1986 (8) TMI 417 - SC - VAT and Sales Tax

Non-profit motive exempts Govt Medical Store Depot from 'dealer' status under Punjab Sales Tax Act. Profit motive key.

Government Medical Store Depot, Karnal Versus State of Haryana and Others

Government Medical Store Depot, Karnal Versus State of Haryana and Others - [1986] 63 STC 198 (SC), 1986 AIR 1902, 1986 (3) SCR 450, 1986 (3) SCC 669, ... Issues:1. Determination of whether the appellant qualifies as a 'dealer' under the Punjab General Sales Tax Act.2. Interpretation of the definition of 'dealer' under the Punjab General Sales Tax Act and the Haryana General Sales Tax Act.3. Applicability of the definitions of 'dealer' under the respective Acts to the assessment years in question.4. Impact of the repeal of the Punjab General Sales Tax Act by the Haryana General Sales Tax Act on the assessment proceedings.Analysis:The judgment by the Supreme Court of India, delivered by Justice R.S. Pathak, addressed the appeals challenging the assessment of sales tax against the Government Medical Store Depot. The appellant argued that it should not be considered a 'dealer' under the Punjab General Sales Tax Act due to its non-profit motive. The Court examined the definitions of 'dealer' under the Punjab Act and the Haryana Act, emphasizing that the absence of a profit motive was irrelevant under the Haryana Act but not explicitly stated in the Punjab Act's definition. The Court clarified that the assessment years in question fell under the Punjab Act's jurisdiction, requiring reference to its definition of 'dealer' (para. 8-10).The Court highlighted the legislative history, noting that the Haryana Act's definition of 'dealer' was specific to that Act and did not apply to the assessment years covered by the appeals. The Court emphasized that the liability incurred by the appellant was under the Punjab Act, necessitating adherence to its definition of 'dealer' for determining tax liability. The Court distinguished the relevance of profit motive in the business for identifying a 'dealer' under the Punjab Act (para. 11-13).Referring to a previous case involving a similar issue, the Court reiterated the significance of establishing a profit motive for categorizing an entity as a 'dealer' liable to tax. The Court emphasized that the burden rests on the revenue to prove the presence of a profit motive in the transactions. Consequently, the Court allowed the appeals, set aside the High Court's judgment, and quashed the assessment proceedings without remanding for fresh assessments (para. 14-15).In conclusion, the Supreme Court allowed the appeals, overturning the High Court's decision and annulling the assessment proceedings. The Court emphasized the necessity of proving a profit motive for tax liability determination and clarified the applicability of the Punjab Act's definition of 'dealer' to the assessment years in question. No costs were awarded in the circumstances of the case (para. 16).