Bombay High Court
Commissioner Of Sales Tax, Maharashtra ... vs Billion Plastics Pvt. Ltd. on 22 February, 1995
Equivalent citations: 1995(2)MHLJ370
Author: D.K. Trivedi
Bench: D.K. Trivedi
JUDGMENT Dr. B.P. Saraf, J.
1. By this reference under section 61(1) of the Bombay Sales Tax Act, 1959 made at the instance of the Revenue, the Maharashtra Sales Tax Tribunal has referred the following questions of law to this Court for opinion :
"1. Whether, on the facts and in the circumstances of the case and on a true and proper interpretation of section 13 of the Bombay Sales Tax Act, 1959, the Tribunal was justified in law in holding that no purchase tax is leviable on the purchase of goods effected from a person who is not a registered dealer under the said Act till the goods are resold or possibility of their resale is ruled out ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the respondent was a dealer qua purchase of the car and the purchase of the car was in course of business ?"
2. The material facts of the case relevant for the purpose of deciding the controversy before us are very brief. The assessee-company is a manufacturer and seller of PVC pipes, PVC compounds and reseller of rigid pipes, sleevings, etc. It is registered as a dealer under the Bombay Sales Tax Act, 1959 ("the Act") in respect of the above business. In its assessment for the period October 1, 1984 to September 30, 1985, the Assistant Commissioner of Sales Tax (Assessment) levied purchase tax under section 13 of the Act at the rate of 12 per cent on the value of a car purchased by the assessee on August 30, 1985, for a sum of Rs. 83,917, and determined the purchase tax payable thereon at Rs. 10,070. The above tax was levied on the basis that the purchase of the above car was made by the assessee from one Mr. Pareshkumar, who was not a registered dealer under the Act. Aggrieved by the above levy of purchase tax, the assessee appealed to the Deputy Commissioner of Sales Tax ("Deputy Commissioner"). Before the Deputy Commissioner, it was contended by the assessee that it had paid the consideration for the purchase of the car directly to M/s. Bombay Cycle and Motor Agency, who was a registered dealer and the insurance policy in respect of the same was also taken directly in the name of the assessee. Hence, according to the assessee, the purchase was not a purchase from unregistered dealer but purchase from M/s. Bombay Cycle and Motor Agency, who was a registered dealer. The Deputy Commissioner did not accept the above contention of the assessee as he found that the car had been booked with M/s. Bombay Cycle and Motor Agency by one Mr. Pareshkumar (from whom the assessee had purchased the same) and the bill in respect thereof was also issued by Bombay Cycle and Motor Agency in the name of the said Mr. Pareshkumar. The Deputy Commissioner, therefore, held that there were two transactions of sale one between M/s. Bombay Cycle and Motor Agency and Mr. Pareshkumar and another between Mr. Pareshkumar and the assessee and Pareshkumar being a person who was not a dealer registered under the Act, the purchase value of the car was exigible to purchase tax in the hands of the assessee under section 13 of the Act. He, therefore, dismissed the appeal of the assessee and confirmed the order of the Assistant Commissioner of Taxes (Assessment). The assessee went in further appeal to the Maharashtra Sales Tax Tribunal ("Tribunals"). Before the Tribunal the assessee reiterated its contention that section 13 was not attracted to the purchase in question. It was also contended by the assessee before the Tribunal that it was not carrying on the business of buying or selling motor cars and hence it was not liable to pay purchase tax in respect of purchase of motor car made by it for its own use from an unregistered dealer. The Tribunal allowed the appeal and set aside the order of the Deputy Commissioner and the Assistant Commissioner of Sales Tax (Assessment). Hence this reference at the instance of the Revenue.
3. We have heard the learned counsel for the Revenue who submits that purchase tax under section 13 is payable by a dealer who is liable to pay tax under section 3 of this Act on the purchase of taxable goods made by him from a person who is not a registered dealer except where the goods so purchased are resold by him. The contention of the learned counsel, in other words, is that it is sufficient to attract the levy of purchase tax under section 13 of the Act that the purchase is made by a dealer who is liable to pay tax under section 3 of the Act and the goods purchased are goods specified in Schedule B, C, D or E to the Act and hence taxable under this Act, and such purchase is made from a person who is not a registered dealer. If these conditions are fulfilled, section 13 would be attracted and purchase tax would become leviable unless the goods so purchased are resold by the purchasing dealer. The counsel for the assessee, on the other hand submits that section 13 would not apply to purchases made by a dealer of taxable goods from unregistered dealer till such goods remain with the purchasing dealer and/or the possibility of resale thereof is ruled out. The other contention of the learned counsel for the assessee is that section 13 would be attracted only in case of purchases of such goods only in respect of which he is a dealer. The submission, in other words, is that in case of a dealer like the assessee in the present case, who does not carry on business of purchase and sale of the cars, no purchase tax can be levied under section 13 in respect of purchase of the car. Further submission is that section 13 applies only to purchases made from a "dealer" who is unregistered or not registered and not to purchase from any and every person who is not even a "dealer".
