K.J. Lingam and Another vs The State of Madras

Ramakrishnan, J.—This revision case is filed against the order of the Sales Tax Appellate Tribunal in T.A. No. 294 of 1962.

The assessees are dealers in motor vehicles and spare parts. We are now concerned in the present revision case with motor vehicles which the

assessees purchased at Avadi within the Madras State from the Director-General of Supplies and Disposals, subsequently broke them into parts

and sold them. These spare parts are assessable under the Madras General Sales Tax Act at the point of the first sale in this State. Treating the

assessees as dealers effecting the first sale of the aforesaid articles, the department assessed them to sales tax. This part of the turnover comes to

Rs. 1,51,589. The contention of the assessees before the department as well as before the Tribunal was that the first seller in regard to the above

turnover was the Director-General of Supplies and Disposals. It is common ground that these motor vehicles, which were sold by the Director-

General of Supplies and Disposals, were vehicles belonging to the Military Department, which were found unusable or condemned and were

entrusted to the Director-General of Supplies and Disposals for disposal to the best advantage. The Assessing Authority as well as the Sales Tax

Appellate Tribunal rejected the contention of the assessees that the Director-General of Supplies and Disposals, whose services were requisitioned

by the Military Department for effecting these sales, was a dealer within the definition of Section 2 (g) of the Madras Sales Tax Act, 1959 [before

the addition of explanation (2) by Act 5 of 1962], so far as the disputed turnover was concerned. The assessees were, therefore, held liable to be

taxed. They have appealed to us from the above decision.

Learned Counsel appearing for the petitioners has submitted that the Director-General of Supplies and Disposals charges 2% as departmental

charges for such sales and also that the office of the Director-General of Supplies and Disposals maintains a commercial intelligence cell and a

statistics department whose advice he takes for effecting sales. But this kind of activity of the Director-General of Supplies and Disposals will not

make him a dealer within the definition of that term in the General Sales Tax Act. In a recent decision of the Supreme Court in State of Andhra

Pradesh v. Abdul Bakshi & Bros. [1964] 15 S.T.C. 644, it has been observed at page 647:

The expression ''business'' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or

profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business

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.

The onus is on the assessee according to Section 10 of the Madras General Sales Tax Act to prove that he is not the first dealer liable to pay

sales tax but only a subsequent dealer entitled to exemption. From the materials available to us, we cannot conclude that the Director-General of

Supplies and Disposals is engaged in a profit making enterprise. Learned Government Pleader has urged that the Director-General of Supplies and

Disposals is in charge of a branch of the Central Government which assists other departments of the Government of India in the matter of obtaining

supplies and also disposing of surplus or condemned stock. In the present case, the Military Department found certain motor vehicles unfit for use

and had indented upon the special skill and experience of the Director-General of Supplies and Disposals for selling the vehicles at the most

advantageous price in the market. But the Military Department, whose instrument or agent the Director-General of Supplies and Disposals is in

making these sales, is not certainly engaged in a profit making activity. The Director-General of Supplies and Disposals after effecting sales of these

vehicles, deducts the prescribed departmental charges and credits the balance to the Military Department. It is fairly obvious that in the matter of

sales of certain unusable or condemned motor vehicles, no conception of any business activity either on the part of the Military Department, or of

the Director-General of Supplies and Disposals, who was its instrument or agent for effecting the sales, can reasonably arise.

We are therefore of the opinion that the assessees were rightly assessed to tax on this disputed turnover. The revision case is therefore

dismissed. There will be no order as to costs.