provisions of the Orissa Sales Tax Act, 1947 (hereinafter referred
to as the 'said Act').
respondent's main business is of running of buses and providing transport
facilities to the travelling public.
with these services the respondent has been disposing of unserviceable, old,
obsolete and unutilised parts from its stores. These parts used to be disposed
of at yearly intervals. The respondent did not get itself registered as a
dealer under the said Act. According to it, no business was being carried on in
respect of which any sales tax could have been levied.
Sales Tax Officer considered that the respondent was liable to pay tax. He
accordingly made an order of assessment under Section 12  of the said Act
seeking to tax respondent's turn-over on the sale of unserviceable old parts,
obsolete parts, spare parts, sale of fuel, oil and supply of material utilised
in body building to the State Transport service. The Assessing Authority also
levied penalty inasmuch as the respondent had failed to get itself registered
under the Act.
respondent filed an appeal against the aforesaid decision before the Assistant
Commissioner, Sales Tax, but was not successful. Second appeal was then
preferred to the Additional Sales Tax Tribunal, Cuttack. The Tribunal accepted the contention of the respondent and
came to the conclusion that the respondent could not be regarded as a dealer
within the scope of the said Act for the purpose of levying tax.
application being filed the Tribunal referred the following three questions of
law to the High Court:
Whether on the facts and in the circumstances of the case, the Member, Addl.
Sales Tax Tribunal, was legally correct in holding that in respect of the
transactions in spare parts and sale of fuel, oil etc. at cost the assessee is
not a dealer as per Section 2 [c] of the Orissa Sales Tax Act, 1947? [b]
Whether on the facts and in the circumstances of the case, the Member, Addl.
Sales Tax Tribunal is correct to hold that purchases of new spare parts and
accessories of such vehicles as Ford, Chevrolet, Despot, Dodge, etc. were not
made with an intention to carry on business of selling the same? [c] Whether on
the facts and in the circumstances of the case, Member, Addl. Sales Tax
Tribunal, is legally correct to hold that the assessee is not a dealer as per
Section 2 [c] of the Orissa Sales Tax Act, 1947 in respect of the sale turnover
of unutilised new spare parts?" The High Court vide its judgment answered
all the aforesaid questions in favour of the respondent and held that it had
not carried on any business as a dealer and, therefore, was not liable to
payment of sales tax.
behalf of the appellant it is contended that though the main business of the
respondent was of carrying passengers by the sale of spare parts and other
items must be regarded as being incidental to that business and, therefore, the
turn-over in respect of the said sales was liable to tax.
P.N. Misra, learned counsel for the respondent, however, submitted that
respondent was not in the business of selling goods and, therefore, such sales
could not form part of its taxable turn-over and the respondent was not obliged
to register itself as a dealer under the said Act.
attention was drawn to a few decisions in an effort to show that the respondent
could not be regarded as carrying on business of selling the spare parts etc.
The first case Raipur Manufacturing Co. Ltd. [(1967) 19 STC 1 ]. In that the
company was carrying in the business of manufacturing cotton textiles, sale of
old discarded goods, coal, by- products and subsidiary products. In determining
with regard to such sales the company could be considered as carrying on
business, this Court held that whether a person carries on business in a
particular commodity must depend upon the volume, frequency, continuity and regularity
of transaction of purchase and sale in a class of goods and the transactions
must ordinarily be entered into with a profit motive. In other words irregular
sales of small quantities of old discarded goods could not be regarded as
carrying on of a business activity. Volume, frequency, continuity etc.
purchase and sales in those items was the determining factor. This principle
has been followed by the Andhra Pradesh High Court in Andhra Pradesh State Road
Transport Andhra Pradesh Road Transport Corporation [(1989) 74 STC 336].
relevant provisions of the Orissa Act are first required to be examined in
order to see whether the aforesaid decisions can support the respondent's
contentions. Section 4 of the said Act is a charging section. It, inter alia,
provides that every dealer whose gross turn-over during the year exceeds the
specified limit shall be liable to pay tax under the said Act on the sales and
purchases effected by it. The expression 'dealer' has been defined in Section 2
[c] of the Act. The relevant portion of the said definition is as follows:
'Dealer' means any person who carries on the business of purchasing, selling,
supplying or distributing goods (including goods used or involved in the
execution of works contract, whether as goods or in some other form), directly
or otherwise, whether for cash or for deferred payment or for commission,
remuneration or other valuable consideration and includes,- [I]
casual dealer;" The expression 'casual dealer' has been defined in Section
2[bb] and is as follows:
'Casual dealer' means a person, who has, whether as principal, agent or in any
of the capacity occasional transactions of a business nature involving purchasing,
selling, supplying or distributing goods in the State whether for commission,
remuneration or otherwise." The expression 'business' has been defined in
Section 2[b] and is as follows:
"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 gain or profit
accrues form 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." The decision of this Court
in Raipur Manufacturing Co. Ltd. case cannot be made applicable here. In that
case this Court considered the volume, frequency, continuity and regularity of
transactions of purchase and sales being an important element in determining
whether a business was being carried out apart from the element of profit
making being there. Hence in the Orissa Act the expression 'dealer' includes a
casual dealer. A casual dealer defined in Section 2[bb] is one who has
occasional transactions of a business nature involving purchasing, selling,
supplying or distribution or goods, whether for commission, remuneration or
otherwise. This means that even if a person did not have a systematic or an organised
business involving regular transactions of purchases and sales he could still
be regarded as a casual dealer if he entered into occasional transactions of a
business nature involving purchases, sales etc. of the goods. In the cases
cited by Mr. Misra there was no consideration of this aspect at all.
