Capital asset sale by shipping company was outside sales tax net before statutory expansion of dealer liability.

A shipping company's isolated sale of a ship held as a capital asset was not liable to sales tax when the transaction was unconnected with its ordinary passenger and cargo business and occurred before the statutory expansion of dealer and business liability on 16 August 1985. The prevailing trade circulars and earlier judicial view treated such capital asset disposals as outside sales tax net for that period, and later curative and relief measures also supported non-leviability where no tax had been separately collected.

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Issues: Whether sales tax was leviable on the sale of a ship, held as a capital asset, effected by a shipping company prior to 16 August 1985.

Analysis: The sale was an isolated disposal of a capital asset and was not part of, or incidental to, the assessee's business of carrying passengers and cargo. The legal position, as understood in the relevant trade circulars and in the earlier judicial view on sales of capital assets, was that such transactions were not liable to sales tax for the period before the statutory amendment made the wider definition of dealer/business operative from 16 August 1985. The later curative and relief measures concerning past transactions also supported the conclusion that tax was not leviable on such earlier sales where no tax had been separately collected.

Conclusion: No sales tax was leviable on the sale of the ship before 16 August 1985, and the issue was answered in favour of the assessee.

Ratio Decidendi: A sale of a capital asset by a shipping company, when unconnected with its ordinary trading activity and made before the operative statutory expansion of liability, is not exigible to sales tax merely because the seller is a registered dealer.

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