Mahatma Gandhi Kashi Vidyapeeth vs State Of U.P. And Others on 2 April, 2013

[Cites 34, Cited by 3]

Allahabad High Court

Mahatma Gandhi Kashi Vidyapeeth vs State Of U.P. And Others on 2 April, 2013

(Delivered by Prakash Krishna, J.) The petitioner, a University, established under the provisions of U.P. State Universities Act, 1973 with aim and object to impart education in various disciplines of Higher Education and Research and also what its name suggests is imparting education from its campus at Varanasi and affiliated Colleges, has to rush to this Court under Article 226 of the Constitution of India to challenge the notice issued by the Deputy Commissioner, Commercial Tax, Sector-11, Varanasi asking it to produce the account books as information available with him is that the petitioner has sold forms worth Rs.8,05,400/- but has not paid the VAT tax under the provisions of the U.P. VAT Act, 2008 (hereinafter referred to as the Act).

The facts are not much in dispute. Only a legal proposition as to whether the petitioner is a 'dealer' within the meaning of section 2(h) and is carrying on the business within the meaning of section 2(e), of the Act.

The case of the petitioner in brief is that it is a statutory body constituted under the provisions of U.P. State Universities Act and is imparting education in various courses run by the University. The seats are limited, therefore, with a view to select only meritorious students, it conducts tests. These tests are held for admission to Graduate, Postgraduate and various professional courses. To facilitate the holding of such tests, the University publishes brochure/admission form containing examination schedule and other conditions for admission in various such courses. Irrespective of the courses or as to whether the tests are held for admission in Undergraduate, Graduate, Postgraduate etc., the costs of these forms is Rs.50/- uniformly to meet out the printing expenses etc. of the admission forms, except for professional courses, cost of which is Rs.500/-. This non profit making activity the University has to undertake it for its smooth functioning. Printing and selling of forms etc. to admission seekers by the petitioner is at the most incidental activity of the petitioner. Section-7 of the State Universities Act enumerates the powers and duties of University. Governor of the State is Ex-officio Chancellor of the State Universities. The petitioner is a statutory body, its powers and duties are statutorily defined and printing and selling of the admission forms to admission seekers does not find mention in the Statute, as one of its object.

The contention of the petitioner in simple terms indeed is that it is imparting education which does not by any stretch of imagination amounts to "business" as it is commonly understood. The imparting of education does not mean dealing, trading or manufacturing 'goods'. The U.P. VAT Act has been enacted for levy and collection of tax on sale or purchase of goods in the State of Uttar Pradesh and for the matters connected therewith and incidental thereto. Earlier, printing materials were not exigible to VAT Act. Schedule-II of the U.P. VAT Act was amended and Entry No.100 was added which provides taxability of "printing material, including diary and calendar" vide notification dated 24th of December, 2007. Submission is that action of the respondents calling upon the petitioner to produce account books with regard to the printing and sale of test forms or initiation of proceedings under the said Act, is wholly without jurisdiction and uncalled for. Hence, the present writ petition.

The respondents in their counter affidavit have not controverted the material allegations as contained in the petition with regard to the activity of the petitioner to impart education etc. The defence as set out by the respondents is that the activity of the petitioner printing the admission forms and realizing price for the same brings him into the ambit of term "dealer" as defined under the Act and activities carried by him are business and consideration received by the petitioner is sale price as defined under the Act, vide para 4 of the counter affidavit. Further, in para 7 thereof it has been stated that the petitioner's function to impart education has nothing to do with the activity of business carried by him. Both are different activities and have to be examined separately. The printing and selling of forms by itself is continuous business being carried on by the petitioner and as such it is covered under the ambit of "dealer" and "business" as defined under the Act. This is the short plea which has been set out in the counter affidavit filed by the Assessing Authority herself, who has issued the impugned notices asking the petitioner to produce the account books and obtain the registration under the Act.

Heard Sri Ravi Kant, learned senior counsel for the petitioner assisted by Ms. Harshita Raghuvanshi and Sri C.B. Tripathi, Special Counsel of State of U.P. for the respondents.

The main crux of the matter is whether the activity in question of the petitioner brings it within the definition of "dealer" and/or it amounts to business as defined under the Act.

