Dealer status and compulsory auction sale under sales tax law failed for lack of business continuity and mutual assent.

A single accidental discovery and isolated sale of a diamond did not amount to carrying on business under section 2(d) of the M.P. General Sales Tax Act, 1958, because dealer status requires continuity and an organised profit-making trading activity; the assessee was therefore not a dealer. A compulsory auction sale under the mining rules was not a sale for sales tax purposes, because a legal sale requires mutual assent and volition, including choice of purchaser and price; the assessee had no such freedom. On both grounds, the sales tax demand could not be sustained.

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Issues: (i) Whether a person who discovers and sells a diamond in a single isolated transaction can be treated as a dealer carrying on the business of selling goods under section 2(d) of the M.P. General Sales Tax Act, 1958. (ii) Whether the compulsory auction sale of a diamond under the relevant mining rules amounts to a sale within the meaning of the Sales Tax Act.

Issue (i): Whether a person who discovers and sells a diamond in a single isolated transaction can be treated as a dealer carrying on the business of selling goods under section 2(d) of the M.P. General Sales Tax Act, 1958.

Analysis: The expression "carries on the business" denotes continuity of trading activity, involving an organised occupation with the motive of profit-making. A single casual or isolated act of sale does not amount to carrying on business. On the facts, the discovery of the diamond was accidental, and its sale was only an isolated transaction without any material showing a business of buying, selling or supplying diamonds.

Conclusion: The assessee was not a dealer within the meaning of section 2(d) of the M.P. General Sales Tax Act, 1958, and this issue was answered in favour of the assessee.

Issue (ii): Whether the compulsory auction sale of a diamond under the relevant mining rules amounts to a sale within the meaning of the Sales Tax Act.

Analysis: A sale for sales tax purposes requires a contract of sale with mutual consent and volition, including the freedom to choose the purchaser and the price. Where title passes by compulsion and the seller has no independent volition, the transaction is not a sale in the legal sense, even if the word "sale" is used in the governing rules. The auction here was compulsory, and the assessee had no choice in the selection of purchaser or price.

Conclusion: The compulsory auction did not constitute a sale under the Sales Tax Act, and this issue was answered in favour of the assessee.

Final Conclusion: The reference was decided by holding that the assessee was neither a dealer nor liable on the auction transaction as a taxable sale, so the sales tax demand could not be sustained.

Ratio Decidendi: For sales tax liability, a dealer must be engaged in a continuous business of trading, and a transfer by compulsory auction without mutual assent or volition is not a sale in the legal sense.

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