Statutory canteen activity integral to a non-commercial function was not a separate business and escaped sales tax.

A canteen run to discharge a statutory obligation was not treated as a separate business for sales tax purposes where it was integral and inseparable from the assessee's main non-commercial activity of maintaining and servicing Navy ships. Although the statutory definition of business extended to incidental or ancillary transactions, the Court noted that this did not automatically convert every incidental activity into a distinct taxable business. Because the canteen formed only a small part of the assessee's overall functioning and was not a detachable commercial venture, its turnover was not exigible to tax and the assessee was not a dealer on that basis.

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Issues: Whether the canteen run by the assessee to comply with a statutory obligation constituted business and made the assessee a dealer liable to sales tax on the canteen turnover.

Analysis: The statutory definitions showed that business included trade, commerce or manufacture and also transactions incidental or ancillary to such activity. The Court held that this did not mean that an activity which is itself business ceases to be so merely because it is incidental to the main non-business activity. At the same time, the canteen was not a separate or detachable commercial venture. It was run in discharge of a statutory obligation, formed only a small part of the assessee's overall functioning, and was integral and inseparable from the assessee's main activity of maintaining and servicing ships of the Indian Navy. In such circumstances, the canteen activity could not realistically be isolated and treated as a distinct business for the purpose of tax.

Conclusion: The canteen transactions were not exigible to tax under the Act, and the assessee was not a dealer on that basis.

Final Conclusion: The revision cases were allowed and the canteen turnover was held not taxable under the A.P. General Sales Tax Act.

Ratio Decidendi: Where a canteen or similar facility is an integral and inseparable part of a statutory, non-commercial main activity, it is not a separate business capable of being taxed merely because it involves sale of goods.

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