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Friday, April 24, 2015

the assessee-Port Trust would fall within the meaning of "dealer" under Section 2(viii) of the Act and is consequently assessable to tax under the Act.= we are of the considered opinion that the activities of the assessee in respect of buying, selling, supplying or distributing goods, executing works contract, transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, whether in course of business or not, would fall within the purview of Section 2(viii) of the Act. Hence, the assessee-Port Trust would fall within the meaning of "dealer" under Section 2(viii) of the Act and is consequently assessable to tax under the Act.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 1906 OF 2007



|M/s Cochin Port Trust                          |   Appellant(s)             |



                                   Versus

|State of Kerala                                |   Respondent(s)            |




                                  J U D G M E N T

      H.L. DATTU, CJI.


This appeal is directed against the judgment and order passed  by  the  High
Court of Kerala at Ernakulam in TRC No. 412 of 2002 and Sales  Tax  Revision
Nos. 321 and 326 of 2005, dated  23.12.2005,  whereby  and  whereunder,  the
High Court has held that  the  appellant-assessee  is  a  dealer  under  the
Kerala General Sales Tax Act, 1963 (for short, “the Act”) and dismissed  the
tax revision preferred by the appellant-assessee.

The question that  arises  for  consideration  in  this  appeal  is  whether
the appellant-Trust is a dealer under the Act and liable to  pay  sales  tax
under the Act on account  of  certain  activities  in  the  nature  of  sale
transactions carried on by it besides its statutory functions. For the  sake
of convenience and brevity, we would only notice the facts relevant  to  the
discussion with respect to the question(s) before us in this appeal.

Brief factual matrix of the case is as follows:  The  appellant-Trust  is  a
statutory authority constituted for rendering port services under the  Major
Port Trusts Act, 1963. The appellant-Trust is a registered dealer under  the
Act  and  an  assessee  on  the  rolls   of   the   Assistant   Commissioner
(Assessment),  Commercial   Taxes,   Special   Circle,   Mattancherry.   The
assessee’s specific activity of dealing in scrap items (sales  of  water  to
ships, tender forms, firewood, waste paper  and  disposal  of  unserviceable
equipment) is the subject matter of assessments in the  instant  appeal  for
the assessment years 1990-91, 1994-95 and 1997-98.

For the aforesaid assessment  years,  the  assessing  authority  had  raised
demand notices under the Act for the sales of scrap items  effected  by  the
assessee  vide  assessment   orders   dated   18.11.1995,   31.03.1999   and
24.10.2001, respectively.

The assessee aggrieved by the said  assessment  orders  had  approached  the
Deputy Commissioner (Appeals) in first statutory appeal.  The  assessee  had
assailed the assessment orders as illegal and unauthorised  on  the  ground,
inter alia, that it  is  not  engaged  in  any  trading  activity  and  only
discharging its statutory functions under the Major  Port  Trust  Act,  1963
and hence, it is not a “dealer” under the Act and cannot be exigible to  tax
thereunder. The first appellate authority has disposed of  the  said  appeal
by separate orders dated 16.01.1998,  28.10.1999  and  25.04.2002  for  each
assessment year 1990-91, 1994-95 and 1997-98,  respectively.  The  appellate
authority has considered the  definition  of  “dealer”  under  the  Act  and
rejecting the plea of the assessee, held that it is  a  “dealer”  under  the
provisions of the Act.

Aggrieved by the aforesaid order(s), the assessee  had  preferred  T.A.  No.
479 of 1998 for the assessment year 1990-91  before  the  Kerala  Sales  Tax
Appellate Tribunal (for short, “the Tribunal”). The assessee  had  contended
that in the instant case the  assessee-Trust  is  a  statutory  body  merely
discharging its functions of rendering port activities and  not  engaged  in
any trading activity or  “business”.  The  transactions  herein  are  merely
causal and incidental sale transactions which only attract sales tax if  the
registered dealer is otherwise carrying on business under the Act, which  is
not the case herein and therefore, the assessee cannot be  classified  as  a
“dealer” under Section 2(viii) of  the  Act.  Reliance  was  placed  by  the
assessee on the dictum of this Court in State of T.N. v. Board  of  Trustees
of the Port of Madras, (1999) 4 SCC 630 (Madras Port  Trust  case).  By  the
order dated 24.09.2001, the Tribunal rejected the  aforesaid  stand  adopted
by the assessee and  held  that  the  assessee  is  a  “dealer”  engaged  in
activities of sale under the Act and thus, exigible to sales tax.

