Bombay High Court
Controller Of Stores, Central Railway vs Commissioner Of Sales Tax, Maharashtra ... on 7 February, 1995
Author: D.K. Trivedi
Bench: D.K. Trivedi
JUDGMENT
1. By this reference under section 61(1) of the Bombay Sales Tax Act, 1959, made at the instance of the assessee, the Maharashtra Sales Tax Tribunal has referred the following question of law to this Court for opinion :
"Whether, the applicant is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959 ?"
2. The assessee, is the Controller of Stores, Central Railway, Bombay. It is registered as a dealer under the Bombay Sales Tax Act, 1959 ("the Act"). It was assessed under the Act for the period April 1, 1984 to March 31, 1985, by the Assistant Commissioner of Sales Tax ("assessing officer") by his order of assessment dated March 31, 1986.
3. The controversy pertains to levy of sales tax on the sales turnover of goods sold by the assessee by public auction and the canteen sales made by it during the period April 1, 1984 to March 31, 1985. The value of the goods disposed of by auction was Rs. 9,71,65,403 and the canteen sales amounted to Rs. 1,45,20,000. By the said assessment, certain sales of disposal materials made by the assessee were subjected to tax. Purchase tax was also levied under section 13 of the Act in respect of certain purchases made by it from unregistered dealers in connection with the business of transportation carried on by it.
4. Against the above order of assessment, the assessee preferred appeal before the Deputy Commissioner of Sales Tax (Appeals) on the ground that the assessee was not a dealer within the meaning of section 2(11) of the Act and it had been wrongly saddled with the tax liability. The Deputy Commissioner, following the decision of the Supreme Court in District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423, rejected the above contention of the assessee and dismissed the appeal. The assessee went in further appeal to the Maharashtra Sales Tax Tribunal ("the Tribunal"). The Tribunal confirmed the order of the Deputy Commissioner and held that the assessee was a dealer liable to pay tax under the Act. Hence this reference at the instance of the assessee.
5. Mr. P. V. Surte, learned counsel for the assessee, submitted before us that the activity carried on by the Indian Railways is not a commercial activity. It is a public utility service run for the welfare of the public in general and the poor in particular. Counsel, however, agreed that the activity of disposal of unclaimed, unserviceable, discarded and scrap materials is ancillary and incidental to the main activity of the assessee of providing transport service. According to Mr. Surte, the decision of the Supreme Court in District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423 is not applicable because of difference in the definition of "business" under the Act and under the Rajasthan Sales Tax Act, 1954, which was considered by the Supreme Court in the above decision.
6. We have carefully perused the decision of the Supreme Court in District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423 and also the definition of "business" in clause (5A) of section 2 of the Act as it stood at the material time. We find that the above decision of the Supreme Court clearly applies to the facts of the present case. The assessee in the case before the Supreme Court and the present case is the same, that is, the Indian Railways. The activity of transportation undertaken by the Indian Railways has been held in that case to be "commerce" within the meaning of the definition of "business" and the sale of unserviceable materials and scrap-iron, etc., as transaction in connection with or ancillary to such commerce. We fail to understand how, in the face of this finding of the Supreme Court, the assessee can contend that it is not a "dealer" under the Bombay Sales Tax Act.
7. "Dealer" has been defined in clause (11) of section 2 of the Act. At the material time, it read :
"(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;
................."
