Commissioner
of Sales Tax Vs. Sai Publication Fund [2002] Insc 166 (22 March 2002)
Shivaraj
V. Patil & Bisheshwar Prasad Singh
With
Civil Appeal No. 1716 of 1999
Shivaraj
V. Patil,J.
CIVIL
APPEAL NO. 9445 OF 1996 In the light of the contentions raised and submissions
made on behalf of the parties, the issue that arises for consideration and
decision in this appeal is whether the Trust - Sai Publication Fund, which has
been set up by some devotees of Saibaba of Shridi for spreading his message,
can be held to be a "dealer" in respect of sale of books, booklets,
pamphlets, photos, stickers and other publications containing message of Saibaba
and the turnover of such publication can be assessed to sales tax under the
Bombay Sales Tax Act, 1959 (for short `the Act').
The
relevant and material facts, leading to filing of this appeal in brief, are
that the assessee (the respondent herein) is a Trust created by four devotees
of Saibaba of Shridi under a trust deed dated 6.8.1984. The object of the Trust
is to spread message of Saibaba of Shridi. In furtherance of and to accomplish
the said object, the assessee publishes books, pamphlets and other literature
containing the message of Saibaba under the aegis of "Sai
Publications" which are available to the devotees of Saibaba on nominal
charge to meet the cost. The sale proceeds of such publication goes to the
Trust and forms part of the property of the Trust, which can be utilized only
for advancement of the objects of the Trust. There is a specific provision in
the trust deed that in the event of failure of the Trust to carry on its aims
and objects, the remaining fund in its hands would be handed over to Sansthanam
of Shridi.
In
order to avoid any controversy relating to leviability of sales tax on the
amount received on sale of such publications, an application was made by the
Trust under Section 52(1)(a) of the Act seeking determination of the questions
whether the Trust could be said to be carrying on "business' as defined in
Section 2(5A) of the Act and whether it could be considered as a
"dealer" within the meaning of Section 2(11) of the Act. The Deputy
Commissioner of Sales Tax by his order dated 28.9.1989 held that the activity
of publication and sale of books etc. amounted to business falling within the
ambit of Section 2(5A) and the Trust was a "dealer" coming within the
meaning of Section 2(11) of the Act. Consequently, he held that the Trust was
liable to pay sales tax on the value of publications sold by it. What weighed
with the Deputy Commissioner in passing the said order was the amendment of the
definition of "business" in Section 2(5A) of the Act by the Maharashtra
Tax Laws (Levy, Amendment & Repeal) Act, 1989 with retrospective effect
from 16.8.1985 to provide that even without profit motive, it can still be
"business".
In the
appeal filed before the Maharashtra Sales Tax Tribunal against the said order
of the Deputy Commissioner, it was contended on behalf of the Trust that it was
not a "dealer" within the meaning of Section 2(11) of the Act as it
was not engaged in any activity which amounted to "business" in view
of the object and activities of the Trust. The Revenue supported the order of
the Deputy Commissioner relying on the amendment of the definition of
"business" as a result of which profit motive was immaterial. The
Tribunal, after due consideration of rival submissions looking to the object of
the Trust and the nature of its activities, concluded that the assessee could
not be held to be a "dealer" and as such no tax could be levied on
the amount received by it from the sale of its publications.
At the
instance of the Revenue, reference was made under Section 61(1) of the Act by
the Tribunal to the High Court for its opinion on the following question:-
"Whether on the facts and circumstances of the case and correct
interpretation of the provisions of the Bombay Sales Tax Act, 1959, as amended
by Maharashtra Act No. 9 of 1989, dispensing with the `profit motive' from the
concept of the 'business' was the Tribunal justified in holding that the respondent
is not a 'dealer qua its activities' of publication and sale of books, booklets
and allied publications including photos and stickers?" The High Court on
consideration of the relevant provisions of the Act, facts of the case and
keeping in view the decisions cited, answered the aforementioned question
referred by the Tribunal in the affirmative and in favour of the assessee.