Further, the assessee has approached the Tribunal in T. A.  No.  1  of  2000
and T. A. No. 143 of  2003  questioning  the  orders  passed  by  the  first
appellate authority for assessment years 1994-95 and 1997-98.  The  Tribunal
has considered the definitions of “dealer”  under  the  Tamil  Nadu  General
Sales Tax Act, 1959 (for short, “the TN Act”)  and  the  Act  and  concluded
that since the two definitions are not pari  materia,  the  observations  of
this Court in Madras  Port  Trust  case  would  not  be  applicable  to  the
assessee-Port Trust. The Tribunal has held that the definition  of  “dealer”
under the Act is wide and in  light  of  the  activities  performed  by  the
assessee, it can be placed in the ambit of “dealer” under the Act and  hence
be liable to pay sales tax under the Act.

Dissatisfied by the orders passed by the Tribunal, the  assessee  approached
the High Court in TRC No. 412 of 2002 and Sales Tax Revision  Nos.  321  and
326 of 2005. The question as to whether the assessee  is  a  “dealer”  under
the Act which was the  cardinal  issue  before  the  Tribunal  was  agitated
before the High Court as the main issue by both  parties  to  the  lis.  The
High Court has delved into the said question  and  also  considered  whether
the Madras Port Trust case decided in the context of the  TN  Act  apply  to
the assessee-Trust which is governed by the Act.  The  High  Court,  in  its
conclusion, has approved the findings of the Tribunal and dismissed the  tax
revision(s) filed by the appellant-assessee.

Aggrieved by the aforesaid, the assessee is before us in this appeal.

Shri V. Giri, learned senior counsel appearing  for  the  appellant-assessee
would submit that the assessee does  not  fall  under  the  ambit  of  under
Section 2(viii) of the Act and cannot be termed  as  a  “dealer”.  He  would
submit that the assessee is only discharging the statutory functions and  is
not engaged in any “business” or trade. Further, that  the  transactions  in
question being incidental and auxiliary would not qualify as business  under
the Act so as to deem the assessee as “dealer” under the Act. He would  draw
support from the observations of  this  Court  in  Madras  Port  Trust  case
wherein this Court has held that the said Port Trust constituted  under  the
Major Port Trust Act, 1963  and  carries  on  statutory  functions,  is  not
exigible to sales tax under the Tamil Nadu General Sales Tax Act, 1959  (for
short, “the TN Act”). He would further contend that since the provisions  of
the TN Act are pari materia with that of the  Act,  the  Madras  Port  Trust
case would squarely apply to the assessee-Cochin Port Trust also.

Per contra, Smt. Liz Mathew, learned counsel appearing for  the  respondent-
Revenue would support the judgment and order passed by the  High  Court  and
contend that the assessee herein is a “dealer”  under  the  Act  engaged  in
sale of scrap material and therefore, exigible to sales tax under  the  Act.
She would submit that the provisions of the TN Act and the Act are not  pari
materia and the claim of  the  assessee  requires  to  be  examined  in  the
context of the Act only and not on the basis of the  provisions  of  the  TN
Act. She would urge that the observations  of  this  Court  in  Madras  Port
Trust case would not be applicable to the instant case in light of  material
difference between the definitions of “dealer” under the  provisions  of  TN
Act and the Act.

The issue that arises for our consideration  and  decision  in  the  instant
case is whether the assessee-Trust is a  dealer  under  the  Act  and  thus,
liable to pay sales tax levied thereunder.
At the outset, it is pertinent to notice Section 2(viii) of  the  Act  which
defines the term "dealer". The said definition is extracted hereunder:

“2(viii) “Dealer” means any person who carries on the  business  of  buying,
selling,  supplying  or  distributing  goods,  executing   works   contract,
transferring the right to use any goods or supplying by way of  or  as  part
of any service, any goods directly or otherwise, whether  for  cash  or  for
deferred  payment,  or  for  commission,  remuneration  or  other   valuable
consideration and includes:

(a)...

(b)...

(c)...

(d)...

