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CASE NO.: Appeal (civil)  164 of 1997

PETITIONER: Vishwanath Jhunjhunwala          

RESPONDENT: State of Uttar Pradesh & Anr.    

DATE OF JUDGMENT: 16/04/2004

BENCH: S. RAJENDRA BABU & G.P. MATHUR

JUDGMENT: J   U  D  G  M  E  N  T [WITH CIVIL APPEALS NOS. 165-166/1997]

RAJENDRA BABU,  J.   :

       At the outset, we make it clear that the learned  counsel are not clear as to the amendments that  have been effected to the Statutes in question.  We  are constrained to proceed upon the material placed  before us and on the basis of the stand taken by  them.

       The appellant before us is a partnership firm  registered as a dealer under the provisions of the UP  Sales Tax Act, 1948 (for short  ’the Act’) and the  Central Sales Tax Act. The firm is engaged in  refining of oil on its own account and also on job  work basis.  For this purpose the firm required  steam coal in huge quantity to be used as fuel for  manufacturing the refined oil.  In order to bring coal  by road from Central Coal Fields, Ranchi to Varanasi,  where the appellant’s factory is situate, the  appellant required Form 31 as prescribed under the  Act and requested the Assistant Commissioner  (Assessment) I Trade Tax Varanasi, respondent No.  2 herein, to issue 1300 Forms 31, who instead of  issuing Form 31 initiated proceedings under Section  15-A(1)(r) of the Act asking the appellant to show  cause as to why penalty be not imposed as coal  which was being imported by the appellant on Form  31 was being used on job work while it should be  used for his own business.   The appellant replied to  the aforesaid show cause notice and an order was  passed directing the appellant not to use the coal  imported on Form 31 for job work.      

       The High Court held that Section 28-A sub- section (1) of the Act makes it clear that an importer  who intends to bring, import  or otherwise receive  into the State from any place outside the State any  goods liable to tax under the Act in such quantity or  measure or of such value as provided under this  provision in connection with his business,  he shall  obtain the prescribed declaration in Form 31 and if  he intends to bring, import or receive such goods  otherwise than in connection with business,  he  may, in the like manner, obtain the prescribed form

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of certificate, that is, Form 30. There was no dispute  before the Court that transactions of sale and  purchase of coal were subject to tax and the  appellant was importing coal in excess of the limits  mentioned under Section 28-A and, therefore, the  appellant should have obtained Form 31 if he  intended to bring or import coal in connection with  his business and if he intended to bring or import  coal otherwise than in connection with his business,  he may obtain Form 32.                      The case set up before the Court by the  respondents is that the coal imported by the  appellant is not only in connection with his business  but also for job work.  Therefore, the High Court,  after adverting to the definition of  "business", held  that the appellant is engaged in the business of  manufacture and sale of refined oil and, in addition,  the appellant also refined oil on job work basis; that  the term "business" would not include job work, that  is, an activity which is in the nature of mere service  which does not involve the purchase or sale of  goods; that, similarly,  the coal intended to be  imported by the appellant for being used on job  work is not in connection with his business and  hence Form No. 31 cannot be issued for the same.   

       It is against this order of the High Court that  the appellant has come up in appeal.

       The term "business" is defined under Section  2(aa) of the Act and reads as follows :-

"business"  in relation to business of  buying or selling goods, includes :- (I) any trade, commerce or manufacture  or any adventure or concern in the nature  of trade, commerce, manufacture,   adventure or concern is carried on with a  motive to make profit and whether or not  any profit accrues from such trade,  commerce, manufacture, adventure or  concern; and

any transaction of buying, selling or  supplying plant, machinery, raw materials,  processing materials, packing materials,  empties, consumable stores, waste or by- products, or any other goods of a similar  nature or any unserviceable or obsolete or  discarded machinery or any parts or  accessories thereof or any waste or scrap  or any of them  (or any other transaction  whatsoever)  which is ancillary to or is  connected with or is incidental to, or  results from, such trade, commerce,  manufacture, adventure or concern;

but does not include any activity in the  nature of mere service or profession which  does not involve the purchase or sale of  goods."

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The High Court placed emphasis on the fact that the  term "business" would  ’not include any activity in  the nature of mere service or profession which does  not involve the purchase or sale of goods’.     In the  present case, admittedly coal is purchased and  imported by the appellant from outside the State of  Uttar Pradesh and, therefore, necessarily it involves  purchase and sale of goods, if not, anything less.  The concept of  "business" as per the definition  would not exclude ’processing materials’  inasmuch  as the appellant utilises the coal imported by him for  processing of  raw material and such activity is also  included in the definition of "business".    

       In explaining the meaning of expression  "business" this Court in Ganesh Prasad Dixit  vs.   Commissioner of Sales Tax, Madhya Pradesh,   1969 (1) SCC 492, quoted the following  observations made in The State of Andhra  Pradesh  vs.  H. Abdul Bakshi and Bros.,  15 STC  644 :-

"A person to be a dealer must be engaged  in the business of buying or selling or  supplying goods.  The expression   ’business’ though extensively used is a  word of indefinite import.   In taxing  statutes it is used in the sense of an  occupation, or profession which occupies  the time, attention and labour of a person,  normally with the object of making profit.   To regard an activity as business there  must be a course of dealings, either  actually continued or contemplated to be  continued with a profit motive, and not for  sport or pleasure.   But to be a dealer a  person need not follow the activity of  buying, selling and supplying the same  commodity.   Mere buying for personal  consumption, i.e. without a profit motive,   will not make a person dealer within the  meaning of the Act,  but a person who  consumes a commodity bought by him in  the course of his trade, or use in  manufacturing another commodity for  sale,  would be regarded as a dealer.  The  Legislature has not made sale of the very  article bought by a person a condition for  treating him as a dealer; the definition  merely requires that the buying of the  commodity mentioned in Rule 5(2) must  be in the course of business, i.e. must be  for sale or use with a view to make profit  out of the integrated activity of buying  and disposal.   The commodity may itself  be converted into another saleable  commodity, or it may be used as an  ingredient or in aid of a manufacturing  process leading to the production of such  saleable commodity."

       When activities of the appellant would  necessarily include job work done by him and he  cannot do this job work except after purchase of

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coal, his activities even if stated to be one in the  nature of mere service would involve purchase of  coal and in that event it falls outside the  exclusionary clause in the definition of "business".   

       In that view of the matter, the view taken by  the High Court is not correct and is set aside and in  turn the view taken by the Assistant Commissioner  (Assessment) also stands set aside.  The appeals  are allowed.