Hence, the present appeal by the Revenue.
Shri
S.K. Dholakia, learned Senior Counsel for the appellant contended that the definition
of "business" is wide and inclusive definition. Despite the same, the
High Court committed a serious error of law in taking a view that
business/activity must still be one which in ordinary connotation is regarded
as business; this is clearly against the legislative intent. According to him,
on the facts that the Trust purchases necessary material and brings some
publications and sells the same when profit motive is immaterial having regard
to the amended definition of Section 2(5A) of the Act. The learned Senior
Counsel emphasized that the activity of the Trust in bringing out publications
and selling them is regular, frequent, of sizeable volume and continuous.
Hence, the assessee was liable to pay sales tax on the amount realized by such
sale of its publications. Citing the decision of this Court 512) he submitted
that all ingredients of "business" are satisfied in the present case.
He submitted that New Delhi Municipal Council vs. State of Punjab & Ors.
((1997) 7 SCC 339) Madras ((1999) 4 SCC 630) also come to his
aid to support his contention.
Shri
Joseph Vellapally, learned Senior Counsel appearing for the respondent in the
connected Civil Appeal No. 1716/1999 argued supporting the impugned judgment
while adding that the controversy raised in this appeal is fully covered by the
recent judgment of this Court in State of T.N. & Anr. vs. Board of Trustees
of the Port of Madras (supra), the very decision cited by the learned Senior
Counsel for the appellant. The learned counsel for the respondent in this
appeal, while adopting the arguments of Shri Vellapally, made submissions
supporting the impugned judgment.
At the
outset, it is useful to notice few provisions of the Act to the extent they are
relevant in order to appreciate the respective contentions relating to the
controversy that has arisen.
"S.2(5A)-
"Business" includes 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
from such trade, commerce, manufacture, adventure or concern and any
transaction in connection with, or incidental or ancillary to, the commencement
or closure of such trade, commerce, manufacture, adventure or
concern;..............
................................................
..........."
"S.2(11):- "Dealer" means any person who whether for commission,
remuneration or otherwise carries on the business of buying or selling goods in
the State, and includes the Central Government, or any state Government which
carries on such business, and also any society, club or other association of
persons which buys goods from or sells goods to its members;........................................
................................................
......"
"S.2(19): "Person" includes any company or association or body
of individual whether incorporated or not, and also a Hindu undivided family, a
firm and a local authority." S.3 :"Incidence of tax (1) Every dealer
whose turnover either of all sales or of all purchases, made during (i) the
year ending on the 31st day of March 1991 or, (ii) the year commencing on the
1st day of April 1981, has exceeded or exceeds the relevant limit specified in
sub-section (4) shall until such liability ceases under sub-section (3), be
liable to pay tax under this Act on his turnover of sales, and on his turnover
of purchases, made on or after the notified
day;............................................
.........................."
The contention that the Trust in question is "dealer" within the
meaning of Section 2(11) read with Section 2(5A) requires careful scrutiny. As
is evident from Section 2(11), every person is not "dealer" but only
those persons "who carry on the business" by buying or selling goods
are regarded as "dealers". From the very definition of dealer, it
follows that a person would not be a dealer in respect of the goods sold or
purchased by him unless he carries on the business of buying and selling such
goods. "Dealer" and "person" are separately defined in
Section 2(11) and Section 2(19) of the Act respectively. "Person"
means not only natural person but includes any company or association or body
of individuals whether incorporated or not and also a Hindu Undivided Family, a
firm or a local authority; whereas "dealer" on the other hand means
only such persons who carry on the business of buying and selling of goods in
the State including those who are deemed to be dealers by virtue of definition
of "dealer" contained in Section 2(11) of the Act. As rightly noticed
by the High Court, it is clear from charging Section 3 that every dealer, whose
turnover of sale or purchase during any year exceeds the limits specified
therein, is liable to payment of tax under the Act on his turnover of sales or
purchases. Although the Act provides for levy of tax on the sales or purchases
of certain goods in the State of Maharashtra, the levy is restricted only to sales or purchases made by
dealers. As is manifest from Section 3 itself, the liability to pay sales tax
is only on the dealers. From the combined reading of Section 3, 2(5A) and 2(11)
of the Act, it follows that the tax under the Act is leviable on the sales or
purchases of taxable goods by a dealer and not by every person. From the facts
of the present case, the sole object of the assessee Trust is to spread the
message of Siababa of Shridi. It is also not disputed that the books and
literature etc. containing the message of Saibaba were distributed by the Trust
to the devotees of Saibaba at cost price. There is no dispute that the primary
and dominant activity of the Trust is to spread the message of Saibaba. This
main activity does not amount to "business". The activity of
publishing and selling literature, books and other literature is obviously
incidental or ancillary to the main activity of spreading message of Saibaba
and not to any business as such even without profit motive and it is in a way a
means to achieve the object of the Trust through which message of Saibaba is
spread. It is clear from the Trust Deed and objects contained therein that it
was not established with an intention of carrying on the business/occupation of
selling or supplying goods. This being the position, it cannot be said that the
Trust carries on the business of selling and supplying goods so as to fall
within the meaning of "dealer" under Section 2(11) of the Act.