4. We have carefully considered rival submissions of the counsel for the parties. Section 13 of the Act, at the material time, read as under :
"13. Purchase tax payable on certain purchases of goods from an unregistered dealer. - Where a dealer, who is liable to pay tax under section 3, purchases any goods specified in Schedules B, C, D or E from a person or from a Government, who or which is not a registered dealer, then unless the goods so purchased are resold by the dealer, there shall be levied, subject to the provisions of sub-section (3) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the Schedules aforesaid."
5. It is clear from a plain reading of the above section that it provides for levy of purchase tax on certain purchases of goods made by a dealer who is liable to pay tax under section 3 of the Act from an "unregistered dealer" or "a person who is not a registered dealer". Though the expression used in the marginal note of the section is, "purchases of goods from an unregistered dealer", the expression used in the body of section is "purchases from a person or from a Government who or which is not a registered dealer". According to the Revenue, the expression "unregistered dealer" or "a person who is not registered dealer" means any person other than a registered dealer. In other words, according to the Revenue purchases from any person other than a registered dealer would be subject to purchase tax under section 13, if other conditions specified therein are satisfied. We have given our careful consideration to the above submission of the Revenue. We, however, find it extremely difficult to accept the same. In our opinion, section 13 does not provide for levy of purchase tax on all purchases of goods made by a dealer who is liable to pay tax from any and every person other than a registered dealer. It applies only to purchases from "dealers" who are "unregistered" or "not registered". The expressions "unregistered dealer" and "not a registered dealer" are interchangeable expressions. Both these expressions presuppose that the person concerned is a "dealer". It is only if the person from whom the purchase is made is a "dealer" in respect of the goods sold by him but not registered as a dealer, that section 13 would be attracted. Purchases of goods from a person who is not even a dealer within the meaning of section 2(11) of the Act will not fall within the purview of section 13 and no purchase tax would be leviable in respect of such purchases. This opinion of ours gets full support from the definitions of "dealer" and "registered dealer" contained in clauses (11) and (25) of section 2 of the Act. "Dealer", as defined in clause (11) of section 2 of the Act 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 only exception is an agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally. It is obvious from the above definition of "dealer" that only such "person" is a dealer who carries on the business of buying or selling goods in the State. "Business" has been defined in clause (5A) of section 2 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, such trade, commerce, manufacture, adventure or concern. The liability to pay tax under this Act is also only on a "dealer". There is thus a perceptible difference between a "dealer" and a "person". Though every dealer would be a person, every person need not be a dealer. A person would be a dealer only if he carries on the business of buying or selling goods and that too only in respect of the goods bought or sold in course of such business. Purchases or sales of any and every goods by a person, who is a dealer, cannot be regarded as purchases or sales by a dealer, unless such sales or purchases are in course of his business or incidental or ancillary thereto.
"Registered dealer" has been defined in clause (25) of section 2 of the Act to mean a dealer registered under section 22. Section 22 of the Act puts a ban on carrying on business "as a dealer" by any dealer liable to pay tax under section 3 or sub-section (6) of section 19 of the Act unless he has been registered and possesses a valid certificate of registration as provided under the Act. Section 3, which deals with the incidence of tax, provides for levy of tax on every "dealer" whose turnover of sales or purchases made during any year exceeds the limits specified therein. Similarly, section 6 of the Act provides that tax leviable under the Act shall be paid by the "dealer" who is liable to pay the same.
