Taxability of discarded scrap sales depends on carrying on business in those goods under the pre-amendment sales tax law.

Under the pre-1 April 1976 Karnataka Sales Tax Act, sale proceeds from discarded railway scrap, cinder and ash were not taxable unless the seller carried on business in those goods. Mere disposal of surplus or unserviceable material did not by itself establish a business transaction. The later amendment widening the definition of business to cover incidental or ancillary transactions was inapplicable to turnovers arising before that date. On that basis, the assessments and notices for the prior period lacked legal authority.

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Issues: Whether, under the Karnataka Sales Tax Act, 1957 as it stood prior to 1 April 1976, the sale proceeds of cinder, ash and other discarded railway scrap material were liable to sales tax as transactions in the course of business.

Analysis: The relevant pre-amendment definitions of "business" and "dealer" required a nexus with carrying on business in the goods sold. The Court applied the Supreme Court principle that mere realization of price by sale of surplus, unserviceable or discarded goods does not by itself establish an intention to carry on business in those goods. The later amendment from 1 April 1976, which widened the definition to include transactions incidental or ancillary to trade or commerce even if not in the course of business, was held inapplicable because the turnovers in question arose before that date. The authority relied on by the State was therefore confined to the amended regime and did not govern the present period.

Conclusion: The sales of cinder and scrap material for the period prior to 1 April 1976 were not taxable as business sales under the Act, and the impugned assessments and notices were without authority of law.

Ratio Decidendi: Under the pre-amendment Karnataka Sales Tax Act, a sale of discarded or unserviceable material is taxable only if the seller carries on business in those goods; a mere disposal of waste or surplus material is not a sale in the course of business.

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