No
doubt, the definition of "business" given in Section 2(5A) of the Act
even without profit motive is wide enough to include any trade, commerce or
manufacture or any adventure or concern in the nature of trade, commerce or
manufacture and any transaction in connection with or incidental or ancillary
to the commencement or closure of such trade, commerce, manufacture, adventure
or concern. If the main activity is not business, then any transaction
incidental or ancillary would not normally amount to "business"
unless an independent intention to carry on "business" in the incidental
or ancillary activity is established. In such cases, the onus of proof of an
independent intention to carry on "business" connected with or
incidental or ancillary sales will rest on the Department. Thus, if the main
activity of a person is not trade, commerce etc., ordinarily incidental or
ancillary activity may not come within the meaning of "business". To
put it differently, the inclusion of incidental or ancillary activity in the
definition of "business" pre-supposes the existence of trade, commerce
etc. The definition of "dealer" contained in Section 2(11) of the Act
clearly indicates that in order to hold a person to be a "dealer", he
must `carry on business' and then only he may also be deemed to be carrying on
business in respect of transaction incidental or ancillary thereto. We have
stated above that the main and dominant activity of the Trust in furtherance of
its object is to spread message. Hence, such activity does not amount to
"business". Publication for the purpose of spreading message is
incidental to the main activity which the Trust does not carry as business. In
this view, the activity of the Trust in bringing out publications and selling
them at cost price to spread message of Saibaba does not make it a dealer under
Section 2(11) of the Act.
This
Court in State of T.N. & Anr. vs. Board of Trustees of the Port of Madras
(supra), after referring to various decisions in regard to "business"
and "carrying on business" in paras 15 and 16 has stated thus:-
"15. Now the definition of "business" in Section 2(d) and in
most of the sales tax statutes is an inclusive definition and includes
"trade or business or manufacture etc." This itself shows that the
legislature has recognized that the word "business" is wider that the
words "trade, commerce or manufacture etc." The word business though
extensively used is a word of indefinite import. In taxing statutes, it is
normally used in the sense of an occupation, a profession which occupies time,
attention and labour of a person, normally with a profit motive and there must
be a course of dealings, either actually continued or contemplated to be
continued with a profit motive and not for sport or pleasure (State of A.P. v. H.Abdul
Bakhi & Bros. (AIR 1965 SC 531). Even if such profit motive is statutory
excluded from the definition of "business", yet the person could be
doing "business".
16.
The words "carrying on business" require something more than merely
selling or buying etc. Whether a person "carries a business" in a
particular commodity must depend upon the volume, frequency, continuity and
regularity of transactions of purchase and sale in a class of goods and the
transactions must ordinarily be entered into with a profit motive (Board of
Revenue v. A.M. Ansari (1976) 3 SCC 512).
