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2017 Supreme(Del) 3883
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, PRATHIBA M. SINGH, JJ.
AIR INDIA LTD. - Petitioner
Versus
COMMISSIONER OF SALES TAX - Respondent
ST.REF. 4 OF 2004, 1-3 OF 2015
Decided On : 12-09-2017
For the Petitioner:Mr. Mukul Gupta, Sr. Advocate with Mr.Tushar Gupta and Mr.Vibhor Garg, Advocates
For the Respondent:Mr. Sanjoy Ghose, ASC for GNCTD with Mr.Urvi Mohan, Mr.Rhishabh Jetley, Advocates.
The dominant activity test is a relevant criterion for determining whether certain sales constitute 'business' under the Delhi Sales Tax Act, 1975.
Headnote:
Sales Tax - Liability of Air India Ltd. - Delhi Sales Tax Act, 1975 - Sections 2(c) and 2(e)
Fact of the Case:
Air India Ltd. challenged the assessment of sales tax on the sales of scrap, depleted parts, and unused aircraft. The Tribunal upheld the assessment, leading to appeals before the Court. The main contention was whether the sales were incidental to its main activity of civil aviation and hence not liable to sales tax.
Finding of the Court:
The Court found that the predominant activity of the Petitioner was civil aviation, and the sale of scrap and old aircraft was only ancillary to it. The Court referred the case to a larger bench for reconsideration, as the dominant activity test had not been applied in the context of air transport before.
Issues: The main issue was whether the sale of unserviceable aircraft and scrap by Air India Ltd. was amenable to Sales Tax under the Delhi Sales Tax Act, 1975.
Ratio Decidendi: The Court's decision was influenced by the dominant activity test and the need for reconsideration of the judgment in Commissioner of Sales Tax vs. DTC in the context of air transport.
Final Decision: The Court referred the case to a larger bench for a decision on whether the sale of unserviceable aircraft and scrap by Air India Ltd. was amenable to Sales Tax under the provisions of the Delhi Sales Tax Act, 1975.
1. The Petitioner, Air India Ltd. (hereafter ‘Air India’) is involved in offering air transportation services. As part of running its business, it sells scrap, depleted parts and sometimes even out-dated or unused aircraft. The question that arises is whether it is liable to pay sales tax on such sales, under the Delhi Sales Tax Act, 1975 (‘DST Act’).
2. The judgment of this Court in Commissioner of Sales Tax vs. DTC, 1996 III AD (Delhi) 462 (hereafter ‘DTC’) is heavily relied upon by the Petitioner to submit that the Petitioner's services are no different from that of the Delhi Transport Corporation (‘DTC’) and hence it is not liable to pay sales tax. The Respondent relies upon several judgments of various High Courts and the Supreme Court, passed in relation to the Railways to argue that the Petitioner is liable to pay sales tax on the sales effected by it.
3. Initially the Petitioner had challenged the assessment made for Assessment Year (‘AY’) 1994-95 which resulted in ST. Ref. 4/2004. Thereafter the Petitioner challenged the assessments made for AYs 1995-96, 1996-97 and 1997-98 which resulted in ST. Ref. 1/2015, ST. Ref. 2/2015 and ST. Ref. 3/2015.
Brief Facts
4. The Petitioner is engaged in the services of civil aviation including the running of aircraft, ferrying of passengers and goods through air routes in both the domestic and international sectors. Till 1974, the Petitioner was registered with the Sales Tax Authorities as a dealer only in respect of its catering business and thereafter, only in relation to providing canteen facilities to its staff. The Respondents sought to re-assess the Petitioner’s returns on account of sales made by it in respect of unserviceable (rejected) air craft and unserviceable stores and spare parts arising in the course of its main activity, namely -civil aviation.
AY 1994-95
5. Re-assessments were sought to be made by the Department in respect of the sales activity of the Petitioner in AY 1994-95 and thereafter in AYs 1995-96, 1996-97 and 1997-98. The assessment proceedings finally resulted in appeals before the Appellate Tribunal, Sales Tax, Delhi (hereinafter referred to as ‘the Tribunal’), which upheld the assessment.
6. Before the Tribunal, the contention of the Petitioner was that its main activity is of running the aircraft and providing services of carriage of passengers and goods, which does not constitute sale of goods in Delhi. Hence it was not amenable to sales tax. According to the Petitioner, the sales of spare parts etc. and scrap, which was incidental and ancillary to its main activity, would also therefore not be amenable to sales tax. The Petitioner contended that it was registered for a limited activity and sale of used aircraft and scrap being not connected with the activity for which it was registered i.e. running of canteens, was not amenable to sales tax.
7. The Tribunal in its order dated 13th January, 2003, upheld the assessments for the AY 1994-95 and observed as under:
“The main objects of the appellant company leave no doubt as to the appellant's business as airline as well as to buy, sell and deal in aircrafts etc. The appellant’s case, to our mind, is quite different from DTC and AP Road Transport Corporation relied upon by the appellant.”
8. Thus, according to the Tribunal, the case of the Petitioner is different from the judgment in DTC (supra) and the Andhra Pradesh State Road Transport Corporation, Hyderabad v. The Commercial Tax Officer, Hyderabad – III [1971] 27 STC 42 (hereafter ‘AP Road Transport Corporation’). The Tribunal also held that the said transactions of sales are incidental and ancillary to or in connection with the Petitioner's 'business' as an airline as established in DTC (supra) and AP Road Transport Corporation (supra). The Tribunal concluded that the Petitioner is a dealer `qua the sale of old aircrafts/scraps’.
9. The Tribunal, on an application by the Petitioner, by order dated 21st May, 2003 referred the following questions to this Cou