(e) a person who, whether in the course of business or not, sells;
(i) goods produced by  him  by  manufacture,  agriculture,  horticulture  or
otherwise; or
(ii) trees which grow spontaneously and  which  are  agreed  to  be  severed
before sale or under the contract of sale;

(f) a person who whether in the course of business or not:
(1) transfers any goods, including controlled goods whether in pursuance  of
a  contract  or  not,  for  cash  or  deferred  payment  or  other  valuable
consideration;
(2) transfers property in goods (whether as goods or  in  some  other  form)
involved in the execution of a works contract;
(3) delivers any  goods  on  hire-purchase  or  any  system  of  payment  by
instalments;
(4) transfers the right to use any goods for any  purpose  (whether  or  not
for a specified  period)  for  cash,  deferred  payment  or  other  valuable
consideration;
(5) supplies, by way of or as part of any service or  in  any  other  manner
whatsoever, goods, being food or any other articles  for  human  consumption
or any drink (whether or not intoxicating), where such supply or service  is
for cash, deferred payment or other valuable consideration;

Explanation.-(1) & (2) ...

(g) a bank or a financing institution which, whether in the  course  of  its
business or not, sells any gold or other valuable article  pledged  with  it
to secure any loan, for the realisation of such loan amount;...”
                                                         (emphasis supplied)


A perusal of the aforesaid definition  would  indicate  that  definition  of
dealer under the Act is  an  inclusive  definition  whereby  wide  range  of
persons has been placed under the ambit of  “dealer”.  It  includes  persons
involved in carrying on any business or trading  activity  and  transactions
effected by them whether in the course of business or not. It is  profitable
to refer to the decision of this Court in Assistant Commissioner,  Ernakulam
v. Hindustan Urban Infrastructure Ltd. and Ors.,  (2015)  3  SCC  735  where
this Court has interpreted the said provision. This Court has  examined  the
scope and ambit of the definition of dealer  under  the  Act.  The  question
before this Court was whether an “Official Liquidator” is a “dealer”  within
the meaning of section 2 (viii) of the Act. This Court in  paragraph  26  of
the judgment has observed:

“…The definition of “dealer” has also been given a wide ambit.  It  includes
any person carrying on business of, inter alia, buying, selling,  supply  or
distribution of goods, whether directly or otherwise. All modes  of  payment
whether  by  way  of  cash,  commission,  remuneration  or  other   valuable
consideration have been included therein. It also includes,  inter  alia,  a
casual trader, a non-resident dealer,  a  commission  agent,  a  broker,  an
auctioneer and other mercantile agents. Sub-section (f)  of  the  definition
further expands the scope of the provision by including  within  its  ambit,
an array of transactions,  which  may  or  may  not  be  in  the  course  of
business. Section 2(viii)(f)(1) expressly includes,  within  the  definition
of a “dealer”, a person who  whether  in  the  course  of  business  or  not
transfers any goods, whether in the pursuance of  a  contract  or  not,  for
cash or deferred payment.”



Therein, this Court has noticed  the  definition  of  dealer  under  various
fiscal legislations and observed that the widest scope  and  ambit  provided
to the “dealer” under the definition clause of  the  Act  is  in  consonance
with the legislative intent to place the persons engaged  in  activities  of
sale and trade which would not otherwise fall in the  restricted  definition
of “business”. This Court has observed as under:

“34. Section 2(viii)(f) further expands the definition of “dealer”  enabling
a far wider class of persons to fall  within  its  ambit.  It  includes  any
person who transfers any goods, transfers property in goods involved in  the
execution of a works contract, delivers any goods on hire  purchase  or  any
system of payment by installments, transfers the right to use any goods  for
any purpose and lastly, any food or beverage supplier or  service  provider,
fit for human consumption. The Explanation 1 to sub-clause  (f)  includes  a
society,  club,  firm  or  an  association  or  body  of  persons,   whether
incorporated or not. Explanation 2 includes the  Central  Government,  State
Government and any of its apparatus within the scope of this section.

35. Therefore, given the exceptionally wide scope of the  definition,  prima
facie, it can be concluded that any person or entity  that  carries  on  any
activity of selling goods, could be categorized  as  a  “dealer”  under  the
Act, 1963. To test the aforesaid conclusion in the context of the  issue  at
hand, we would delve into the interpretation ascribed by this Court  to  the
term “dealer”. A careful reading of the definition  of  “dealer”  under  the
Act, 1963, would make it evident that the legislature  intended  to  provide
for  an  inclusive  criterion  and   broaden   the   ambit   of   the   said
classification. The legislature did not propose to  restrict  the  scope  of
the term as perceived in common parlance.”


Here, since the definition of  “dealer”  is  wide  to  include  transactions
conducted in the course of business or otherwise,  to  answer  the  question
posed before us, we do not deem  it  necessary  to  examine  the  nature  of
activity carried out by the assessee-Port Trust in as  much  as  whether  it
falls under the definition of “business” under the Act or not.