Such
profit motive may, however, be statutorily excluded from the definition of
"business" but still the person may be "carrying on
business." Further in para 30 of the same judgment, it is stated thus:-
"30. In our view, if the main activity was not "business", then
the connected, incidental or ancillary activities of sales would not normally
amount to "business" unless an independent intention to conduct
"business" in these connected, incidental or ancillary activities is
established by the Revenue. It will then be necessary to find out whether the
transactions which are connected, incidental or ancillary are only an
infinitesimal or small part of the main activities. In other words, the
presumption will be that these connected, incidental or ancillary activities of
sale are not "business" and the onus of proof of an independent
intention to do "business" in these connected, incidental and
ancillary sales will rest on the Department. If, for example, these connected,
incidental or ancillary transactions are so large as to render the main activity
infinitesimal or very small, then of course the case would fall under the first
category referred to earlier." (Emphasis supplied) In the case on hand,
the Revenue neither contended nor proved that in sale of publications the Trust
had an independent intention to do business as incidental or as an ancillary
activity.
This
Court in the aforementioned judgment further examined the cases to find out if
the main activity was not "business".
In para
32, reference is made to the case of Bombay High Court in (Bom)]. In that case,
the educational society was entrusted with the task of founding a college and
for that purpose it was to construct buildings therefor. It was held that it
could not be said to be "carrying on business" merely because for the
above purposes, it established a brick kiln and sold surplus bricks and scrap
at cost price without intending to make profit or gain.
Having
regard to main activities and its objects, it was held that the educational
society was not established "to carry on business" and the sale of
bricks was held not excisable to sales tax. Chagla C.J. pointed out that it was
not merely the act of selling or buying etc. that constituted a person a
"dealer" but the "object" of the person who carried on the
activities was important. It was further stated that it was not every activity
or any repeated activity resulting in sale or supply of goods that would
attract sales tax. If legislature intended to tax every sale or purchase
irrespective of the object of the activities out of which the transaction
arose, then it was unnecessary to state that the person must "carry on
business" of selling, buying etc.
In para
33 of the same judgment, this Court has referred to various decisions to
consider whether one is a "dealer" or carries on "business"
and the nature and object of activity. The said para reads thus:- "In Girdharilal
Jiwanlal vs. CST [(1957) 8 STC 732 (Bom)], the Bombay High Court held that an
agriculturist did not necessarily fall within the definition of a
"dealer" under Section 2(c) of the C.P. & Berar Sales Tax Act
(Act 21 of 1967), merely because he sold or supplied commodities. It must be
shown that he was carrying on a business. It was held that it must be
established that his primary intention in engaging himself in such activities
must be to carry on the business of sale or supply of agricultural produce.
This High Court held that there was "nothing to show that the petitioner
acquired these lands with a view to doing 'the business of selling or
supplying' agricultural produce. According to [the assessee] he [was]
principally an agriculturist who also deals in cotton, coal, oilseeds and
groundnuts".
(emphasis
supplied).
He was
having agriculture for the purpose of earning income from the fields but there
was nothing to show that he acquired the lands with the primary intention of
doing business of selling or buying agricultural produce. This decision was
approved by this Court in Dy. Commissioner of Agricultural Income Tax &
Sales Tax v. Travancore Rubber & Tea Co. [(1967) 20 STC 520 (SC)] and it
was held that where the only facts established were that the assessee converted
latex tapped from rubber trees into sheets and effected a sale of those sheets
to its customers, the conversion of latex into sheets being a process essential
for transport and marketing of the produce, the Department had failed to prove
that "the assessee was formed" with a commercial purpose. The Allahabad
High in Swadeshi Cotton Mills Co. Ltd. V. STO [(1964) 15 STC 505 (All)] was
dealing with a batch of cases where different bodies were running canteens. One
of the cases concerned Aligarh Muslim University which was maintaining dining halls
where it was serving food and refreshments to its resident-students. It was
held, referring to observations of this Court in University of Delhi v. Ram Nath [AIR 1963 SC 1873] that
it was incongruous to call educational activities of the University as
amounting to "carrying on business". The activity of serving food in
the dining hall was a minor part of the overall activity of the university.