It is clear from the above discussion that section 13 is intended to levy tax only on the purchases of the goods made by a dealer who is liable to pay tax under this Act from a dealer who is not registered either because of his turnover falling below the limits specified in section 3 or otherwise. This has been done with a view to check avoidance of payment of sales tax by dealers on purchases made by them by making purchases from unregistered dealers or dealers who are not registered. In such cases, the purchaser has himself been made liable for payment of purchase tax in respect of such purchases unless the goods are resold by him, in which event he would become liable to pay sales tax on the sale price thereof. In either event, the purchasing dealer would have to pay the tax, whether purchase tax or sales tax. The Revenue is thus assured of the tax on sales or purchases of such goods at one point or the other, which would have been lost otherwise. However, keeping in view the nature, scheme and object of section 13 and the fact that it is the assessee only who would have full knowledge about the person from whom he has purchased the goods, the onus of proving that the person from whom the purchase in question had been made was not a "dealer" will always be on the assessee. Because, in such a case it is not only difficult but rather impossible for the Revenue to establish that the person concerned from whom the assessee had purchased the goods was a dealer in those goods though not registered under the Act. If the assessee fails to satisfy the assessing authority that the person from whom the purchase in question had been made was not a dealer within the meaning of section 2(11) of the Act, purchase tax would be leviable under section 13 on the purchases made by him from such person. In that event, the assessing officer will be justified in drawing an inference that the purchase in question was effected from a person who was a dealer but unregistered or not registered.
6. We have also considered the submission of the learned counsel for the assessee that section 13 would be attracted only in respect of purchases made by a dealer who is liable to pay tax under the Act in course of his business. We are of the opinion that keeping in view the scheme of the Act and the intent and purpose of section 13, purchase tax can be levied on a dealer only if he carries on the business of buying or selling those goods. Any and every purchase by a dealer would not fall under section 13 of the Act. We are fully supported in our above opinion by the decision of the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 where dealing with the scheme of the Bombay Sales Tax Act, 1953, it was held :
"Under the Bombay Sales Tax Act, 1953, the aggregate of the price received and receivable by a person carrying on business of selling goods is liable to be included in his taxable turnover. It follows as a corollary that in the turnover of a person carrying on the business of selling one commodity will not be included the price received by him by sale of another commodity unless he carries on the business of selling that other commodity. That is so because within the meaning of section 2(6) of Bombay Act 3 of 1953 to be a dealer a person must carry on the business of selling those goods, price whereof is sought to be included in the turnover. In other words, he must carry on the business of selling a commodity before his turnover from sale of that commodity is taxable.....".
This view of ours also gets support from the latter part of section 13 of the Act which provides that purchase tax shall not be payable if the goods purchased are resold by him. This goes to show that the goods purchased by the dealer are goods which are intended for resale. The question of purchase tax under section 13 would arise only when the goods so purchased are not resold and used for some other purpose, e.g., personal use of the dealer or disposed of in any manner, other than by way of sale.
7. We may now examine the facts of the present case in the light of the law discussed above. The admitted position is that the purchase of the car was made by the assessee from a person who was not a dealer. Moreover, the assessee was also not a dealer in motor cars. He was a dealer in PVC pipes, PVC compounds and rigid pipes, etc. Hence two of the prerequisites of section 13 are not fulfilled. Firstly, the purchase of the car has not been made by the assessee as a dealer who is liable to pay tax under section 3 of the Act because he does not carry on the business of selling and supplying cars. He is, therefore, not a dealer in respect of purchase of car. Secondly, the person namely, Mr. Pareshkumar, from whom the car had been purchased by the assessee, admittedly was not a dealer within the meaning of section 2(11) of the Act. The car was in fact purchased by the said person from a registered dealer, namely, M/s. Bombay Cycle and Motor Agency and thereafter sold by him to the assessee. There is no dispute about the fact that Pareshkumar was not a dealer within the meaning of section 2(11) of the Act and he was not carrying on business of selling or supplying cars. Under the circumstances, section 13 of the Act would not be attracted to the purchase in question and no purchase tax can be levied on the assessee under the said section on the purchase value of the car. We are, therefore, of the opinion that the Tribunal was justified in holding that no purchase tax was leviable under section 13 of the Act on the purchase of the car in question though on grounds different from those given by the Tribunal.
8. We have carefully perused the questions referred to us by the Tribunal. We are, however, of the opinion that it is necessary to reframe the question to bring out the real controversy arising in this case. We, therefore, reframe the question as follows :
"Whether the Tribunal was justified in holding that no purchase tax was leviable under section 13 of the Act in respect of the purchases made by the assessee from a person who was not a dealer within the meaning of section 2(11) of the Act ?"
9. For the reasons set out above, we answer the above reframed question in the affirmative and in favour of the assessee.
10. Under the facts and circumstances of the case, we make no order as to costs.
11. Question reframed and answered in the affirmative.