In the instant case, the appellant-assessee  would  place  reliance  on  the
decision of this Court in Madras Port Trust case,  draw  similarity  between
the provisions of TN  Act  and  the  Act  and  therefore,  submit  that  the
observations of the Madras Port Trust would be  applicable  to  the  instant
case. Therein, the question before this Court was whether  the  Madras  Port
Trust is a “dealer”  under  the  TN  Act  or  not.  The  definition  clauses
contained in the TN Act under Section 2(g) and 2(d) have been dealt with  to
examine the aforesaid question. For the sake of clarity, we would  refer  to
Section 2(g) and 2(d) of the TN Act as under:

 “Section 2(g) 'dealer' means any person who  carries  on  the  business  of
buying, selling, supplying or distributing  goods,  directly  or  otherwise,
whether for cash, or for deferred payment, or for  commission,  remuneration
or other valuable consideration, and includes-
(i) a local authority... which carries on such business;

(ii) . . .

(iii) a factor, ... or an auctioneer,  or  any  other  mercantile  agent  by
whatever name called, ... who carries on the business  of  buying,  selling,
supplying or distributing goods on behalf of any principal, or through  whom
the goods are bought, sold, supplied or distributed;

(iv) to (ix) ...

Explanation (1) ...

Explanation (2).-The Central  Government  or  any  State  Government  which,
whether or not in the course of business, buy, sell,  supply  or  distribute
goods, directly or otherwise, for cash, or  for  deferred  payment,  or  for
commission, remuneration or other valuable consideration,  shall  be  deemed
to be a dealer for the purposes of this Act;"

                                     ***

"Section 2(d) 'business' includes,-
(i) any trade, or commerce or manufacture or any  adventure  or  concern  in
the nature of trade, commerce or manufacture, whether  or  not  such  trade,
commerce, manufacture, adventure or concern is carried on with a  motive  to
make gain or profit and whether or not any profit accrues from  such  trade,
commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with,  or  incidental  or  ancillary  to,
such trade, commerce, manufacture, adventure or concern.”


This  Court  in  the  said  decision  has  elaborately  considered   various
provisions of the TN Act in the context of the Major Port Trusts Act,  1963.
This Court has noticed that port trusts are not established for carrying  on
business and thereafter, referred to the various activities  of  the  Madras
Port Trust and observed that its activities and services only indicate  that
the activity in question, that is, the sales of unserviceable  or  unclaimed
goods  is  infinitesimal  as  compared  to  the  very  large  range  of  the
activities and services it is supposed to render. This Court  has  therefore
concluded that the Madras Port Trust is not  involved  in  any  activity  of
"carrying on business" as  provided  for  under  Section  2  (g)  read  with
Section 2(d) of the TN Act and therefore, it is not a  "dealer'  within  the
meaning of Section 2(g) of the TN Act.

In our considered view, the aforesaid  decision  of  this  Court  would  not
enure to the benefit of the assessee in the instant case. The said  decision
was rendered on the  basis  of  the  question  whether  the  Port  Trust  is
carrying on “business” under the TN Act and if it is a  “dealer”  under  the
TN Act so as to be exigible to  tax  thereunder.  The  aforesaid  conclusion
emanates from the stark distinction of definition of “dealer” under  the  TN
Act and the Act. The definition under the Act is a  wider  definition  while
the TN Act as it then stood, provides for a very restricted meaning  of  the
term “dealer”. A comparison of the definition clauses in the Act and the  TN
Act would show that the requirement of "carrying  on  business"  by  buying,
selling, supplying or distributing goods directly or otherwise  whether  for
cash or deferred payment or for commission, remuneration or  other  valuable
consideration was a necessary ingredient of a dealer under the TN  Act,  but
clauses like (e), (f) and (g) of Section 2(viii) of the Act were  absent  in
the TN Act. Thus, the said definitions are not pari materia.


In the Madras  Port  Trust  case,  this  Court  has  laid  emphasis  on  the
expression "carrying on business" in the context of the TN Act,  and  it  is
in that context it has reached the conclusion that the Madras Port Trust  is
not engaged in any business which is  a  necessary  prerequisite  under  the
definition of a “dealer” under the TN Act. In the Act herein, the  necessity
of a person carrying on business  to  be  placed  under  the  definition  of
“dealer” is absent.  The  definition  expressly  includes  the  persons  who
whether in course of business or not engage  in  the  sale  or  transfer  of
goods and thus, does not mandate the requirement of conducting business  for
a person to be exigible under the Act.  The  contradistinction  between  the
definition of “dealer” under the TN Act and  the  Act  makes  it  abundantly
clear that the observations of this Court in Madras Port Trust  case,  which
refer to the definition of TN Act and interprets it to reach the  conclusion
of the Trust not being exigible to tax, cannot be accepted  in  the  instant
case.

