Incidental statutory activity by a port trust was not business, so sales tax liability on ship water supplies failed.

The Andhra Pradesh HC held that supplying drinking water to visiting ships was an incidental activity performed by a port trust in discharge of its statutory functions under the Major Port Trusts Act, not a dominant commercial undertaking. Applying the principle that an activity is not "business" for sales tax purposes unless it is the principal or primary function, the court found that the port trust was not a "dealer" on this turnover. The notice levying sales tax on water supplied to ships was therefore not sustainable and the demand was set aside.

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Issues: Whether the activity of supplying drinking water to visiting ships by the port trust constituted "business" so as to render the port trust a "dealer" liable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The supply of drinking water to vessels was undertaken by the port trust in discharge of its statutory functions under the Major Port Trusts Act, 1963. The activity was examined in the light of the settled principle that an undertaking is not engaged in "business" where the impugned activity is merely incidental and not its dominant or primary function. The earlier decision concerning the same port trust, as approved by the Supreme Court in the Madras Port Trust case, supported the view that port-related ancillary activities do not by themselves amount to business for sales tax purposes. On that basis, the notice treating the port trust as a dealer and levying tax on water supplied to ships could not be sustained.

Conclusion: The supply of drinking water to ships was only an incidental statutory activity and not business; the port trust was not a dealer liable to tax on that turnover.

Final Conclusion: The writ petition succeeded and the demand notice was set aside.

Ratio Decidendi: An activity performed by a statutory port in discharge of its statutory obligations is not "business" for sales tax purposes if it is merely incidental and not a dominant commercial activity.

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