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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  354-355     OF 2015 (SPECIAL LEAVE PETITION (C) NOS.7939-7940 OF 2004)

ASSITANT COMMISSIONER,  ERNAKULAM ... PETITIONER(S)

VERSUS

HINDUSTAN URBAN INFRASTRUCTURE  LTD. AND ORS. ... RESPONDENT(S)    

J U D G M E N T

H.L. DATTU, CJI.

1. Leave granted.

2. The issue that arises for our consideration and  

decision in the present appeals is whether an “Official  

Liquidator” is a “dealer” within the meaning of section 2  

(viii) of the Kerala General Sales Tax Act, 1963 (for  

short, “the Act, 1963”), and therefore would be required  

to collect sales tax in respect of the sales effected by  

him pursuant to winding up proceedings of a company in  

liquidation.

3. These  appeals  are  directed  against  the  

judgment(s)  and  order(s)  passed  by  the  High  Court  of

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Kerala in M.F.A. No.1394 of 2002, dated 11.02.2003, and  

in Review Petition No.191 of 2003, dated 21.03.2003. The  

Division Bench of the High Court in review confirmed the  

finding in M.F.A. No.1394 of 2002 and concluded that the  

Official  Liquidator  is  not  a  “dealer”  under  the  Act,  

1963. However, by the impugned judgment, the High Court  

has set aside the finding of the learned Single Judge  

which held that the machinery purchased in the auction  

sale  conducted  by  the  Official  Liquidator  is  not  be  

liable to be taxed under the Act, 1963. The impugned  

judgment has further accepted a fresh plea raised by the  

appellant that the auction purchaser would be liable to  

pay purchase tax under section 5A of the Act, 1963.

4. It is relevant to state that respondent No.1,  

that is, Hindustan Urban Infrastructure Ltd., had filed a  

separate appeal- Civil Appeal No.5048 of 2003 against the  

specific  finding  of  the  High  Court  in  the  impugned  

judgment with regard to the liability to pay purchase tax  

which was imposed upon the auction purchaser thereunder.  

This  Court  has  separately  dealt  with  the  aforesaid  

question by its order dated 04.09.2014 in the said civil  

appeal.

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FACTS:-

5. To appreciate the issues involved, it would be  

necessary to notice the facts leading up to the present  

appeals. M/s. Premier Cable Company Ltd. (for short, “the  

Company”), was registered under the Companies Act, 1956  

(for  short,  “the  Act,  1956”),  and  engaged  in  the  

manufacturing of PVC power cables, Aluminium conductors,  

enameled wires, etc.  Pursuant to a recommendation by the  

Board for Industrial and Financial Reconstruction, (for  

short, “BIFR”), the Company was ordered to be wound up by  

an order passed by the High Court in C.P. No.2 of 1996,  

dated 18.06.1998. Respondent No.2, that is, the Official  

Liquidator attached to the High Court was appointed to  

take charge of the assets and liabilities of the Company  

and  to  deal  with  the  same  in  accordance  with  the  

provisions  of  the  Act,  1956  and  the  Rules  framed  

thereunder.  

6. Pursuant  to  the  aforesaid  order,  the  Official  

Liquidator issued a notice inviting tenders, in respect  

of the sale of assets of the Company in liquidation,  

dated 26.11.2001. The aforesaid assets included land with  

factory  building,  workshop  building,  canteen  building,

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godowns, quarters and other auxiliary buildings and also  

plant and machinery of the company in liquidation. The  

Terms and Conditions of the sale of the assets of the  

Company expressly provided,  inter alia, that such sale  

would be subject to confirmation by the High Court and  

further subject to any subsequent terms and conditions as  

may be imposed by the High Court.

7. Respondent No.1–auction  purchaser, in response  

to the notice inviting tenders issued by the Official  

Liquidator, offered to purchase Lot Nos.1-2 for a total  

amount of Rs.5,76,00,000/- (Rupees Five Crore Seventy Six  

Lakh only), by an offer letter dated 18.12.2001. It was  

expressly stated therein that the said amount would be  

inclusive  of  all  statutory  levies  such  as  Sales  Tax,  

Central Sales Tax, Excise Duty, etc., if any, as may be  

applicable.  After  accepting  the  offer  so  made,  the  

Official  Liquidator  had  placed  the  same  before  the  

learned Judge dealing with the company matters for its  

confirmation.   

