2005 (7) TMI 615 - HC - VAT and Sales Tax

Court rules transport activities not a business under Bombay Sales Tax Act, applicant not a 'dealer'

The court held in favor of the applicant, ruling that the applicant's transport activities, mandated by law and not for profit, did not qualify as a ... - Issues Involved:1. Definition of 'dealer' under section 2(11) of the Bombay Sales Tax Act, 1959.2. Definition of 'business' under section 2(5A) of the Bombay Sales Tax Act, 1959.3. Burden of proof regarding profit-motive in the applicant's activities.Issue-wise Detailed Analysis:1. Definition of 'dealer' under section 2(11) of the Bombay Sales Tax Act, 1959:The applicant, an undertaking established under the Bombay Municipal Corporation Act, 1888, argued that it was not a 'dealer' for its transport activities. It was registered as a 'dealer' for its electricity generation and distribution activities, but contended that its transport services, mandated by law and not for profit, did not qualify it as a dealer. The court noted that the definition of 'dealer' includes entities disposing of goods as unserviceable or as scrap. However, the explanation that included transport companies was amended to exclude them, indicating that transport companies disposing of scrap do not constitute a business and are not 'dealers' under section 2(11).2. Definition of 'business' under section 2(5A) of the Bombay Sales Tax Act, 1959:The applicant claimed that its transport activities were not carried out with a profit-motive, which was necessary for an activity to be considered a business during the relevant period (1983-84). The court examined the definition of 'business,' which was amended in 1985 to make profit-motive irrelevant. However, during the period in question, profit-motive was relevant. The court found that the applicant's transport activities, mandated by law and not aimed at profit, did not meet the definition of 'business' under section 2(5A) for the relevant period.3. Burden of proof regarding profit-motive in the applicant's activities:The court held that the respondent needed to prove that the applicant's transport activities were carried on with a profit-motive to classify them as a business. The applicant's activities were mandated by law and aimed at providing affordable transport facilities, not at making a profit. The court referenced several cases, including State of Gujarat v. Raipur Manufacturing Co. Ltd., which emphasized the necessity of profit-motive and regularity of transactions to constitute a business. The court concluded that the applicant's disposal of unserviceable vehicles and materials did not exhibit the frequency, continuity, and regularity required to be considered a business.Conclusion:The court concluded that the applicant was not carrying on business qua its transport activities during the relevant period and was not a 'dealer' under section 2(11) of the Bombay Sales Tax Act. The court answered all the questions in the negative, in favor of the applicant, and against the respondent. The reference was disposed of accordingly.