The term "business" has been defined in Section 2(h) of the Act in the following manner:-

"Dealer" means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes, -

i. a local authority, body corporate, company, any cooperative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business;

ii. a factor, broker, arhati, commission agent, del credere agent, or any other mercantile agent;

iii. an auctioneer who carries on the business of selling or auctioning goods belonging to any principal;

iv. Government;

v. any person who acts within the State as an agent of a dealer residing outside the State;

vi. a firm or a company or a body corporate, the principal office or headquarter whereof is situated outside the State, having a branch or office in the State;

vii. any person who carries on the business of transfer of the right to use any goods for any purpose;

viii. railway container contractor, transporter or any other carrier or a forwarding agent of goods;

ix. an owner or person-in-charge of a godown or warehouse who stores commercial goods.

x. a factor, broker, arhati, commission agent, del credere agent, or any other mercantile agent;

xi. an auctioneer who carries on the business of selling or auctioning goods belonging to any principal;

xii. Government;

xiii. any person who acts within the State as an agent of a dealer residing outside the State;

xiv. a firm or a company or a body corporate, the principal office or headquarters whereof is situated outside the State, having a branch or office in the State;

xv. any person who carries on the business of transfer of the right to use any goods for any purpose;

xvi. railway container contractor, transporter or any other carrier or a forwarding agent of goods;

xvii. an owner or person-in-charge of a godown or warehouse who stores commercial goods.

Section 2(m) of the Act defines the term "goods" as follows:

"goods means every kind of moveable property and includes all materials, commodities and articles involved in the execution of a works contract, and growing crops, grass, trees and things attached to, or fastened to anything permanently attached to the earth which, under the contract of sale, are agreed to be severed, but does not include newspapers, actionable claims, stocks, shares, securities or postal stationary sold by the Postal Department."

Section 2(h) of the Act defines the term "dealer" as follows:-

"Dealer" means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration..................."

To begin with, the learned senior counsel for the petitioner places reliance upon Swadeshi Cotton Mills Co. Limited Vs. Sales Tax Officer, AIR 1965 Alld. 86. In this case a division bench of this Court was called upon to decide a question relating to the petitioner company running a canteen in the Mill. The Court interpreted the words "sale", and "dealer" as then stood under the U.P. Sales Tax Act. The Court held that running of canteen by Mill for its employees may not be to make profit or gain but may only be to fulfil its statutory obligation or to provide for welfare of its workmen. The canteen is a step in the aid of petitioner's business. From this point of view, an ultimate profit motive is visible. It was held that the petitioner is exigible to tax under the U.P. Sales Tax Act. Along with the above case, the Court considered the nature of the charges paid by students for the food served to them in the dining hall by the University. A question arose whether the supply of such food stuff/Nasta by the University against levy of fee on the students is or is not price for the food stuff. The Court, relying upon a case--The University of Delhi and another Vs. Ram Nath and others, AIR 1963 SC 1873 held that the activity of providing meals to its resident students is such a minor subordinate and insignificant part that it would unreasonable to allow this work to lend business colour to the University so as to make an institution carrying on a business of buying and selling. Education in its true aspect is more a mission and a vocation rather than a profession or trade or business, however wide may be the connotation of the two letter words under the Sales Tax Act." In paragraph-8 of The Delhi University Justice Gajendragadkar proceeded to observe:

"It is true that like all educational institutions the University of Delhi employs subordinate staff and this subordinate staff does the work assigned to it; but in the main scheme of imparting education, this subordinate staff plays such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend its industrial colour to the principal activity of the University which is imparting education."

After the above quotation, the Court has held as follows:-

54. The learned counsel for the petitioner argues, and in my opinion not without force, that the activity of providing meals to its residential students is such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend a business colour to the University so as to make it an institution carrying on the business of buying and selling. The Supreme Court further observed in the case of the University of Delhi, AIR 1963 SC 1873:

"Education in its true aspect is more a mission and a vocation rather than a profession or trade or business, however wide may be the connotation of the two latter words under the Act."

55. The University dining-hall service cannot be compared with a hotel serving its guests. Arbuckle in his book "Student Personnel Services in Higher Education" at page 205 observes :

"There is general agreement that the institution is responsible for the physical, mental and emotional well-being of the student who lives on the campus twenty four hours a day. The college obviously has a greater responsibility to a dormitory student than a hotel has to one of its guests. If an institution of higher learning is interested in a complete education for its students, then it will accept the responsibility for the total living conditions that they experience during their stay on the campus."