cannot be denied that the respondent is a business organisation whose activity
is that of providing road transport. In the course of its carrying on of the
said business some obsolete parts, spare parts etc. are not required by it. As
a prudent business organisation the said items, which were obviously used or
intended for use in its business, are sold when there is no requirement for
them. We find it difficult to accept that such sales cannot even be regarded as
occasional sales of a business nature which would make the respondent a casual
dealer within the meaning of that expression occurring in Section 2[bb] of the
said Storage and Distributing Co. of India Ltd. and Anr. [ (1973) 31 STC 426 ]
this Court was concerned, inter alia, with the sale of scrap where the
definition of the word business in the Madras General Sales Tax Act had done
away with motive for making profit as being a relevant consideration in
determining whether the assessee carried on business or not.
2(d) of the Madras Act was similar to the present definition in Section 2(b) of
the Orissa Act and it included the words "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". In connection with the sale of scrap
it was observed at page 433 as follows:
the view we hold the scrap sold is certainly connected with the business of the
company and the turnover in respect of this commodity is liable to tax. It
cannot also be said of the assessee's advertisement materials at cost price or
less than cost price is not connected with the business of the assessee.
wallets and key chains are all given by the dealers to its customers for
purposes of maintaining and increasing the sales of the products of the assessee
and is therefore, connected with the business. What the assessee is doing is to
facilitate the dealers to acquire at their cost such advertising by the assessee-company
which, instead of allowing each of them to have these separately printed or
manufactured, itself undertook to do go and supplied them to its dealers. The
supply of such material is in our view being connected with the business is
liable to be included in the turnover of the assessee." In the District
Controller of Stores, Northern Railway, Anr. [ (1976) 37 STC 423, ] this Court
was concerned with a question whether the sales of unserviceable material and
scrap by the Northern Railway, Jodhpur, was exigible
to sales tax. the Rajasthan Sales Tax Act had been amended and, like the Madras
Sales Tax Act and the Orissa Sales Tax Act the definition of business had
eliminated the profit making element and keeping this in view this Court held
that the activity of the appellant in selling unserviceable material and scrap would
be business within clause 1 of the definition of the word 'business' introduced
by the amending Act. This Court held even if it be assumed that the activity
involved in selling unserviceable material and scrap-iron etc. may not amount
to carrying on business in the normal connotation of that term, it would still
be business within the meaning of the expression business occurring in the said
Act. Such sales were, therefore, to be held to exigible to sales tax.
definition of the word 'business' in the Orissa Act being perimateria with the
definition of such expression in the Madras Act as well as the Rajasthan Act,
the ratio of the decision in Burmah Shell case (supra) and the District
Controller's case (supra) would be clearly applicable in the instant case and,
therefore, the respondent will have to be regarded as a dealer carrying on the
business of selling spare parts etc. and thereby become liable to pay sales tax
on the sale of such items.
submitted by Mr. Misra that neither the High Court nor the other authorities
had gone into the question as to whether the respondent could be regarded as a
casual dealer. It is true that apparently the attention of the High Court was
not drawn to Section 2[bb]. This, however, can be of no assistance to the
respondent because on the facts as found by the Tribunal it is evident that the
provisions of Section 2[bb] are clearly attracted to the instant case. If the
High Court has ignored a relevant statutory provision and then come to a wrong
conclusion that cannot be a ground for the respondent to contend that Court
should also not refer to the said sub-section. The contention of the respondent
would have been correct if the applicability of Section 2 [bb] depended on the
investigation of facts and that had not been done. However, the facts as found
here clearly disclose that the respondent has to be regarded at least as a
casual dealer. The mere fact that the High Court over-looked the said provision
cannot be a ground for the respondent to contend that this Court should not go
into that question.
opinion the High Court was not right in concluding that the respondent was not
a dealer who was liable to pay sales tax on the sales of the spare parts etc.
by it. We accordingly allow these appeals and answer the questions of law in
the negative and against the respondent. There will be no order as to costs.