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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and R. J. Bhave, J.
MADHYA PRADESH ELECTRICITY BOARD - Appellant
Versus
COMMISSIONER OF SALES TAX - Respondents
Misc. Civil Case 96 Of 1967
Decided On : 11/16/1967
It is erroneous to say that the Madhya Pradesh Electricity Board, constituted under the Electricity (Supply) Act, 1948, carries on the activity of distribution and supply of electricity on "no profit, no loss" basis. The Board carries on the business of selling and supplying electricity as a trading operation with a view to earn profits. 1966 RN 503 REVERSED. [Para4]
(2) Sales Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (g) - Sales Tax Act, 1947 (C.P. and Berar) - S. 2 (d) - goods - electrical energy is not 'goods' - Sale of Goods Act. 1930 –S. 2 (7).
(3) Sale of Goods Act, 1930 - S. 2 (7) – goods - electrical energy - is not goods.
In construing the definition of 'goods' and 'sale', as given in the Sales Tax Acts, it must be remembered that for the purposes of those Acts 'sales of goods' has the same meaning which it has in the Sale of Goods Act, 1930. A.I.R. 1950 SC 560 and 1962 RN 472 relied on.
The Sale of Goods Act, 1930, is not applicable to electrical energy. AIR 1936 Cal. 753 relied on. [Para 6]
Electricity does not fall within the meaning of the definition of 'goods' given in the Sales Tax Acts of 1947 and 1958, 46 CLR 572 referred to. (1963) 14 STC 600 dissented from. [Paras 7 & 8]
(4) Sales Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (d) - Sales Tax Act 1947 (C.P. and Berar) - S. 2(c) – dealer - selling electricity which is not 'goods' - is not a dealer.
Electricity does not fall within the definition of 'goods' given in the Sales Tax Acts of 1947 and 1958, and when the M.P. Electricity Board distributes and supplies electrical energy there is no sale of electricity as goods. That being so, the Board cannot be held to be a 'dealer' as defined in section 2 (c) of the 1947 - Act of section 2 (d) of the 1958 - Act, in respect of its activity of generation, distribution, sale and supply of electrical energy. [Para 7]
(5) Sale Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (d) - Sales Tax Act, 1947 (C.P. and Berar) - S.2 (c) - dealer - should carry on the business with a view to earn profit - but actual profit not necessary.
It is no doubt true that the expression "carries on the business of selling or supplying goods" occurring in the definition of 'dealer' given in the Sales Tax Acts of 1947 and 1958 means carrying on of continuous trading operations with a view to earn profits. The test is the object with which the activity is carried on and not whether the person carrying on the activity actually gets profits or loss. 1961 RN 57 relied on. [Para 4]
(6) Sales Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (d) – dealer - production and sale of subsidiary product - assessee when a dealer in respect of the subsidiary product - volume, frequency, continuity and regularity of the transaction to be seen-coal-ash produced by Electricity Board.
The question whether a person carries on the 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 product motive. It is not necessary that profits must, in fact, be earned when a subsidiary product is turned out in the factory of the assessee and that product is regularly and continuously sold from time to time, the intention to carryon business in such product may be reasonably attributed to the assessee. (1967) 19 STC 1 relied on.
The assessee Board was a dealer In respect of coal-ash produced and sold by it. [Para 9]
(7) Sale of Goods Act, 1930 - S. 2 (7) – goods – Steam - is goods (8) Sales Tax - General Sales Tax Act, 1958 (M.P.) - 2 (g) - good steam - is goods.
Steam falls within the definition of 'goods' given in the Sale of Goods Act. 1930 and the Sales Tax Acts of 1947 and 1958. (1957) 8 STC 61 relied on. [Para 11]
(9) Sales Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (d) – dealer - steam supplied by Electricity Board on no profit basis - no sales tax leviable.
The contract between the assessee - Board and the Nepa Mills showed that the assessee supplied surplus steam on no profit basis and steam in excess of its requirements was not produced with a view to undertaking the activity of selling it with a profit motive.
Held: The assessee was not a dealer in respect of the steam and the supply of steam was not taxable. [Para 10]
(10) Sales Tax - General Sales Tax Act, 1958 (M.P.) - S. 2 (d) - supply of tender forms to contractors - not a sale.