"The aim of education is the creation of a well-educated, healthy young generation imbued with a rational progressive outlook on life." (at page 1876)

56. The dining-hall service is an integral part of the University for imparting education to the students. It is indissolubly blended with, and is an inseparable component of education of this University. I find it difficult to appreciate the respondent's argument that the dining hall service of the University should be separately treated and qua this activity the University should be treated as carrying on the business of buying or selling. In my opinion, the University is not a "dealer" as defined by the Safes Tax Act.

Sri Ravi Kant, learned senior counsel for the petitioner, on the strength of the above ruling, submitted that undoubtedly the petitioner University is imparting education in various disciplines at multiple levels. It is also engaged in providing the facility to students who are interested in doing research work. Looking to the vast and main activity of the University, the sale of forms to the students is only its nano part. He further places reliance upon the Commissioner of Sales Tax Vs. Sai Publication Fund, (2002) 4 SCC 57, a case under the Bombay Sales Tax Act. The respondent therein was a trust --Sai Publication Fund. The said trust was set up by the devotees of Saibaba of Shirdi for spreading his massage. The trust was getting published and was selling books, booklets, pamphlets,photos, stickers and other publications containing the massage of Saibaba. A dispute arose as to whether the turnover of such publication can be assessed to sales tax under the Bombay Sales Tax Act, 1959. The Apex Court examined the scheme of that Act, definitions of 'business', 'dealer' and 'person' as also the incidents of tax therein. The terms "business" and "dealer" were also as here similarly very widely worded there. The definition of business did not include profit motive as an essential condition for business. For the sake of convenience, the definitions of "business", "Dealer" and "person" which were up for consideration, are reproduced below:-

"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."

While interpreting the term "business" which includes any trade, commerce, or manufacture etc., the Court held that 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 the business, incidental or ancillary, activity is established. The relevant portion of paragraph 11 is reproduced below:-

11. 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."

Emphasis has been laid on the main activity of the person to fall within the definition of business. This has been clarified further by adding that the inclusion of incidental or ancillary activity in the definition of business presupposes the existence of trade, commerce etc.. A person to become a dealer, must carry on the business and, then only, he may also be deemed to be carrying on the business in respect of a transaction incidental or ancillary therefor.

Reverting to the definition of "dealer" as contained in the U.P. VAT Act, means who carries on whether regular or otherwise the business of buying and selling goods, directly or indirectly.................. . It could not be denied by the respondents either in the counter affidavit or during the arguments that the petitioner is established to impart education which is not a business. The argument is that while imparting education to the students, the petitioner has indulged in selling of printed material by way of forms to the students which brings him within the definition of "dealer" qua the sale transactions of these forms. The words "dealer" and "business" are undoubtedly very widely worded. Dealer includes any person who carries on the business regularly or otherwise. The contention of Shri Tripathi is that printing or selling of admission forms, on the own showing the petitioner, is annual feature. Even if it is not a regular feature, the said annual activity is covered within the meaning of words "regular or otherwise". Argument is that a solitary incidence of sale and purchase by a person who does not carry on the business of buying and selling, will make him fall within the definition of word "dealer".

It is difficult to agree with him. The intention of legislature does not appear to be so wide while defining the word "dealer". The business as defined under section 2(e) means any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce .......................... . The words "trade, commerce or manufacture" denote a course of action. It will not cover a solitary or isolatory instances. Sections 3, 6, 7 and 28 of the U.P. State Universities Act, 1973 are reproduced below:-

3. Incorporation of Universities.--(1) The Chancellor, the Vice-Chancellor and the members of the Executive Council, the Court and the Academic Council for the time being holding office as such in any University shall constitute a body corporate by the name of that University.

(2) Each University shall have perpetual succession and a common seal and shall sue and be sued by its name.

xx xx xx xx xx xx xx xx

6. University open to all classes and creed.--The University shall be open to all persons irrespective of class or creed, but nothing in this section shall be deemed to require the University to admit to any course of study a larger number of students than may be determined by the Ordinances:

Provided that nothing in this section shall be deemed to prevent the University from making special provisions for admission of students belong to 1[the Scheduled Castes, the Scheduled Tribes or Other Backward Classes of citizens].

