Purchase tax not attracted on incidental building repairs or truck-hire tyres where the assessee was not a dealer in goods

Purchase tax was held inapplicable on building materials bought for repairs, renewal and maintenance of business premises because such expenditure was merely incidental to keeping the premises usable and did not amount to carrying on a building business. Purchase tax was also held not leviable on tyres purchased for trucks plying for public hire, as that transport activity did not make the assessee a dealer in goods for the purpose of purchase tax. The Tribunal's reference to a larger Bench was upheld as justified because it arose from a prior divergence of views in a connected matter. The substantive purchase-tax issues were resolved in favour of the assessee.

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Issues: (i) Whether purchase tax was leviable on building materials purchased for repairs, renewal and maintenance of buildings; (ii) Whether the assessee was a dealer in respect of the activity of plying trucks for public hire so as to attract purchase tax on tyres purchased for those trucks; (iii) Whether the Tribunal was justified in referring the point relating to purchase tax on building materials to a Division Bench.

Issue (i): Whether purchase tax was leviable on building materials purchased for repairs, renewal and maintenance of buildings.

Analysis: The assessee was engaged in manufacture and sale of ceramics, not in the business of building construction or repair. The purchase of materials for repairs, renewal and maintenance of buildings was only incidental to keeping the business premises in usable condition and did not itself amount to business in building activity. The nature of the expenditure did not alter the legal position merely because it related to maintenance rather than initial construction or expansion.

Conclusion: The levy of purchase tax on the building materials was not justified and this issue was answered in favour of the assessee.

Issue (ii): Whether the assessee was a dealer in respect of the activity of plying trucks for public hire so as to attract purchase tax on tyres purchased for those trucks.

Analysis: A dealer under the Act is a person carrying on the business of buying, selling, supplying or distributing goods. The activity of plying trucks for public hire was a transport service and did not convert the assessee into a dealer in goods in relation to that activity. Since the trucks were not used in the assessee's manufacturing or trading business, the tyres purchased for them could not be treated as purchases liable to purchase tax on that footing.

Conclusion: The assessee was not a dealer in respect of plying trucks for public hire and the purchase of tyres was not liable to purchase tax; this issue was answered in favour of the assessee.

Issue (iii): Whether the Tribunal was justified in referring the point relating to purchase tax on building materials to a Division Bench.

Analysis: The reference to a Division Bench was made because the Member hearing the rectification application differed from the view earlier taken in a connected appeal. In those circumstances, the course adopted under the applicable rule governing reference to a larger Bench was justified.

Conclusion: The Tribunal was justified in making the reference and this issue was answered against the assessee.

Final Conclusion: The reference was disposed of by answering the first two questions against the revenue and the third question against the assessee, resulting in relief to the assessee on the substantive purchase-tax issues.

Ratio Decidendi: An activity is liable to purchase tax only when the relevant purchases are made in the course of the dealer's business; incidental maintenance of business premises or a separate transport service not constituting trading in goods does not by itself make the assessee a dealer for that purpose.

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