Incidental scrap sales by a manufacturing business can be taxable when they arise from the main undertaking.

Occasional disposal of scrap, old machinery, spare parts and other unserviceable materials by an ongoing manufacturing concern falls within the inclusive definition of "business" when the sales are connected with, incidental to, or ancillary to the main undertaking. Such transactions do not lose taxable character merely because they are sporadic, lack continuity, or are not pursued with a separate profit motive. A dealer may also include a casual dealer for these purposes. The article notes that, on these principles, sales of scrap and unserviceable materials arising from the manufacturing business are exigible to sales tax, and the contrary view of the Tribunal was erroneous.

---

---

Issues: Whether the occasional sale of scrap, old machinery, spare parts and other unserviceable materials by a manufacturing concern is a transaction in connection with, or incidental or ancillary to, its main business so as to be taxable under section 2(b)(ii) of the Orissa Sales Tax Act, 1947.

Analysis: The inclusive definition of "business" under section 2(b)(ii) covers transactions connected with, or incidental or ancillary to, a trader's, manufacturer's or commercial undertaking. Once the main activity is business, a sporadic sale of discarded or unserviceable items arising from that business does not lose its taxable character merely because it is occasional, lacks continuity, or is not undertaken with a separate profit motive. The definition of "dealer" also includes a "casual dealer", and occasional business transactions of this nature can attract tax. In the present case, the assessee was an ongoing manufacturing and selling concern and the disposal of scrap and unserviceable materials was a natural incident of that business. Earlier decisions holding otherwise could not assist the assessee because they stood diluted by the later Supreme Court ruling recognising such sales as taxable when connected with the main business.

Conclusion: The sale of scrap materials and old unserviceable materials is taxable and the Tribunal was wrong in applying the test of business in the manner it did.

Ratio Decidendi: Where a dealer is carrying on a business of manufacture or sale, occasional disposal of scrap or unserviceable assets connected with that business constitutes business under the statutory definition and is exigible to sales tax, even without continuity or independent profit motive.

---