8. Subsequent to the confirmation of the said sale,  

the auction purchaser, being desirous to transport the  

purchased assets across the border of multiple States,

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had requested the Official Liquidator to incorporate the  

relevant  sales  tax  registration  numbers  in  the  sale  

invoices,  vide letter dated 29.08.2002. By letter dated  

03.09.2002,  the  Official  Liquidator  had  declined  to  

accede to the request so made.  

9. Subsequently, the Official Liquidator filed an  

affidavit before the learned Single Judge of the High  

Court,  inter alia, stating that the Official Liquidator  

would neither be collecting nor be paying any cess or  

sales  tax  in  respect  of  the  sale  effected  by  the  

respondent No.2. It was stated that, in the opinion of  

the Official Liquidator, the auction purchaser should be  

directed  by  the  High  Court  to  meet  any  expenses  or  

liability towards payment of cess, sales tax, etc., if  

and when the same becomes payable.

10. An application was also filed by the Official  

Liquidator, in the Company Petition before the learned  

Singe Judge, inter alia, seeking clarification on certain  

aspects  of  the  matter  including  whether  the  auction  

purchaser would be liable to pay tax on the purchase of  

goods, pursuant to the auction conducted and further to  

direct the auction purchaser to pay any tax as may be

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leviable by the Sales Tax Department. The learned Single  

Judge  after  considering  the  prayers  made  in  the  

application has passed an order, in C.A. No.293 of 2002  

and  C.A.  No.333  of  2002  in  C.P.  No.2  of  1996,  dated  

30.10.2002, wherein it was held that the sale in question  

cannot be treated as a sale by the Central Government or  

by  a  registered  dealer  entitled  to  collect  tax  and  

further has observed that the auction purchaser cannot be  

treated as a dealer under the Act, 1963 and further that  

the said sale in question would not be exigible to sales  

tax.

11. The  Appellant,  aggrieved  by  the  order  of  the  

learned Single Judge, filed an appeal against the order  

dated  30.10.2002,  inter  alia,  contending  that  the  

Official Liquidator would be bound to pay sales tax as  

and  when  a  sale  of  the  assets  of  the  company  in  

liquidation would be effected by him.  The Division Bench  

of the High Court by an order passed in M.F.A. No.1394 of  

2002, observed that the “Official Liquidator” would not  

fall within the definition of “dealer” under the Act,  

1963,  dated  11.02.2003.  Accordingly  the  appeal  was  

dismissed and the order of the learned Single Judge was

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confirmed.  

12. Aggrieved  by  the  aforesaid  order  dated  

11.02.2003, the appellant filed Review Petition No.191 of  

2003 before the High Court. In the Review Petition, a new  

plea was advanced by the appellant claiming that even if  

the  Official  Liquidator  did  not  fall  within  the  

definition of dealer under the Act, 1963, section 5A of  

the said Act would be attracted insofar as the auction  

purchaser is concerned.

13. By the impugned judgment(s) and order(s) passed  

in Review Petition No.191 of 2003, dated 21.03.2003, the  

High Court held that the Official Liquidator cannot be  

treated as a dealer under the Act, 1963, and therefore it  

is not exigible for payment of sales tax. However, the  

Court  was  of  the  view  that  the  auction  purchaser  is  

liable to pay purchase tax under section 5A of the Act,  

1963.  

ISSUES:-

14. The issues that arise for the consideration in  

the  present  appeals  are  firstly,  whether  the  Official  

Liquidator is a “dealer” within the meaning of the Act,  

1963, and secondly, whether the Official Liquidator would

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be required to pay sales tax in respect of sales effected  

pursuant to a winding up proceedings.

SUBMISSIONS:-

15. Shri V. Giri, learned counsel for the appellant,  

submits that the consistent stand taken by the Revenue,  

is that the Official Liquidator is liable to pay sales  

tax on the transaction in question. He would state that  

the Official Liquidator was held to be a “dealer” under  

the Act, 1963 by the learned Single Judge as well as by  

the Division Bench of the High Court, and that it is only  

in review that the said finding was reversed. To support  

the decision of the learned Single Judge and the Division  

Bench  of  the  High  Court,  he  would  rely  upon  the  

definition of “dealer” as provided under the Act, 1963  

and submit that the Official Liquidator is an agent of  

the Central Government and therefore would deemed to be a  

dealer as provided under explanation 2 to section 2(viii)

(f)  of  the  Act,  1963.  To  further  substantiate  his  

contention, he would refer to the Statement filed, by the  

Special  Government  Pleader  (Taxes),  appearing  for  the  

Sales Tax Authorities, before the learned Single Judge of  

the High Court, wherein it was categorically stated that

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the Official Liquidator would be liable to pay tax at the  

relevant rate under the Act, 1963, whether or not he had  

collected the same from the auction purchaser.