7. Powers and duties of the University.-- The University shall have the following powers and duties, namely--

(1) to provide for instruction in such branches of learning as the University may think fit, and to make provision for research and for the advancement and dissemination of knowledge;

(2) to admit any college to the privileges of affiliation or recognition or to enlarge the privileges of any college already affiliated or recognised, as the case may be, or to withdraw or curtail any such privilege and to guide and control the work of affiliated and associated colleges;

(3) to institute degrees, diplomas and other academic distinctions;

(4) to hold examinations for, and to grant and confer degrees, diplomas and other academic distinctions to and on persons, who--

(a) have pursued a course of study in the University, a constituent college or an affiliated college, or associated college; or

(b) have carried on research in the University or in any institution recognized in that behalf by the University or independently, under conditions laid down in the Statutes and the Ordinances; or

(c) have pursued a course of study by correspondence whether residing within the area of the University or not, and have been registered by the University, subject to such conditions as may be laid down in the Statutes and Ordinances as external candidates; or xx xx xx xx xx xx (17) to do all such acts and things, whether incidental to the powers aforesaid or not, as may be requisite in order to further the objects of the University.

2[7-A. Additional powers and duties of certain University.--Upon being authorised by the State Government by notification under the Uttar Pradesh Homoeopathic Medicine Act, 1951 3[Doctor Bhimrao Ambedkar University, Agra or 4[Chhatrapati] Shahu Ji Maharaj University, Kanpur], as the case may be, shall--

(a) hold examinations for and grant diplomas in Homeopathy;

(b) take over the functions of holding of examinations for courses prescribed by the Board of Homoeopathic Medicine constituted under the said Act and granting diplomas and shall exercise and perform all the powers and functions of such Board under the said Act with respect to holding of such examination and granting of diplomas.

"28. Admission Committee.--

(1) There shall be an Admission Committee of the University, the constitution of which shall be such as may be provided for in the Ordinances, (2) The Admission Committee shall have the power to appoint such number of sub-Committee as it thinks fit.

(3) Subject to the superintendence of the Academic Council and to the provisions of sub section (5), the Admission Committee shall lay down the principles or norms governing the policy of admission to various courses of studies in the University and may also nominate a person or a sub-Committee as the admitting authority in respect of any course of study in an Institute or a constituent College maintained by the University.

(4) Subject to the provisions of Sub-section (5), the Committee may issue any direction as respects criteria or methods of admissions (including the number of students to be admitted) to constituent Colleges maintained by the State Government and affiliated or associated Colleges, and such directions shall be binding on such colleges.

(5) Notwithstanding anything contained in any other provision of this Act--

(a) reservation of seats of admission in any course of study in University, Institute, constituent College, affiliated College or associated College for the students belonging to the Scheduled Castes, Scheduled Tribes and Other Backward Classes of citizens may be made and regulated by such orders as the State Government may, by notification, make in that behalf:

Provided that reservation under this clause shall not exceed fifty per cent of the total number of seats in any course of study :

Provided further that reservation under this clause shall not apply in the case of an institution established and administered by minorities referred in Clause (1) of Article 30 of the Constitution :

Provided also that the reservation under this clause shall not apply the category of Other Backward Classes of citizen specified in Schedule II to the Uttar Pradesh Public Services (Reservation for Scheduled Castes, Scheduled Tribes and Other Backward Classes) Act, 1994--

(b) admission to the medical and engineering colleges and to course of instruction for degrees in education and Ayurvedic or Unani systems of medicine (including the number of students to be admitted) shall subject to Clause (a), be regulated by such orders) which if necessary may be with retrospective effect, but not effective prior to January 1, 1979) as the State Government may, by notification, make in that behalf :

Provided that no order regulating admission under this clause shall be inconsistent with the rights of minorities in the matter of establishing and administering educational institutions of their choice;

(c) in making an order under Clause (a), the State Government may direct that any person who wilfully acted in a manner intended to contravene, or defeat the purposes of the order shall be punishable with imprisonment for a term not exceeding three months or with the fine not exceeding one thousand rupees, or with both, as may be specified in the order.

(5-A) Every order made under Clause (a) of Sub-section (5) shall be laid, as soon as may be, before both. Houses of the State Legislature and the provisions of Sub-section (1) of Section 23-A of the Uttar Pradesh General Clauses Act, 1904 shall apply as they apply in respect of rules made by the State Government under any Uttar Pradesh Act.

(6) No student admitted to any College in contravention of the provisions of this section shall be permitted to take up any examination conducted by the University and the Vice-Chancellor shall have the power to cancel any admission made in such contravention."

