Surplus raw material sales do not create dealer status absent trading intention or business activity in sale.

Surplus cotton purchased for use in manufacturing and later sold because of excess stock and blocked capital did not, on these facts, amount to carrying on a business of selling cotton under section 2(6) of the Bombay Sales Tax Act, 1953. The Supreme Court treated the memorandum power to buy and sell cotton and prior isolated sales as relevant but not decisive, and held that the department failed to show a trading intention or profit motive. The impugned sales were therefore incidental disposals of raw material, not business sales, and the respondents were not dealers in cotton in respect of those sales.

---

---

Issues: Whether the sale of surplus cotton by a cotton textile manufacturer constituted carrying on the business of selling cotton so as to make it a dealer in cotton under section 2(6) of the Bombay Sales Tax Act, 1953.

Analysis: The respondents purchased cotton for use in their manufacturing business. The sale of 411 bales occurred because the earlier-arriving consignment created surplus stock and locking up of capital, not because the cotton had been acquired with an intention to trade in it. The existence of a power in the memorandum to buy and sell cotton, and prior isolated sales, were only relevant circumstances and were not decisive. The material question was whether the sales showed an intention to carry on a business of selling cotton or were merely incidental disposals of surplus raw material. On the facts, the department did not establish any offsetting circumstance showing a trading intention or profit motive.

Conclusion: The respondents were not dealers in cotton in respect of the impugned sales, and the sales were not taxable as business sales.

Ratio Decidendi: Disposal of surplus raw material purchased for use in manufacturing does not amount to carrying on the business of selling such material unless the surrounding circumstances show a trading intention or a business activity incidental to sale.

---