1982 (12) TMI 172 - HC - VAT and Sales Tax

Building contractors' material purchases subject to sales tax under Bombay Sales Tax Act

Commissioner of Sales Tax, Maharashtra State, Bombay Versus GM Apte and Sons

The High Court held that purchases of building materials for construction or repairs by building contractors constitute purchases made in the course of ... - Issues:1. Whether purchases of building materials and scaffolding materials by building contractors constitute purchases made in the course of business.2. Whether building contractors can be considered as dealers under the Bombay Sales Tax Act.Analysis:The respondents, engaged in the business of building contractors, were assessed by the Sales Tax Officer as unregistered dealers for purchasing building materials and scaffolding materials from unregistered dealers. The Tribunal initially ruled that the purchases were not made in the course of business and that the respondents were not dealers as per the Act. However, the Commissioner of Sales Tax raised two questions before the High Court regarding the justification of the Tribunal's decision.In a previous judgment involving similar issues, the High Court had held that purchases of building materials by building contractors for construction or repairs constituted purchases made in the course of business. The definition of 'dealer' under the Act was crucial, and the Court emphasized that purchases of goods indispensable for business activities qualified as purchases made in the course of business. The distinction was made between goods essential for business operations and those considered capital assets or adjuncts to business activities.Regarding the specific questions raised, the High Court answered that purchases of building materials for construction or repairs were indeed made in the course of business by the respondents. However, the purchases of scaffolding materials were deemed not made in the course of business if they were considered adjuncts to business activities or part of the respondents' capital assets. The determination of whether scaffolding materials constituted capital assets was left to the Tribunal for further consideration.Ultimately, the High Court ruled in favor of the department and against the assessee, concluding that the respondents were not exempt from being classified as dealers under the Bombay Sales Tax Act. No costs were awarded for the reference. The judgment provided clarity on the interpretation of purchases made in the course of business for building contractors under the tax laws.