Having noticed the scheme of the U.P. State Universities Act, the main activity of the petitioner is to impart education undoubtedly. In discharge of its duties and obligations, printing and sale of admission forms to the students does not make the activity of the petitioner as business activity or making him dealer within the meaning of Act. We find that in M/S Scholors Home Senior Secondary School Vs State Of Uttarakhand And Another, 2011 NTN (46)-229 the Uttaranchal High Court has considered the question of exigibility of sales Tax on boarding fee by the educational institutions from the students. The educational institution was not charging any separate amount or cost for food supplied to the students using the hostel facility. The mess was being run by the institution itself. The tax authorities sought to levy sales tax/VAT tax on the supply of food by institutions from the students using hostel facilities. After making an in depth analysis of the word "dealer", under the VAT Act which is similar to the U.P. VAT Act, it was held that the main activity of the petitioner is imparting education and is not business and supply of food stuff to the residential students which is incidental would not amount to business since the main activity of the petitioner could not be treated as a commerce or business. The relevant paragraph-33 is reproduced below:-

33. "In the light of the aforesaid, the main activity of the petitioner is imparting education and is not business. Any transaction, namely, supply of food stuff to its residential students which is incidental would not amount to 'business' since the main activity of the petitioner could not be treated as a commerce or a business. The incidental activity of supplying food stuff would not come within the meaning of the word 'business' as defined under Section 2(6) of the Act. Consequently, since no business is being carried out and there is no sale, the petitioner would not come within the meaning of the word 'dealer' as defined under the Act."

We see no reason to differ with the aforesaid proposition of law, which is based on correct reading of various judicial pronouncements of the Apex Court. The case on hand stands on a better footing in as much as in this facts situation the element of business i.e. motive on the part of the University to indulge in any business activity is totally lacking and statutorily impossible. It is a matter of mere convenience for students and University to get the forms printed for a price and not more than that.

Now, we may consider the decisions relied upon by the learned counsel for the respondents. The attention of the Court was invited to State of Gujrat Vs. Raipur Manufacturing Company Limited, AIR 1967 SC 1066. This was a case under the Bombay Sales Tax Act. The petitioner company had disposed of the miscellaneous and discarded old items. It also sold by-products obtained during the course of manufacturing. The Apex Court has held while interpreting the expression "business" -- to record 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. Whether a person carries on 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. By the use of the expression "profit motive" it is not intended that profit must in fact be earned. The relevant portion is reproduced below:-

The expression "business" though extensively used in taxing statutes, 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. Whether a person carries on 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. By the use of the expression "profit motive" it is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series, of transactions effected by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions : in others it would have to be in- ferred from a review of the circumstances attendant upon the transaction. For instance, where a person who purchases a commodity in bulk and sells it in retail it may be readily inferred that he has a profit motive in entering into the series of transactions of purchase and sale. A similar inference may be raised where a person manufactures finished goods from raw materials belonging to him or purchased by him, and sells them. But where a person comes to own in the course of his business of manufacturing or selling a commodity, some other commodity which is not a by-product or a subsidiary product of that business and he sells that commodity, cogent evidence that he has intention to carry on business of selling that commodity would be required. Where a person in the course of carrying on a business is required to dispose of what may be called his fixed assets or his discarded goods acquired in the course of the business, an inference that he desired to carry on the business of selling his machinery or fixed assets or discarded goods would not ordinarily arise. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist. But no test is decisive of the intention to carry on the business: in the light of all the circumstances an inference that a person desires to carry on the business of selling goods may be raised.

xx xx xx xx xx xx xx xx It is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behalf of the State that where a dealer with a -view to reduce the cost of production disposed of unserviceable articles used in the manufacture of goods and credits the price received in his accounts, he must be deemed to have a profit motive, for it would be uneconomical for the business to store unserviceable articles and to survive as an economic unit. But the question is of intention to carry on business of selling any particular class of goods. Undoubtedly from the frequency, volume, continuity and regularity of transactions carried on with a profit motive, an inference that it was intended to carry on business in the commodity may arise. But it does not arise merely because the price received by sale of discarded goods enters the accounts of the trader and may on an overall view enhance Ms total profit, or indirectly reduce the cost of production of goods in the business of selling of which he is engaged. An attempt to realize price by sale of surplus unserviceable or discarded goods does not necessarily lead to an inference that business is intended to be carried on in those goods, and the fact that unserviceable goods are sold and not stored so that badly needed space is available for the business of the assessee also does not lead to the inference that business is intended to be carried on in selling those goods."

