Incidental sales in manufacturing business are taxable when discarded mill stores and by-products arise from the running of the enterprise.

Sale of unserviceable stores and discarded mill items, including scrap, dyes, chemicals, broken iron hoops, obsolete machinery and coal ash, was held exigible to sales tax under the M.P. General Sales Tax Act, 1958. The expanded definition of "business" in section 2(bb) covered transactions incidental or ancillary to the assessee's manufacturing activity, so the assessee remained a dealer under section 2(d) even though some goods, such as cloth, were tax-free. Tax-free turnover affected only computation, not dealer status. Sales of discarded materials and obsolete machinery were connected with the running of the mills, and coal ash was treated as a distinct by-product of manufacture. The constitutional objection based on capital assets was rejected.

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Issues: Whether the sale of unserviceable stores and discarded items such as scrap, dyes, chemicals, broken iron hoops, obsolete machinery and coal ash by the assessee was exigible to sales tax under the M.P. General Sales Tax Act, 1958.

Analysis: The statutory definition of "business" had been expanded by section 2(bb) so as to include not only trade, commerce or manufacture, whether or not undertaken with profit motive, but also transactions in connection with, or incidental or ancillary to, such business. The assessee was admittedly engaged in manufacture of cloth and yarn and was therefore carrying on business within section 2(bb). Its sales of cloth and yarn showed that it was a dealer under section 2(d), and the turnover definition in section 2(t) included sales regardless of whether any part was taxable. Cloth being tax-free under section 10 and Schedule I affected only the computation of taxable turnover, not the character of the assessee as a dealer. The sale of discarded materials and obsolete machinery was connected with the running of the mills and fell within incidental or ancillary transactions. Coal ash was also treated as a distinct by-product arising from manufacture. The constitutional objection based on capital assets was rejected because sales tax under entry 54 of List II operates in a different field from taxes on capital value under entry 86 of List I.

Conclusion: The sale of the unserviceable items was exigible to tax and the assessee was liable to be treated as a dealer in respect of those transactions.

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