( 1. ) THIS is a reference under Section 44 (1) of the Madhya Pradesh General Sales Tax Act, 1958, by the Board of Revenue, Madhya Pradesh, at the instance of the Commissioner of Sales Tax, M. P. , referring to the court the following question for its opinion, namely :

Whether, in the facts and circumstances of the case, the sale price of the Ambassador car should be included in the taxable turnover of the assessee? (The car was purchased for office use after full payment of Central sales tax, namely, 10 per cent.)

( 2. ) THE assessee, M/s. Project Automobiles, Bhilai, is a distributor of Ambassador cars and is a registered dealer in automobiles and their accessories. The assessee purchased one Ambassador car for its office use after payment of full Central sales tax at 10 per cent and later on sold it for Rs. 10,500. The assessees contention was that this was a casual sale, not connected with its business. The Assistant Commissioner of Sales Tax, Raipur, as well as the Deputy Commissioner of Sales Tax, Raipur, in the first appeal, held the sale of the office car to be taxable on the ground that the sale of the car was a transaction in connection with the assessees business essentially, when it was a dealer in motor cars. In second appeal, the Board of Revenue held that this was not a sale that was taxable in the hands of the assessee.

( 3. ) IN accepting the assessees contention, the Board of Revenue observed: It seems that in Clause (ii) of the definition of business, the connection contemplated is proximate and not remote. Naturally there may be scope for legitimate difference of opinion as to where to draw the dividing line. Compared to the instances cited above in this paragraph (vegetables and canteen), the sale of used materials or discarded assets has a closer connection with the main business. But even in this, if a sugar factory disposed of old furniture of its office, the connection with the business is not so close, as the disposal of, say, a truck regularly used in the transport of raw materials, waste products or the manufactured product. The statement of objects and reasons of the amending Act No. 16 of 1966 refers to the decisions of some of the High Courts that transactions of sale which are only incidental or ancillary to the main business of the dealer cannot be assessed to tax. No particular ruling has been mentioned as having occasioned the amendment. The sale of discarded assets has also not been specifically mentioned. In the Supreme Court ruling in the case of State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 S. T. C. 1 (S. C.), it is stated that waste caustic liquor may be regarded as a by-product or a Subsidiary product in the course of manufacture and the sale thereof is incidental to the business of the company and the turnover in respect of both kolsi and waste caustic liquor would be liable to sales tax. In the same judgment it is stated that where a person in the course of carrying on a business is required to dispose of what may be called his fixed assets or his discarded goods acquired in the course of the business, an inference that he desired to carry on the business of selling his fixed assets or discarded goods would not ordinarily arise. Then it concludes saying :

In the light of the above discussion, I think the sale of an Ambassador car by Project Automobiles, Bhilai, should not be liable to sales tax. It is true that the business of Project Automobiles, Bhilai, is to sell Hindustan Ambassador cars. But car for office use may be purchased by any business house, whether the business is of selling cars or anything else. If a dealer in the car business were to purchase cars purporting to be for office use and sell them again and again with a view to extra profit or to avoid the normal priority of allocation or due to any other move, the frequency of such transactions might legitimately lead to the inference that they are in fact a part of the normal business. But in this cas