Government Medical Store Depot, Karnal
Vs. State of Haryana & ANR [1986] INSC 158 (5 August 1986)
PATHAK, R.S. 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 The Punjab Act was repealed by the enactment of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 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
Taxes. Gauhati & Ors., [1985] 2 Scale 600, referred to.
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 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 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.
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.
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