Further, it is brought to our notice that  in  Madras  Port  Trust  case the
applications were preferred  by  the  Port  Trusts  of  Cochin,  Kandla  and
Calcutta before this Court for intervention. However, this  Court  has  only
permitted them to support the submissions of the Madras Port  Trust  in  the
context of the Tamil Nadu statute and in paragraph 6 of  the  said  judgment
observed that the exigibility of the said Port Trusts under  the  respective
State enactments is not examined thereunder. Therefore, this Court has  only
referred to the provisions of TN Act and not examined the scope of  the  Act
vis-à-vis the assessee-Port Trust in Madras Port Trust case.

It is further pertinent to notice that the TN Act was amended by Act  22  of
2002 whereby explanation (3) was added to definition clause 2(g) of  the  TN
Act. By the said amendment the Madras Port Trust has now been declared as  a
dealer under the TN Act. Explanation (3)  states  that  if  the  port  trust
disposes of any goods including unclaimed or  confiscated  or  unserviceable
or scrap surplus, old or obsolete  goods  or  discarded  material  or  waste
products whether by auction or otherwise directly or through  an  agent  for
cash or for deferred  payment  or  for  any  other  valuable  consideration,
notwithstanding anything contained in the TNGST Act, it shall be  deemed  to
be a dealer for the purpose of the Act.  Therefore,  by  amendment  act  the
legislature  has  specifically  brought  in  Port  Trust  also  within   the
definition  of  "dealer"  under  Section 2(g) of  the  Act  and  thus,   the
substratum of the judgment in Madras Port Trust case has been lost.

Shri Giri has relied  upon  the  decision  of  this  Court  in  CST  v.  Sai
Publication Fund, (2002)  4  SCC  57  and  submitted  that  where  the  main
activity is not a business then  any  incidental  or  ancillary  transaction
would only amount to business  if  an  independent  intention  to  carry  on
business in the incidental or ancillary transaction is established.  In  the
said case, the provisions of Bombay Sales Tax Act,  1959  were  examined  to
ascertain whether the ancillary activity of publication and  sale  of  books
by Saibaba Trust amounted  to  “business”  under  the  said  Act,  when  the
dominant activity of the said Trust was non-profit dissemination of  message
of Saibaba. Therein the Court has examined the definition  of  dealer  under
Section 2(11) of the said Act and  observed  that  every  person  is  not  a
“dealer” but only those persons “who carry on the  business”  by  buying  or
selling goods are regarded as “dealers”. Thus, under the said Act, from  the
very definition of dealer, it follows that a person would not  be  a  dealer
in respect of the goods sold or purchased by him unless he  carries  on  the
business of buying  and  selling  such  goods.  In  the  instant  case,  the
definition  of  dealer  under  Section  2(viii)  is  wide  and  specifically
includes persons who have effected sale or transfer  of  goods  irrespective
of the said sale or transfer being in course of business or not.  Therefore,
the dictum of this Court in the said decision would also not  be  applicable
in the instant case.

Therefore, in light of the foregoing discussions, we are of  the  considered
opinion that the activities of the assessee in respect of  buying,  selling,
supplying or distributing goods, executing works contract, transferring  the
right to use any goods or supplying by way of or as  part  of  any  service,
any goods directly or otherwise, whether for cash or  for  deferred  payment
or for commission, remuneration or other valuable consideration, whether  in
course  of  business  or   not,   would   fall   within   the   purview   of
Section 2(viii) of  the  Act.  Hence,   the assessee-Port Trust would   fall
within the meaning of "dealer"  under  Section 2(viii) of  the  Act  and  is
consequently assessable to tax under the Act.
We are of the considered opinion that the High Court has not  committed  any
error, whatsoever, and therefore, the  civil  appeal  being  devoid  of  any
merit requires to be dismissed.

In the result, the appeal is dismissed and the judgment and order passed  by
the High Court is confirmed.  No costs.

            Ordered accordingly.

                                                        .................CJI
                                                                [H.L. DATTU]


                                                        ..................J.
                                                              [R.K. AGRAWAL]


                                                        ..................J.
                                                               [ARUN MISHRA]

NEW DELHI,
APRIL 22, 2015.

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