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1995 Supreme(Bom) 78
IN THE HIGH COURT OF BOMBAY
B.P.Saraf, D.K.Trivedi, JJ.
CONTROLLER OF STORES, CENTRAL RAILWAY
Versus
COMMISSIONER OF SALES TAX, MAHARASHTRA STATE, BOMBAY.
Sales Tax Reference No. 5 of 1993
Decided On: Decided On : 07-02-1995
P. V. Surte, for the applicant.
N. T. Saraf, for the respondent.
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.
Headnote:
BOMBAY SALES TAX ACT, 1959 - SECTION 2(11), 2(5A) - DEALER - RAILWAY ADMINISTRATION - WHETHER A DEALER - SALE OF UNSERVICEABLE MATERIALS AND SCRAP-IRON BY RAILWAYS - WHETHER TAXABLE.
Fact of the Case:
The assessee, Controller of Stores, Central Railway, Bombay, was assessed to sales tax under the Bombay Sales Tax Act, 1959, on the sales turnover of goods sold by public auction and canteen sales made by it during the period April 1, 1984 to March 31, 1985. The assessee contended that it was not a dealer within the meaning of section 2(11) of the Act and had been wrongly saddled with the tax liability.
Finding of the Court:
The court held that the assessee was 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.
Issues: Whether the assessee, Controller of Stores, Central Railway, Bombay, was a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959.
Ratio Decidendi: The court relied on the decision of the Supreme Court in District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423, where it was held 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.
Final Decision: The court answered the question referred to it in the affirmative and in favour of the Revenue.
The judgment of the Court was delivered by
DR. B. P. SARAF, J. - 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 s