16. Shri  C.S.  Rajan,  learned  counsel  for  the  

Official  Liquidator-respondent  No.2,  would  support  the  

findings of the High Court in the review petition and  

state that the Official Liquidator would not be liable to  

pay any tax under the Act, 1963. He would further state  

that  the  liability  would  in  fact  be  on  the  auction  

purchaser who would be exigible to purchase tax under  

section 5A of the Act, 1963.  

17. Shri Rajan would then elaborate upon the nature  

of the activities carried on by the Official Liquidator  

and  submit  that  since  an  Official  Liquidator  is  an  

officer  of  the  Court,  he  merely  discharges  statutory  

functions imposed upon him and therefore cannot be held  

liable to pay tax under the Act, 1963. To support this  

submission, he would further refer to various provisions  

of the Act, 1956 and the Companies (Court) Rules, 1959  

(for short, “the Rules, 1959”). Shri Rajan would lastly  

submit  that  since  the  Official  Liquidator  discharges  

statutory functions of selling the assets of the Company

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in liquidation, he cannot be perceived to be carrying on  

“business” as defined under the Act, 1963 and thus cannot  

be exigible to tax.

18. Shri  S.K.  Bagaria,  learned  senior  counsel  for  

the auction purchaser would submit that the question of  

payment of purchase tax could not arise because firstly,  

the  contention  was  raised  for  the  first  time  in  the  

review petition, and secondly, the said tax is a single-

point levy at the first point of sale. He would contend  

that the auction purchaser could not be made liable for a  

tax  that  was  not  even  imposed  or  demanded  by  the  

competent  authority.  He  would  then  contend  that  the  

Official  Liquidator  makes  the  sale  on  behalf  of  the  

Company and not as the owner. Lastly, Shri Bagaria would  

refer to Rule 54 of the Kerala General Sales Tax Rules,  

1963 (for short, “the Rules, 1963”) and section 17 of the  

Central Sales Tax Act, 1956 (for short, “the CST Act”) to  

demonstrate  that  the  liability  to  pay  sales  tax  was  

clearly on the Official Liquidator.

19. We  have  heard  the  learned  counsel  for  the  

parties to the lis and also carefully perused the orders  

passed by the courts and the forums below.

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20. The point for the consideration and decision of  

this  Court  is  whether  the  Official  Liquidator  is  a  

“dealer” within the meaning of the Act, 1963, and whether  

or not he would be required to pay sales tax in respect  

of  sales  effected  by  him  pursuant  to  winding  up  

proceedings.

RELEVANT PROVISIONS:-

21. To  appreciate  the  arguments  canvassed  it  is  

relevant  to  notice  the  relevant  provisions.  They  are-  

sections 448, 456, 457 of the Act, 1956; Rules 232, 233  

of the Rules, 1959; sections 2 (vi), 2 (viii), 5, 5A, 22  

of the Act, 1963; and Rule 54 of the Rules, 1963. Since  

these provisions have been amended from time to time, we  

have considered the provisions as they were in statute  

book during the relevant period.

22. Sections  448, 456,  457 of  the Act,  1956 deal  

with  the  appointment  and  powers  of  the  Official  

Liquidator. Section 448 of the Act, 1956 provides for the  

appointment of an Official Liquidator for the purpose of  

winding  up  of  a  company.  The  Official  Liquidator  so  

appointed conducts the proceedings in the winding up of  

the  company  and  performs  other  duties,  as  the  court

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imposes upon him, in consonance with the provisions of  

the Act, 1956. Section 456 of the Act, 1956 states that  

pursuant to a winding up order, the liquidator shall take  

into  his  custody  or  under  his  control,  all  the  

properties, effects and actionable claims to which the  

company is or appears to be entitled to. By the said  

provision, all the properties and effects of the company  

are deemed to be in the custody of the court, from the  

date of the winding up order. Section 457 of the Act,  

1956 lists the powers of the Official Liquidator. The  

powers include, inter alia, to carry on business of the  

company  for  its  beneficial  winding  up,  to  sell  the  

immovable and movable property and actionable claims of  

the company, by public auction or private contract, and  

to do all things as may be necessary for winding up the  

affairs of the company and distribution of its assets.  

