Case Note & Summary
The case involves a reference under the Bombay Sales Tax Act, 1959, at the instance of the BEST Undertaking, which is a municipal entity established under the Bombay Municipal Corporation Act. The Undertaking engages in two activities: generation and distribution of electricity, and rendering transport facilities to the people of Bombay. It was registered as a dealer under section 22(5A) of the Act and was assessed for sales tax for the year 1981-82. The dispute pertains to the returns for the period from 1.4.83 to 31.3.84. The Assistant Commissioner of Sales Tax assessed the Undertaking as a dealer. The appeal before the Deputy Commissioner was rejected on the ground that the Undertaking was registered under section 22(5A). The second appeal before the Maharashtra Sales Tax Tribunal was also dismissed. The Tribunal made a reference to the High Court on three questions of law: (a) whether the applicant is a dealer under section 2(11) of the Act; (b) whether the applicant is carrying on business under section 2(5A); and (c) whether the burden of proof regarding absence of profit motive lies on the applicant. The High Court held that the definition of 'dealer' under section 2(11) includes any person who carries on the business of buying, selling, supplying or distributing goods, and the transport service involves the supply of service for hire, which is a supply of goods. The definition of 'business' under section 2(5A) includes any trade, commerce, manufacture, adventure or concern, and profit motive is not essential. The court noted that the Undertaking sells tickets and provides transport for hire, which is a commercial activity. The burden of proof that the activity is not business lies on the applicant, and it failed to prove that there was no profit motive. The court answered all three questions in the affirmative, against the applicant and in favor of the Revenue.
Headnote
A) Sales Tax - Dealer - Definition under Section 2(11) of Bombay Sales Tax Act, 1959 - The BEST Undertaking, established under Bombay Municipal Corporation Act, provides transport services for hire and sells tickets, which constitutes supply of goods (service) for consideration - Held that the Undertaking is a dealer under the Act (Paras 1-3). B) Sales Tax - Business - Definition under Section 2(5A) of Bombay Sales Tax Act, 1959 - Transport service rendered by BEST Undertaking is an activity in the nature of trade or commerce, and profit motive is not a necessary ingredient - Held that the activity constitutes business under the Act (Paras 2-4). C) Sales Tax - Burden of Proof - Absence of Profit Motive - The applicant claimed that its transport service is not business because it is run without profit motive - Held that the burden to prove absence of profit motive lies on the applicant, and it failed to discharge that burden (Para 3).
Issue of Consideration
Whether the BEST Undertaking, a municipal transport service provider, is a 'dealer' under the Bombay Sales Tax Act, 1959, and whether its transport activity constitutes 'business' under the Act, and whether the burden of proof regarding absence of profit motive lies on the applicant.
Final Decision
The High Court answered all three questions of law in the affirmative, against the applicant and in favor of the Revenue. The reference is disposed of accordingly.
Law Points
- Definition of dealer under section 2(11) of Bombay Sales Tax Act
- 1959 includes any person who carries on business of buying
- selling
- supplying or distributing goods
- definition of business under section 2(5A) includes any trade
- commerce
- manufacture
- adventure or concern
- profit motive is not essential for an activity to be business
- burden of proof lies on the person claiming exemption from tax to show that activity is not business
- transport service for hire or reward is business.