If tenders have to be given in certain prescribed forms and according to certain prescribed specifications, then it cannot be held that by supplying specifications and tender forms at a price to the prospective contractors the assesse - Board carries on the business of selling specification and tender forms. [Para 11]
(11) Sales Tax - General Sales Tax Act, 1958 (M.P.) - Ss. 7 and 2 (d) - assessee not a dealer in respect of the goods - no purchase tax leviable.
The provisions of section 7 of the Act apply only when taxable goods are purchased by a registered dealer free of taxes. Where the assessee is not a dealer in respect of any goods, then the assessee is clearly not entitled to purchase any taxable goods for the aforesaid activity without paying any sales tax to the selling dealer. The question therefore of the assesse being liable to purchase tax under section 7 of the Act cannot arise. [Para 12]
( 1 ) THIS order will also govern the disposal of Miscellaneous Civil Cases Nos. 97 to 103, all of 1967.
( 2 ) THESE eight Miscellaneous Civil Cases are all references under Section 44 (1) of the Madhya Pradesh General Sales Tax Act, 1958, (hereinafter called the Act), and arise out of proceedings initiated against the Madhya Pradesh Electricity Board, jabal-pur, for assessment to sales tax and purchase tax for the periods from 1957-58 to 1964-65. The common questions in these references, which have been referred to this Court for decision by the Sales Tax Tribunal (Board of Revenue), are :--
"1 On the facts and circumstances of the case whether or not the madhya Pra-desh Electricity Board is a dealer within the meaning of section 2 (c) of the C. P. and Berar Sales Tax Act, and Section 2 (d) of the madhya Pradesh General Sales Tax Act, 1958, in respect of its activity of generation, distribution, sale and supply of electrical energy? 2. On the facts and circumstances of the case, whether or not the turnover re- presenting the sale of coal-ash is liable to be assessed to sales tax?
3. On the facts and circumstances of the case, whether or not steam is saleable goods and if they are saleable goods is the turnover representing the supply thereof liable to be assessed to sales tax in the hands of the assessee? 4. On the facts and circumstances of the case, whether or not the inclusion of the turnover arising out of the sale of specification and tender forms in the taxable turnover in the different periods was legal and proper? 5. On the facts and circumstances of the case, whether or not purchase of taxable goods from unregistered dealers for use in activities not directly concerned with the main business activity of the assessee namely generating, distributing and supplying of electricity is liable for purchase tax?"
( 3 ) THE Material facts are that the assessee the Madhya Pradesh Electricity Board, is a body constituted under Section 5 of the Electricity (Supply) Act, 1948. It is charged under Section 18 of that Act with the general duty of promoting, the coordinated development of the generation, supply and distribution of electricity within the State in the most efficient and economical manner. In the assessment years the assessee-Board sold, supplied and distributed electricity to various consumers. It also sold coal-ash, a waste product: and supplied steam to Nepa mills of Burhanpur. The assessee also supplied on payment specification and tender forms to persons intending to give tenders for the various works undertaken by the Board. In the assessment years, the assessee "purchased Gitti, murram, sand etc, from unregistered dealers and consumed them in the manufacture of other goods. " the assessment for the period from. 1st April 1957 to 31st March 1959 is governed by the C. P. and Berar Sales Tax Act, 1947; the assessment for the remaining period is governed by the M. P. General Sales Tax Act, 1958. No sales tax is payable in respect of sale of electrical energy under Section 6 of the 1947 act, read with item No. 29 of Schedule II to that Act. So also, under the Act of 1958 sale of electrical energy is exempt from sales tax under Section 10, read with item No. 13 of the Schedule to the Act. The turnover of the sale of electrical energy is, however, taken into account for determining the gross turnover. The assistant Commissioner of Sales Tax, Jabal-pur, assessed the Board to sales tax on its turnover of sale of coal-ash and tender and specification forms, and the supply of steam to Nepa Mills. He also imposed on the Board purchase-tax on gitti, Murram, sand etc. , purchased from unregistered dealers and consumed in the manufacture of other goods. The assessee was allowed deduction for the sales of tax-free goods. This assessment was upheld in appeal by the Deputy commissioner of Sales Tax, Jabal-pur. In second appeal, which the assessee then preferred, the Sales Tax Tribunal took the view that the assessee is no
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