After laying down the above proposition of law, it was held that sale of miscellaneous discarded old items will not amount to business activity. The aforesaid decision instead of advancing the case of the respondents supports the view which we have taken in the earlier part of this judgment. The test appears to be is -- to have the intention to carry on the business i.e. selling the admission forms in question. In this case, the petitioner was textile mill itself and therefore, the question of main activity as to whether it amounts to business or not was not in issue.

Then, reliance was placed on New Delhi Municipal Committee Vs. State of Punjab, AIR 1997 SC 2847 (part of paragraph-15 in particular). The relevant portion of the said paragraph reads as under:-

"We may pause here a while and explain why we are attaching such restricted meaning to the words "trade or business" in the proviso to Section 155 and in clause (2) of Article 289. Both the word import substantially the same idea though, ordinarily speaking, the expression "business" appears to be wider in its content. The expression, however, has no definite meaning; its meaning varies with the context and several other factors. See Board of Revenue v. A.M. Ansari [1976 (3) S.C.C.512] and State of Gujarat v. Raipur Manufacturing Company [1967 (1) S.C.R.618]. As observed by Lord Diplock in Town Investments Limited v. Department of Environment [1977 (1) All.E.R.813-H.L.], "the word `business' is an etymological chameleon; it suits its meaning to the context in which it is found. It is not a term of legal art and its dictionary meanings, as Lindley, C.J. pointed out in Rolls v. Miller embrace almost anything which is an occupation, as distinct from a pleasure - anything which is an occupation or a duty which requires attention is a business....'." Having regard to the context in which the words "trade or business" occur - whether in the proviso to Section 155 of the Government of Indian Act, 1935 or in clause (2) of Article 289 of our Constitution - they must be given, and we have given, a restricted meaning, the context being levy of tax by one unit of federal upon the income of the other unit, the manifold activities carried on by governments under out constitutional scheme, the necessity to maintain a balance between the Centre and the States and so on."

The controversy involved therein was entirely different. The decision was rendered in the context of Article 289 of the Constitution of India. The question was -- "Whether the properties of the States situated in Union Territory of Delhi are exempt from property taxes levied under the municipal enactments enforced in the Union Territory of Delhi. In that connection while giving meaning to Article 289 clause (2) and section 155 of the relevant Statute defining the words "land" and "buildings" the following observations were made:-

"Now what does clause (2) of Article 289 say? It may be noticed that the language of the first proviso to Section 155 and of clause (2) of Article 289 is practically identical [except for the two distinguishing features mentioned hereinbefore]. It would, therefore, suffice if we discuss the proviso. It says - omitting reference t Princely States - that where a trade or business of any kind is carried on by or on behalf of the government of a Province in any part of British India [outside that Province], nothing in sub-section (1) shall exempt that Government from any Federal taxation in respect of that trade of business or any operations connected therewith or any income arising in connection therewith or any property [i.e., lands and buildings] occupied for the purposes thereof. It is necessary to emphasis that the proviso to Section 155(1) which by its own force levied taxes upon the trading and business operations carried on by the Provincial governments did not either define the said expressions or specify which trading or business operations are subject to taxation. On this account. the proviso was not and could not be said to have been, ineffective or unenforceable. It was effective till January 26, 1950. Clause (2) of Article 289 also similarly does not define or specify - nor does it require that the law made thereunder should so define or specify. It cannot be said that unless the law made under and with reference to clause (2) specifies the particular trading or business operations to be taxed, it would not be a law within the meaning of clause (2). Coming back to the language of clause (2), a question is raised, why does the proviso speak of taxation in respect of trade or business when the main limb of sub-section (1) speaks only of taxes in respect of lands or buildings and income? Is the ambit of proviso wider than the main limb? Is it an independent provision of a substantive nature notwithstanding the label given to it as a proviso? Or is it only an exception? It is asked. We are, however, of the considered opinion that it is more important to give effect to the language of and the intention underlying the proviso than to find a label for it. It is clarificatory in nature without a doubt; it appears to be more indeed. It is concerned mainly with the "income" [of Provincial governments] referred to in the main limb of sub-section (1). It speaks of tax on the "lands or buildings" in that context alone, as we shall explain in the next paragraph. The idea underlying the proviso is to make it clear that the exemption of income of Provincial government operates only where the income is earned or received by it as a government; it will not avail where the income is earned or received by the Provincial government on account of or from any trade or business carried on by it - that is a trade or a business carried on with profit motive. In the light of the language of the proviso to Section 155 and clause (2) of Article 289, it is not possible to say that every activity carried on by the government is governmental activity. A distinction has to be made between governmental activity and trade and business carried on by the government, at least for the purpose of this clause. It is for this reason, we say, that unless an activity in the nature of trade and business is carried on with a profit motive, it would not be a trade or business contemplated by clause (2). For example, mere sale of government properties, immovable or movable, or granting of leases and licences in respect of its properties does not amount to carrying on trade or business. Only where a trade or business is carried on with a profit motive - or any property is used or occupied for the purpose of carrying on such trade of business - that the proviso [or for that matter clause (2) of Article 289] would be attracted. Where there is no profit motive involved in any activity carried on by the State government, it cannot be said to be carrying on a trade or business within the meaning of the proviso/clause (2), merely because some profit results from the activity."

