1964 (4) TMI 75 - SC - VAT and Sales Tax

Supreme Court rules tanning bark purchase subject to sales tax

The Supreme Court allowed the appeal, setting aside the High Court's order and restoring the decision of the Sales Tax Appellate Tribunal. The Court held ... Definition of dealer - turnover for taxation - business - course of dealings and profit-motive - consumption in the course of business - rule 5(2) - purchases treated as turnover - commodity bought for use in manufacture vs. bought for saleDefinition of dealer - business - course of dealings and profit-motive - consumption in the course of business - rule 5(2) - purchases treated as turnover - Whether purchases of tanning bark used in the respondents' tannery are includible in taxable turnover under rule 5(2) because the respondents are dealers in tanning bark - HELD THAT: - The Court interpreted the statutory definition of 'dealer' and the concept of 'business' to require an occupation or course of dealings carried on with a view to profit; mere personal consumption without profit-motive does not make one a dealer. However, the Legislature did not require that the very article bought must itself be resold for the buyer to be a dealer in that article. Where a commodity specified in the rule is purchased in the course of the buyer's trade for use in manufacturing an article for sale, such purchases fall within the ambit of buying 'in the course of business.' Therefore purchases of tanning bark by persons engaged in the manufacture and sale of dressed hides and skins, even if consumed in the manufacturing process rather than resold in the same form, are part of the dealer's turnover for taxation under rule 5(2). The High Court's contrary view-that buying a commodity for consumption in manufacture excludes the buyer from being a dealer in that commodity under rule 5(2)-was rejected. The Court relied on the integrated concept of buying and disposal with profit-motive and approved the reasoning in the analogous Madras decision cited in the judgment.Purchases of tanning bark used in the respondents' trade are includible in taxable turnover under rule 5(2); the High Court's exclusion of such purchases was erroneous.Final Conclusion: The appeal is allowed; the High Court's order excluding the price of tanning bark from the respondents' taxable turnover is set aside and the Sales Tax Appellate Tribunal's order restoring inclusion of those purchases in turnover is reinstated. No order as to costs. Issues:1. Whether the price paid for buying tanning bark required in the tannery is liable to duty under the Hyderabad General Sales Tax Act.2. Interpretation of the term 'dealer' under the Act.3. Determining if buying a commodity for consumption in the business qualifies a person as a dealer.Analysis:1. The case involved a dispute regarding the liability to pay tax on the price paid for buying tanning bark used in a tannery. The respondents contended that since the tanning bark was bought for consumption in the tannery and not for sale, they should not be considered dealers in tanning bark and thus not liable to duty under the Hyderabad General Sales Tax Act.2. The definition of 'dealer' under the Act includes any person engaged in the business of buying, selling, or supplying goods. The Court clarified that to be considered a dealer, a person must be engaged in the business of buying or selling goods with a profit motive. Mere buying for personal consumption does not qualify a person as a dealer, but using a commodity in the course of trade or manufacturing another commodity for sale does make a person a dealer.3. The Court rejected the view that buying a commodity for consumption in the business, rather than for sale, exempts a person from being classified as a dealer. It emphasized that the purchase of a commodity for use in the manufacturing process or for consumption in the business still qualifies the person as a dealer. The Court cited a similar interpretation by the Madras High Court in a related case to support its decision.In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's order and restoring the decision of the Sales Tax Appellate Tribunal. The Court held that the purchase of tanning bark by the respondents for use in their tannery business qualified them as dealers under the Act, and the price paid for buying tanning bark was indeed liable to duty under the Hyderabad General Sales Tax Act.