1964 (8) TMI 59 - HC - VAT and Sales Tax

High Court rules spare parts sales subject to sales tax. Director-General not a dealer. Assessees liable.

The High Court of Madras upheld the assessment of sales tax on the turnover from the sale of spare parts of motor vehicles by the assessees. The court ... - Issues:1. Whether the assessees are liable to pay sales tax on the turnover from the sale of spare parts of motor vehicles.2. Whether the Director-General of Supplies and Disposals can be considered a dealer under the Madras General Sales Tax Act.3. Whether the assessees are entitled to exemption as subsequent dealers.Analysis:The High Court of Madras heard a revision case against the Sales Tax Appellate Tribunal's order regarding the liability of assessees, who are dealers in motor vehicles and spare parts, to pay sales tax on the turnover from the sale of spare parts. The assessees purchased motor vehicles at Avadi within the Madras State, broke them into parts, and sold them. The department assessed them to sales tax, treating them as dealers effecting the first sale of the spare parts. The assessees contended that the first seller was the Director-General of Supplies and Disposals. Both the Assessing Authority and the Tribunal rejected this contention, holding the assessees liable to be taxed on the disputed turnover amounting to Rs. 1,51,589.The counsel for the assessees argued that the Director-General of Supplies and Disposals should not be considered a dealer under the Madras Sales Tax Act based on the Supreme Court's definition of 'business.' The onus was on the assessees to prove that they were only subsequent dealers entitled to exemption. The court analyzed the nature of the Director-General's activities and concluded that there was no profit-making enterprise involved. The Director-General assisted the Military Department in selling unusable or condemned motor vehicles without engaging in a profit-making activity. The court found that neither the Military Department nor the Director-General of Supplies and Disposals could be considered engaged in a business activity regarding the sales of these vehicles.Therefore, the court dismissed the revision case, upholding the assessment of sales tax on the disputed turnover. The court found that the assessees were rightly assessed to tax, as the Director-General of Supplies and Disposals did not qualify as a dealer under the Madras Sales Tax Act. The judgment concluded with the dismissal of the petition, with no order as to costs.