We hardly see its any applicability to the controversy on hand. The term "business" or "dealer" as understood in the context of State Sales tax Laws was not up for consideration even remotely there. This case does not advance the case of the respondents any further.

Similarly, the decision in the case of Indian Express P. Ltd. Vs. State of Tamilnadu (1987) 67 STC 474 is of no help being besides the point. The issue was whether the sale of surplus copies of newspapers by weight as waste is sale of newspaper or not. Sale of newspaper is exempt from the Sales Tax. The question arose whether unsold surplus copies of newspapers disposed of by weight as waste paper amounts to as sale of newspapers or something else. In that connection, the following observations were made:-

"It is also clear from the material on the record that the transactions of sale of the surplus copies must be regarded as a business carried on by the appellant. It was an activity which he pursued regularly, and the motive was to earn a profit. It was incidental to the business carried on by the appellant of printing and publishing newspapers. In the course of carrying on the business of printing and publishing newspapers, it is inevitable that a number of copies should remain surplus and that they should, therefore, be sold as waste paper. The business of selling the surplus copies as waste paper attracted sale tax, having regard to the terms of clause (d) of section 2 of the Act, which defines the expression "business", as it stood at the relevant time.

In our opinion, the High Court is plainly right in maintaining the sales tax assessment on the turnover of the surplus copies of newspapers sold as waste paper."

The aforesaid quoted observation should be read and understood in the context of the controversy.

In District Controller of Stores Vs. Assistant Commercial Taxation Officer, 1976 UPTC 247 the controversy was whether the Northern Railway is liable to pay sales tax on the sales of unserviceable materials and scraps etc.. The Apex Court upheld the view of the High Court that the sales of unserviceable materials were exigible to tax in view of definition of term "dealer" as contained in section 2(f) of Rajasthan Sales Tax Act. The case is distinguishable as it proceeded on the footing that the Railway is engaged in transportation which is not so in the case of educational institution. It appears to be that there was no dispute that Railway is not a dealer within the meaning of a relevant statutory provision. The dispute was whether incidental or ancillary activities of such dealer which amounts to business are exigible to sales tax law or not. In that connection, it was held that in the definition of dealer and business, such a dealer will also be liable to pay the sales tax on the sale of unserviceable material and scrap. This case is, therefore, distinguishable. For the same reason, the other relied upon cases Karnatka Pawn Brokkers Assn. & Ors., Etc. Versus State of Karnataka & Ors., Etc., AIR 1999 SC 201; State of Tamil Nadur Vs. Binny Ltd., Madras, AIR 1980 SC 2038; Federal Bank Ltd. and Ords. Versus State of Kerala and Ors., JT 2007 (5) SC 91; Member Board of Revenue, West Bengal Versus Controller of Stores Eastern Railway, AIR 1999 SC 1468 and State of Orissa Versus M/s. Orissa Road Transport Co. Ltd. and Ords., AIR 1997 SC 3409 are distinguishable. Noticeably, in all these cases, the main activity of dealer was business activity. In the last case i.e. the State of Orissa Versus M/s. Orissa Road Transport Co. Ltd., scrap was sold and it was held that the sale of scraps certainly connected the business of respondents and turnover in respect of the said commodity is liable to tax. The relevant paragraph 11 is reproduced below:-

"It cannot be denied that the respondent is a business organisation whose activity is that of providing road transport. In the course of its carrying on of the said business some obsolete parts, spare parts etc. are not required by it. As a prudent business organisation the said items, which were obviously used or intended for use in its business, are sold when there is no requirement for them. We find it difficult to accept that such sales cannot even be regarded as occasional sales of a business nature which would make the respondent a casual dealer within the meaning of that expression occurring in Section 2[bb] of the said Act. In the case of State of Tamil Nadu Vs. Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Anr. [ (1973) 31 STC 426 ] this Court was concerned, inter alia, with the sale of scrap where the definition of the word business in the Madras General Sales Tax Act had done away with motive for making profit as being a relevant consideration in determining whether the assessee carried on business or not. Section 2(d) of the Madras Act was similar to the present definition in Section 2(b) of the Orissa Act and it included, the words "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".