The expression " business" appearing in the above definition was not defined in the Act. A definition of "business" was inserted in the Act for the first time with effect from January 15, 1975, by Maharashtra Act 62 of 1974 by incorporating clause (5A) in section 2 of the Act. The said clause (5A), reads as follows :
"(5A) 'business' included 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, such trade, commerce, manufacture, adventure or concern;"
8. The scope and ambit of "business", as defined in clause (5A) of section 2 of the Act, was enlarged and amplified by amendments made from time to time. It is however not necessary for us to refer to those amendments as, in our opinion, the case of the assessee falls even under unamended clause (5A) which has been set out above. Moreover, by the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1985 (Act 24 of 1985), the following Explanation was added to the definition of "dealer" in cause (11) of section 2 of the Act :
"Explanation. - For the purposes of this clause, each of the following persons and bodies who dispose of any goods including goods as unclaimed or confiscated or as unserviceable or as scrap, surplus, old, obsolete or discarded material or waste products whether by auction or otherwise, directly or through an agent for cash, or for deferred payment, or for any other valuable consideration, shall, notwithstanding anything contained in clause (5A) or any other provision of this Act, be deemed to be a dealer, to the extent of such disposals, namely :-
(a) The Bombay Port Trust;
(b) Municipal corporations, and Municipal Councils, and other local authorities;
(c) Railway administration as defined under the Indian Railways Act, 1890;
(d) Shipping, transport and construction companies;
(e) Air transport companies and Airlines;
(f) Transporters, holding permit for transport vehicles granted under the Motor Vehicles Act, 1939, which are used or adopted to be used for hire;
(g) Maharashtra State Road Transport Corporation constituted under the Road Transport Corporations Act, 1950;
(h) Customs Department of the Government of India administering the Customs Act, 1962;
(i) Any other corporation, company, body or authority set up by the Central Government, or any State Government;"
Obviously, this amendment is merely clarificatory in nature and was made to validate all assessments made under the provisions of the Act before the commencement of the above amendment which were subject-matter of challenge before different forums on the ground that the persons specified in the Explanation were not "dealers" within the meaning of section 2(11) of the Act.
9. From a conjoint reading of the definitions of "dealer" and "business", as they stood at the material time, it is manifest that a person would be a dealer if he carries on business, which includes :
(i) any trade, commerce or manufacture or concern in the nature of trade, commerce or manufacture, and
(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern.
Indian Railways, would be a dealer if it meets the above requirements.
10. Learned counsel for the assessee submits that Indian Railways cannot be held to be a dealer because it does not carry on any business. We find it difficult to accept the above contention. In our opinion, this issue is no more res integra in view of the decision of the Supreme Court in District Controller of Stores, Northern Railway v. Assistant commercial Taxation Officer [1976] 37 STC 423, where repelling identical contention, it was held :
"We also think that there is no fallacy in thinking that the Railway since it is concerned in the activity of transportation is engaged in commerce within the meaning of clause (i) of the definition and that the sale of unserviceable materials and scrap-iron, etc., is transaction in connection with or ancillary to such commerce within the clause (ii) of that definition."
11. In the instant case, sales tax has been levied on the sales of unserviceable materials and iron scrap by the Railways. The above activity has been held by the Supreme Court to be a transaction in connection with or incidental to the main activity of the Railways which amounts to "commerce" and hence "business". It would, therefor, be a dealer within the meaning of clause (11) of section 2 of the Act read with clause (5A) thereof. We do not find any distinguishing feature which may justify a departure from the ratio of the above decision of the Supreme Court.
12. We also do not find any merit in the contention made on behalf of the Railways that it does not carry on any commercial activity with profit-motive. This contention is wholly unfounded. There can be no dispute about the fact that railways are run by the Central Government as a commercial activity with a view to earn profits. It is the profit-motive which is material. It is not necessary that profit must in fact be earned. It is equally immaterial that it is run by the Central Government, because Central Government which carries on business, has been specifically included in the definition of "dealer" in section 2(11) of the Act.
13. We are, therefore, of the clear opinion that Indian Railways, represented by the controller of Stores, Central Railway, Bombay, is a dealer within the meaning of section 2(11) read with section 2(5A) of the Bombay Sales Tax Act, 1959, liable to pay sales tax on the sales of unserviceable materials, scrap-iron, etc., effected by it by public auction.
14. Accordingly, we answer the question referred to us in the affirmative and in favour of the Revenue.
15. Considering the facts and circumstances of the case, we direct the assessee to pay the costs of this reference, which is estimated at Rs. 2,000 to the Commissioner.
Reference answered in the affirmative.