2015 Supreme(SC) 30

SUPREME COURT OF INDIA
H.L. DATTU, CJI., S.A. BOBDE, J.
ASSITANT COMMISSIONER, ERNAKULAM – PETITIONERS
VERSUS
HINDUSTAN URBAN INFRASTRUCTURE LTD. AND ORS. – RESPONDENTS
CIVIL APPEAL NOS. 354-355 OF 2015 (SPECIAL LEAVE PETITION (C) NOS.7939-7940 OF 2004)
Decided On : 13-01-2015

IMPORTANT POINTS
Terms business and dealer in the Kerala Sales Tax Act have inclusive definitions.
“Carrying on business” cannot be restricted only to buying and selling.
Company in liquidation, whose assets are sold by way of an auction, would be a “dealer”.
Auction sale of machinery of Company under liquidation would be exigible to tax u/s 5(1) of Act 1963.
Official Liquidator would be required to pay the tax payable on the sale of the assets of the company in liquidation.

Headnote:(a) Kerala General Sales Tax Act, 1963 – Section 2(vi) and (viii) and (viii)(f)(1) – Business and dealer – Term “business” includes both incidental and ancillary transactions – Profit motive is not an essential component – Term “dealer” includes any person carrying on business of buying, selling, supply or distribution of goods, whether directly or otherwise – All modes of payment included – Also includes casual trader, non-resident dealer, commission agent, broker, auctioneer and other mercantile agents – Section 2(viii)(f)(1) expressly includes as a “dealer”, a person who whether in the course of business or not transfers any goods, whether in the pursuance of a contract or not, for cash or deferred payment. (Para 26)

       (b) Kerala General Sales Tax Act, 1963 – Section 2(viii) – “Carrying on business” – Has to be construed widely – Cannot be restricted only to buying and selling. (Para 32)

       (c) Kerala General Sales Tax Act, 1963 – Section 2(viii)(f)((1) – Dealer – Definition is inclusive – Scope not restricted as perceived by common parlance – “Dealer” would include persons involved in carrying on any business or trading activity, such as the sale of machinery as instantly – Company in liquidation, whose assets are sold by way of an auction, would be a “dealer”. (Para 35, 43)

       (1973) 1 SCC 46; (2003) 3 SCC 239; (1989) 1 SCC 636; (1975) 4 SCC 745; (2004) 7 SCC 195; 1985 Supp SCC 280; (1997) 3 SCC 410 – Relied upon

       (d) Kerala General Sales Tax Act, 1963 – Section 5(1) r/w First Schedule – Auction sale of machinery of Company under liquidation – Liable to sales tax at the point of first sale – Transaction in question instantly – Exigible to tax u/s 5(1) – Therefore section 5A does not apply. (Para 45, 46)

       (e) Companies Act, 1956 – Section 457(3) r/w Rule 232, Companies Rules 1959 – Official Liquidator – Derives its authority from the Act – Acts on behalf of the company in liquidation – Is appointed by and is under the control and supervision of the Court while discharging his duties. (Para 54)

       (1969) 3 SCC 537; AIR 1966 SC 1481; (2008) 14 SCC 17 – Relied upon

       (1980) 1 All ER 117; (1975) 2 All ER 537 – Referred

       (f) Companies Act, 1956 – Section 457 – Official liquidator – Akin to agent for winding up of Company – He steps into shoes of Directors – All powers and functions for carrying on the business of the company vest with official liquidator. (Para 56)

       (g) Kerala General Sales Tax Act, 1963 – Section 2(viii)(f) and 5 r/w Rule 54, Kerala General Sales Tax Rules, 1963 – Official liquidator stepping into shoes of the Company under liquidation – Conduct of auction sale involving transfer of goods – Falls within section 2(viii)(f) – Since Company under liquidation is a dealer, liable to pay tax – Therefore liability to pay sales tax would be on Official Liquidator in the same manner as the Company in liquidation – Official Liquidator would be required to pay the tax payable on the sale of the assets of the company in liquidation. (Para 59, 61, 62)

       (1980) 1 All ER 117 – Referred

       Facts of the case:

       The issue arising in the these appeals is whether an “Official Liquidator” is a “dealer” within the meaning of section 2(viii) of the Kerala General Sales Tax Act, 1963, and therefore would be required to collect sales tax in respect of the sales effected by him pursuant to winding up proceedings of a company in liquidation.

       High Court of Kerala concluded that the Official Liquidator is not a “dealer” under the Act, 1963. However the High Court has held that the machinery purchased in the auction sale conducted by the Official Liquidator is liable to be taxed under the Act, 1963. The Court also accepted a fresh plea raised by the appellant that the auction purchaser would be liable to pay purchase tax under section 5A of the Act, 1963.

       Finding of the Court:

       Official Liquidator would be required to pay the tax payable on the sale of the assets of the company in liquidation.

       Result: Appeals allowed.