Kerala High Court
Deputy Commissioner Of Sales Tax (Law), ... vs Ruby Rubber Works Ltd. on 29 January, 1986
Equivalent citations: [1988]71STC125(KER)
Author: M. Fathima Beevi
Bench: M. Fathima Beevi
JUDGMENT P.C. Balakrishna Menon, J.
1. This revision by the State is against the decision of the Kerala Sales Tax Appellate Tribunal, Trivandrum, directing the deletion of the sales turnover of machinery amounting to Rs. 9,51,689.69 from the taxable turnover of the assessee for the year 1975-76.
2. The assessee is a public limited company engaged in the manufacture and sale of cycle tyres, tubes, rubber goods, etc., and is a dealer registered under the Kerala General Sales Tax Act, 1963. The total turnover of the assessee for the year 1975-76 took in also a sum of Rs. 10,36,764.35 being the sale proceeds of machinery sold during the accounting year. The assessee claimed that the aforesaid turnover by sale of machinery is not taxable as it does not fall within the business of the assessee and the assessee is not a dealer in machinery. Overruling this contention the Assistant Commissioner of Sales Tax (Assessment) brought this turnover also to tax. In appeal the Deputy Commissioner of Sales Tax (Appeals) confirmed the decision of the assessing authority that the sales turnover of machinery is also exigible to tax, but reduced the quantum to Rs. 9,51,689.69. In appeal at the instance of the department the Tribunal held that the assessee is not a dealer in machinery and the sale of machinery in the present case is not part of the business of the assessee. The Tribunal has therefore directed deletion of the turnover on the sale of machinery from the taxable turnover of the assessee. It is against this that the department has come up in revision.
3. The contention of the assessee as stated in paragraph 1 of the order of the Tribunal is, "according to the appellants these sales were of machinery items which were found to be surplus and could not be treated as part of their regular business dealings". What was sold was, therefore, surplus machinery which were not of use in the factory of the assessee. Counsel for the assessee points out that the machinery purchased for the use in the factory had never been put to use and it was for that reason that it became surplus and had to be sold at cost price. Since, however, the machinery was intended for use in the factory of the assessee for the manufacture of such articles in respect of which the assessee is a dealer and had to be sold later for want of use, we are of the view that the sale of machinery will fall within the meaning of the expression "business" as amended by Act 22 of 1974. The expression "dealer" is defined in Section 2(viii) of the Act to mean "any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes, inter alia, a casual trader". The expression "casual trader" is defined in Section 2(vii) to mean "a person who has, whether as principal, agent or in any other capacity, occasional transactions involving the buying, selling, supply or distribution of goods in the State, whether for cash or for deferred payment, or for commission, remuneration, or other valuable consideration". Section 2(vi) defines "business" to include "(a) any trade, commerce, or manufacture or any adventure or concern in the nature of trade, 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 ; and (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern". There is no dispute that the assessee is a registered dealer engaged in the manufacture and sale of cycle tubes, tyres and other rubber goods. The machinery in question was purchased by the assessee for use in the manufacture of such articles of trade. That was sold at cost price having found it surplus in the factory. The sale of such machinery is a transaction incidental or ancillary to the "trade, commerce, manufacture, adventure or concern" of the assessee falling under Sub-clause (b) of Section 2(vi) of the Act. Sale of advertising materials such as calendars, wallets, key chains, etc., at cost price was held to be incidental and connected with the business of the assessee by the Supreme Court in the decision in State of Tamil Nadu v. Burmah Shell Co. Ltd. [1973] 31 STC 426. In the same case it is held that scrap sold is also connected with the business of the assessee and the turnover in respect of such sales is also liable to tax. A Division Bench of this Court in the unreported decision in T. R. C. No. 30 of 1981 (Parthas Textiles v. State of Kerala) has held that the sale of a motor car was connected with the textile business of the assessee exigible to tax under the Act. The turnover by sale of unserviceable vehicles and scrap materials obtained by the Kerala State Road Transport Corporation was held to be liable to tax in the unreported decision of a Division Bench of this Court in T. R. C. Nos. 49, 50 and 51 of 1981 (Kerala State Road Transport Corporation v. State of Kerala).
In the light of these pronouncements we are clearly of the view that the turnover by sale of the surplus machinery in the present case is exigible to tax and the Tribunal was wrong in directing deletion of the same from the taxable turnover of the assessee. We therefore set aside the order of the Tribunal and restore that of the Deputy Commissioner of Agricultural Income-tax and Sales Tax (Appeals), Quilon. The tax revision case is allowed. There will, however, be no order as to costs.