Profit motive and dealer status under the Central Sales Tax Act determine whether supply transactions attract sales tax.

Under the pre-1976 Central Sales Tax Act regime, supply transactions are not business unless they are carried on with a profit motive, and a levy cannot stand on conjecture about surplus charges alone. On the facts described, the note states that the supply of forms did not amount to business, so the assessee was not a dealer within section 2(b). Once dealer status failed, the foundation for assessment disappeared, making the sales tax levy without jurisdiction and illegal.

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Issues: (i) whether the transactions of supply of forms by the assessee constituted business within the meaning of the definition of dealer under the Central Sales Tax Act, 1956; (ii) whether the assessee was a dealer under that Act on the facts found; (iii) whether the levy of sales tax under the Central Sales Tax Act, 1956 was without jurisdiction or illegal.

Issue (i): Whether the transactions of supply of forms by the assessee constituted business within the meaning of the definition of dealer under the Central Sales Tax Act, 1956.

Analysis: For the relevant period, business under the Central Sales Tax Act, 1956 included trade or commerce or an adventure in the nature of trade or commerce. The assessee had consistently maintained that its supplies were not made with an object of profit. The levy charge of 10 per cent, even if unexplained, did not by itself compel an inference of profit motive, because such charge could also cover storage, overhead and administration costs. The finding that profit motive existed was therefore not warranted on the facts found.

Conclusion: The transactions did not constitute business for the purpose of the Act, and the issue is answered in favour of the assessee.

Issue (ii): Whether the assessee was a dealer under the Central Sales Tax Act, 1956 on the facts found.

Analysis: A dealer under section 2(b) of the Central Sales Tax Act, 1956 must be a person carrying on business of buying, selling or supplying goods. Since the transactions in question were not shown to have been carried on as business with a profit motive, the factual basis for treating the assessee as a dealer failed. The Tribunal had relied on a High Court decision later set aside by the Supreme Court, and that basis could not support the finding of dealer status.

Conclusion: The assessee was not a dealer within the meaning of section 2(b) of the Central Sales Tax Act, 1956, and this issue is answered in favour of the assessee.

Issue (iii): Whether the levy of sales tax under the Central Sales Tax Act, 1956 was without jurisdiction or illegal.

Analysis: Once the assessee was held not to be carrying on business as a dealer within the meaning of the Act, the foundation for assessment under the Central Sales Tax Act, 1956 disappeared. The assessment could not be sustained merely because the assessee was registered under the Bengal Finance (Sales Tax) Act, 1941 or because accounts were not produced in the manner suggested by the taxing authority.

Conclusion: The levy of sales tax was without jurisdiction and illegal, and this issue is answered in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue on the substantive questions, and the assessment under the Central Sales Tax Act, 1956 was set aside in effect.

Ratio Decidendi: Under the pre-1976 Central Sales Tax Act regime, a transaction is not business unless it is carried on with a profit motive, and the burden lies on the Revenue to establish that element when dealer status is in dispute.

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