Lastly, reliance was placed on Aswini Hospital Pvt. Ltd. Versus C.T.O., Thrissur and Others, 2013 NTN (51) 29, a decision by learned Single Judge of Kerala High Court in the context of Kerala Value Added Tax Act, 2003. It was a case of private hospital supplying medicines to patients also. The question which arose was whether such a hospital supplying medicines to patients is liable for registration under the relevant Statute/Sales Tax Law. The Kerala High Court held that the supply of medicines amounts to "sale" and hospital is a dealer. A close reading of the decision would show that the High Court held that the hospital is engaged in carrying on the business. It was so held in view of the wide definition of business contained in the relevant Statute. In this very case, the judgment of the Apex Court in the case of Sai Publication Fund (supra) has been referred. With regard to it the Court has observed as follows:-

"In (2002) 4 SCC 57 the question that arises for consideration before the Apex Court was as to whether the trust of Sai Publication Fund which was set up by some devotees of Saibaba can be held to the a "dealer". In respect of sale of books, booklets, pamphlets and other literature containing the message of Saibaba and the turnover can be assessed to tax under the Bombay Sales Tax Act, 1959.

From the above decisions it is clear that if the main activities of the assessee concerned were not business. In which case any business activity incidental or ancillary thereto which is infinitesimal or small part of the main activities cannot bring it within the scope of the term 'dealer'. In other words, the presumption will be that these connected incidental or ancillary activities of sales are not business in these connected incidental and ancillary sales will rest on the Department. It was also held that if the main activity is "non-business" and activity of buying and selling which forms part of an integral part of the non-business activity then also the party will not be a dealer."

The upshot of the above discussion is that if the main activity of the petitioner is business or not, is the decisive factor to answer the question--Whether the person is dealer for incidental or ancillary activity. If the main activity of a person is not business activity, then, such person will not be dealer for incidental or ancillary transaction. Imparting education is a mission. Right to education, in the context of Articles 45 , 41 means (a) every child/citizen of this country has a right to free education until he completes the age of fourteen years; and (b) if a child or citizen completes the age of 14 years the State shall make effective provision or securing the right to work and education within the limits of its economic capacity and development. In the Unni Krishnan, J.P. And Ors. Etc. Vs. Andhra Pradesh, (1993) 1 SCC 645, the Apex Court has laid down that a true democracy is one where education is universal, where people understand what is good for them and the nation and know how to govern themselves.

In ancient time, there were Gurukul Ashrams to impart education. An old Sanskrit adage states: "That is Education which leads to liberation" liberation from ignorance which shrouds the mind; liberation from superstition which paralyses effort, liberation from prejudices which bring the Vision of the Truth". The aims of education has been recognized by the Indian Courts from time to time. Education is perhaps most important function of State and Local Self Governments. It is unthinkable and beyond imagination to treat the imparting of education as business. The relationship in between teacher and one taught is not a business relation. The idea and purpose of imparting education is to develop personality of the students to carry the nation forward and in right direction.

Recently, the Noble Prize Winner Economist Amartya Sen while speaking on education has said that "Education converts cabbage into cauliflower."

Viewed as above, we are of the opinion that the petitioner is not a dealer within the meaning of section 2(h) of the Act, therefore, its activity of printing and selling of admission forms to the students does not amount to business within the meaning of section 2(e) of the Act. The petitioner being beyond the purview of the U.P. VAT Act could not be compelled to obtain registration under the said Act or to produce its account books before the respondents. The impugned notice and orders passed by the Authorities under the U.P. VAT Act are palpably illegal and without jurisdiction and cannot be allowed to stand.

In the result, the writ petition succeeds and is allowed in terms of the reliefs A to D as claimed in the writ petition.

No order as to costs.

(R.S. Ram (Maurya), J.) (Prakash Krishna, J.) Order Date :-02.04.2013 LBY

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