Dominant service activity controls dealer status: occasional salvage sales by an insurer were not treated as business for sales tax.

An insurance company was not treated as a dealer carrying on business under the U.P. Sales Tax Act merely because it occasionally sold salvage arising from settlement of claims. The definitions of "business" and "dealer" were construed by reference to the dominant nature of the assessee's activity: insurance remained a service, not a trading enterprise, and isolated disposal of salvage did not convert that service into buying and selling goods. On that basis, the occasional sale of salvage was held incidental to the insurance business and not exigible to sales tax. The revisions were allowed and the tribunal's order was set aside, leaving the assessee free from the tax demand.

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Issues: Whether the insurance company was a dealer carrying on business within the meaning of the U.P. Sales Tax Act so that occasional sale of salvage arising from settlement of insurance claims was exigible to sales tax.

Analysis: The definitions of "business" and "dealer" in the Act were construed in the light of the nature of the assessee's activity. The decisive consideration was whether the activity was one of buying and selling goods or merely the rendering of insurance service. The Court distinguished cases involving commercial undertakings such as railways, where sale of unserviceable goods was incidental to commerce, and agreed with the view that where the dominant activity is service, isolated disposal of salvage does not convert the undertaking into a trading concern. The occasional sale of salvage was held to be incidental to the insurance service and not a regular business of buying or selling.

Conclusion: The assessee was not a dealer, its activity did not amount to business within the meaning of the Act, and sales tax could not be levied on the occasional sale of salvage.

Final Conclusion: The revisions were allowed and the tribunal's order was set aside, leaving the assessee free from the impugned tax liability.

Ratio Decidendi: Where the dominant activity is a service and not trade or commerce, an occasional sale incidental to that service does not by itself make the person a dealer or the activity a business for sales tax purposes.

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