The purchase of raw materials and sale of manufactured cement by a research institute are not taxable under the Tamil Nadu General Sales Tax Act, 1959, as the activities are not in the nature of trade or commerce.

DR. A. S. ANAND, C.J.

These three tax revision petitions arising out of a common order passed by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, dated 16th May, 1981, had been preferred by the Revenue and are being disposed of in common by this order. The assessment years in question are 1977-78 and 1978-79. A brief reference to the facts is necessary to appreciate the controversy raised before us.

The assessee is an association called Cement Research Institute of India. The objects of the association are to promote research and other scientific works connected with the cement trade or industry of trades and industries allied thereto, as also to maintain laboratories, workshops and conduct experiments. It is, an institution initiated by the cement industry and supported by the Council of Scientific and Industrial Research of the Government of India. The organisation comes under the overall administrative control of the Government of India and is financed in equal proportion by the Government of India and its members. The assessee purchased raw materials like limestones, gypsum, literate, sand, etc., for their day-to-day research activities. There is no dispute that the assessee consumed the raw materials in the course of their research and the purchase of the raw materials was only for the object of consuming them for research activities. The cement manufactured was disposed of as such to examine the improvement in the productivity and quality. The assessee also undertook testing and analysis of the samples and assisted the member-industries in the design and layout of their laboratories as well as in the selection of instruments and apparatus. The assessing authorities considered that the purchases of the raw materials and the sales effected by the organisation were in the course of normal trade activities. Before the Tribunal, the following three questions were considered :1. Whether the appellants are dealers doing business and whether the transactions of the appellants are in the course of business ?

2. Whether the assessment made under section 7-A. On the purchase turnover is eligible to tax or not ? and

3. Whether the enhancement petition of the learned State Representative for bringing in the turnover of Rs. 80, 781.33 to tax under section 7-A in the assessment for 1978-79 is allowable ?

The Tribunal after a detailed discussion and taking notice of the nature of the activities of the assessee came to the conclusion that there was no commercial activity at all carried on by the assessee in respect of the cement manufactured by consuming the raw materials purchased. The Tribunal found that an analysis of the transaction went to establish that the same did not result in any taxable event under the sales tax law. The Tribunal relying upon the law laid down by this court in Deputy Commissioner (C.T.) v. South India Textile Research Association 1978 (41) STC 197 found in favour of the assessee on all the points.

The learned Government Advocate appearing for the Revenue submitted that the assessee is a dealer and his activity would be covered by section2(d) of the Tamil Nadu General Sales Tax Act, 1959. It was submitted that though the assessee consumed the raw materials in the course of their research, the sale of the product of research was in the nature of a commercial activity of the assessees. It was also submitted that since the assessee had charged excise duty in their bills and also paid excise duties on the manufactured cement, it, therefore, was an additional evidence to hold that the assessees are dealers in cement. So far as the judgment reported in Deputy Commissioner (C.T.) v. South India Textile Research Association 1978 (41) STC 197 (Mad.) is concerned, it was not disputed that the judgment was applicable to the case, but it was pleaded that a special leave petition had been preferred in the Supreme Court and is pending disposal.In Deputy Commissioner (C.T.) v. South India Text