However, the powers conferred by virtue of the section  

457 of the Act, 1956, on the liquidator, are subject to  

the control of the Court.  

23. In  exercise  of  the  powers  conferred  by  sub-

sections (1) and (2) of section 643 of the Act, 1956, the  

Rules, 1959 were enacted. The relevant rules regarding

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the collection and distribution of assets in a winding-up  

by court are found under Rules 232 to 234 of the Rules,  

1959.  Rule 232 deals with the powers of the Official  

Liquidator. As per the rule, the duties imposed on the  

Court under section 467(1) of the Act, 1956 concerning  

the  collection  of  the  assets  of  the  company  and  the  

application of the assets in discharge of the company's  

liabilities must be discharged by the Official Liquidator  

as  an  officer  of  the  Court.  The  discharge  of  the  

aforesaid functions would be subject to the control of  

the Court and to the proviso in section 643(2) of the  

Act,  1956.  Rule  233  states  that  in  discharge  of  the  

duties imposed upon the Official Liquidator, pursuant to  

section 467(1) of the Act, 1956, and for the purpose of  

acquiring and retaining possession of the property of the  

company, he must be treated as a Receiver of the property  

appointed by the Court.

24. Section  2  of  the  Act,  1963  provides  for  the  

meaning of certain expressions in the said Act. Section  

2(vi) defines “business” as follows:  

“(vi) “Business” includes: - (a) any trade, commerce or manufacture or any  adventure or concern in the nature of trade,  commerce, or manufacture, whether or not such

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

25. Section 2(viii) of the Act, 1963 deals with the  

definition of the term ‘dealer’ as under:

“(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) [Omitted] (b) a casual trader; (c) x x x x  (d) x x x x  (e) x x x x  (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 installments;

(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

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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)  A  society  including  a  co- operative  society,  club  or  firm  or  an  association  or  body  of  persons,  whether  incorporated or not) which whether or not in the  course  of  business,  buys,  sells,  supplies  or  distributes  goods  from  or  to  its  members  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; Explanation: - (2) The Central Government or a  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.

(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.

Explanation I: - Bank for the purposes of this  clause  includes  a  Nationalized  Bank  or  a  Schedule Bank or a Co-operative Bank; Explanation II: - Financing Institution means a  financing institution other than a bank;”

26. On perusal of the aforementioned definitions, it  

would appear that the term “business” has been given a  

broad  meaning  by  including  within  its  ambit  both  

incidental and ancillary transactions. Further, it has

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also eliminated the requirement of a profit motive as  

being an essential component. 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.

27. Section  5  of  the  Act,  1963  is  the  charging  

provision under the said Act and provides for the levy of  

tax on the sale and purchase of goods. It provides that  

every dealer, whose total turnover for that year is not

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less than Rs.2,00,000/-, would be liable to pay tax as  

per rates and at points as specified in the Schedules to  

the Act, 1963. The First Schedule to the Act, 1963 would  

be relevant for the purpose of the present appeal. Serial  

No.84  of  the  said  Schedule  deals  with,  inter  alia,  

Machinery and it provides that the point of levy shall be  

at the point of first sale in the State by a dealer who  

is liable to tax under section 5 of the Act, 1963.

28. Section  5A  of  the  Act,  1963  is  the  charging  

provision as regard to the imposition of purchase tax.  

Under  the  said  provision,  the  purchaser  of  any  goods  

which may be consumed, used, disposed or dispatched to  

any place outside the State from a registered dealer will  

incur  liability  for  payment  of  purchase  tax.  The  

provision  amply  clarifies  that  purchase  tax  would  be  

applicable  only  in  circumstances  in  which  no  tax  is  

payable  under  sub-sections  (1),  (3),  (4)  or  (5)  of  

section 5 of the Act, 1963.

29. The Rules, 1963, have been enacted in exercise  

of the powers conferred by section 57 of the Act, 1963.  

