Commercial business test and reassessment limitation defeated sales tax liability of a co-operative society.

A co-operative society engaged in winning and selling minor minerals was not a dealer under the Bombay Sales Tax Act because its objects, bye-laws and overall activity showed an arrangement to protect labourers and secure wages, with sales being merely incidental and not a commercial business carried on for profit. Reassessment was also held confined to the five-year limitation period applicable where there was no concealment or knowingly incorrect return, and the later notice issued after remand was treated as the operative notice. The reference was answered in favour of the assessee on both issues.

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Issues: (i) Whether the co-operative society was a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959 and liable to registration and tax. (ii) Whether reassessment under section 35 of the Bombay Sales Tax Act, 1959 was barred by limitation and whether the relevant notice was the later notice issued after remand.

Issue (i): Whether the co-operative society was a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959 and liable to registration and tax.

Analysis: The definition of dealer required carrying on the business of buying or selling goods, and the element of business had to be gathered from the real nature of the activity and the totality of circumstances. The society's objects, bye-laws and overall organisation showed that it was formed to protect illiterate labourers engaged in winning minor minerals, provide them employment, secure reasonable wages and prevent exploitation. The sale of the minerals was incidental to that object and was undertaken to realise the best price for the labour of its members, not with a set purpose of carrying on commercial trading for profit. The presence of systematic sales, by itself, was not ative.

Conclusion: The society was not a dealer and was not liable to registration and tax.

Issue (ii): Whether reassessment under section 35 of the Bombay Sales Tax Act, 1959 was barred by limitation and whether the relevant notice was the later notice issued after remand.

Analysis: In the absence of concealment or knowingly incorrect returns, reassessment fell within the five-year period prescribed for cases not involving concealment. The earlier composite notice had been held invalid, and the later notice issued after remand was the operative notice. On that basis, assessments for periods beyond the five-year limit were time-barred.

Conclusion: The reassessment could not extend beyond the five-year period and the time-bar objection succeeded.

Final Conclusion: The reference was answered in favour of the assessee on both questions, confirming that the society was not exigible as a dealer and that the reassessment was confined by the shorter limitation period.

Ratio Decidendi: For sales tax liability, the existence of organised sales is not enough by itself; the activity must, on the totality of circumstances, amount to a business carried on with the requisite commercial object, and in the absence of concealment reassessment must remain within the shorter statutory limitation period.

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