Education was more a mission and avocation rather than a profession or trade or
business. The aim of education was the creation of a well-educated, healthy,
young generation imbued with a rational and progressive outlook of life. On this
reasoning, it was held that Aligarh University was not "carrying on
business" and the sale of food at the dining halls was not liable to tax.
Likewise after the amendment of the definition of "business' question
arose in Indian Institute of Technology v. State of U.P. [(1976) 38 STC 428
(All)] with respect to the visitors' hostel maintained by the Indian Institute
of Technology where lodging and boarding facilities were provided to persons
who would come to the Institute in connection with education and the academic
activities of the Institute. It was observed that the statutory obligation of
maintenance of the hostel which involved supply and sale of food was an
integral part of the objects of the Institute. Nor could the running of the
hostel be treated as the principal activity of the Institute. The Institute
could not be held to be doing business.
Similarly,
in the case of a research organization, in Dy. Commissioner (C.T.) v. South
India Textile Research Assn. [(1978) 41 STC 197 (Mad)] which was purchasing
cotton and selling the cotton yarn/cotton waste resulting from the research
activities, it was held that the Institute was solely and exclusively
constituted for the purposes of research and was not carrying on
"business" and these sales and purchases above-mentioned could not be
subjected to sales tax. Likewise, in State of T.N. v. Cement Research Institute
of India [(1992) 86 STC 124 (Mad)] it was held that the Institute was an organistion
the objects of which were to promote research and other scientific work that
the laboratories and workshops were maintained by the organization for
conducting experiments and that though the cement manufactured as a result of
research was sold, it could not be considered to be a trading activity within
Section 2(d) of the Tamil Nadu General Sales Tax Act, 1959. Again in Tirumala Tirupati
Devasthanam v. State of Madras [(1972) 29 STC 266 (Mad)] the disputes arose
with regard to the sales of silverware etc. which are customarily deposited in
the hundis by devotees.
It was
held by the Madras High Court that the Devasthanam's main activities were
religious in nature and these sales were not liable to tax.
(No
doubt, the case related to a period where the profit motive was not excluded by
statute).
We are
of the view that all these decisions involve the general principle that the
main activity must be "business" and these rulings do support the
case of the respondent-Port Trust." (Emphasis supplied) This decision is
directly on the point supporting the case of the respondent after noticing
number of decisions on the point including the decisions cited by the learned
counsel before us.
It may
be stated that the question of profit motive or no profit move would be
relevant only where person carries on trade, commerce, manufacture or adventure
in the nature of trade, commerce etc. On the facts and in the circumstances of
the present case irrespective of the profit motive, it could not be said that
the Trust either was "dealer" or was carrying on trade, commerce etc.
The Trust is not carrying on trade, commerce etc., in the sense of occupation
to be a "dealer" as its main object is to spread message of Saibaba
of Shridi as already noticed above.
Having
regard to all aspects of the matter, the High Court was right in answering the
question referred by the Tribunal in the affirmative and in favour of the
respondent-assessee. We must however add here that whether a particular person
is a "dealer" and whether he carries on "business", are the
matters to be decided on facts and in the circumstances of each case.
For
what is stated above, we answer the question set out in the beginning in the
negative and in favour of the respondent- assessee and dismiss the appeal
finding no merit in it but with no order as to costs.
Civil
Appeal No. 1716 of 1999 The impugned order was passed by the Tribunal relying
on the judgment of the Bombay High Court in the case of Sai Publication Fund
impugned in abovementioned C.A. No. 9445/96. The learned counsel also submitted
that the result of this appeal depended on the decision in said C.A. No.
9445/96 as the facts and circumstances of both the cases are similar.
Consequently, in view of the dismissal of the C.A. No. 9445/96, this appeal is
also dismissed. No costs.
........................J
(SHIVRAJ V. PATIL) ........................J (BISHESHWAR PRASAD SINGH) March
22, 2002.
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