Rule 54 of the Rules, 1963, reads as follows:

“54.  Liability  of  Court  of  Wards,  Official  Trustee etc.-

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In the case of business, owned by a dealer whose  estate or any portion of whose estate is under  the control of Court of Wards, the Administrator  General, the official trustee or any Receiver or  manager  (including  any  person  whatever  be  his  designation, who in fact manages the business on  behalf of the dealer) appointed by, or, under  any order of a Court, the tax shall be levied  upon and recoverable from such Court of Wards,  Administrator  General,  Official  Trustee,  Receiver or Manager in like manner and on the  same  terms  as  it  would  be  leviable  upon  and  recoverable  from  the  dealer  if  he  were  conducting  the  business  himself,  and  all  the  provisions of the Act and Rules made there under  shall apply accordingly.”

30. The aforementioned Rule contemplates a scenario  

wherein  a  business,  owned  by  a  dealer,  is  under  the  

control of, inter alia, the official trustee or receiver  

or manager, including any other person who manages the  

business of the said dealer, who is appointed by an order  

of a Court. In such an event, tax would be recoverable  

from  such  a  person  who  controls  the  business  of  the  

dealer in the same or like manner, as would have been  

recoverable from the dealer itself.

DISCUSSION:-

31. At  the outset,  it would  be necessary  to make  

reference to the Statement/Affidavit filed by the Special  

Government Pleader (Taxes), appearing for the Revenue,

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before the learned Single Judge of the High Court. In the  

said Statement/Affidavit, the Revenue has stated that a  

sale by the Official Liquidator, whether by auction or  

otherwise,  is  a  sale  by  the  Central  Government  and  

therefore the Official Liquidator becomes a dealer under  

the Act, 1963. It was further stated that although tax  

may be collected only by a registered dealer, the Central  

Government is empowered to collect tax in the manner a  

registered dealer is entitled to. The Revenue, in its  

conclusion  therein,  has  stated  that  the  Official  

Liquidator would be liable to pay tax at the relevant  

rate, whether he had collected the same or not.

32. To appreciate the stand of the Revenue, it would  

be profitable to refer to Section 2(viii) of the Act,  

1963 which defines the expression “dealer” as any person  

who carries on the business of buying, selling, supplying  

or  distributing  goods,  executing  works  contract,  

transferring right to use any goods or supplying by way  

of  or  as  part  of  any  service,  any  goods  directly  or  

indirectly. The aforementioned activities are carried out  

for the payment of consideration, in the form of cash,  

deferred  payment,  commission,  remuneration,  etc.  Thus,

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the emphasis under this clause of “carrying on business”  

is  to  be  understood  in  a  wide  sense  and  not  merely  

restricted to the activity of buying and selling.  

33. The expression “business” has been given a wide  

and inclusive definition, whereby ‘any business, trade,  

commerce  or  manufacture  or  any  activity  of  the  said  

nature, whether or not it is carried on with a motive for  

profit’ has been expressly included. It further includes  

any transaction in connection with such trade, commerce,  

etc.  including  within  its  purview,  all  ancillary  or  

incidental  activities  in  connection  with  any  trade,  

commerce, etc.

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

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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.  

36. The definition of a dealer under various sales  

tax legislations has been given a wide import by several  

decisions of this Court. In Chowringhee Sales Bureau (P)  

Ltd. v. CIT, (1973) 1 SCC 46, inter alia, a challenge was

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made to the explanation to the definition of “dealer”  

under the Bengal Finance (Sales Tax) Act, 1941 on the  

ground that is sought to levy a tax on a person who is  

neither a seller nor a purchaser. A three-Judge Bench of  

this Court, rejecting the said challenge, held that the  

term “dealer” would include an auctioneer who carries on  

the business of selling and who has in the customary  

course of business authority to sell goods belonging to  

the principal. It was further observed that the given  

explanation sought to tax a transaction of sale of goods.  

It was held that, a statutory provision providing for a  

levy of sales tax on a person such as an auctioneer,  

would be permissible, if there is a close and direct  

connection between the transaction of sale and the person  

made liable for the payment of sales tax.

37. In State of U.P. v. Union of India, (2003) 3 SCC  

239, this Court held that the Central Government, when  

involved in the business of buying and selling, could be  

treated as a “dealer” under the U.P. Sales Tax Act, 1940.  

The Court observed as follows:

“11. ...It is thus clear that in regard to a  transfer of the right to use any goods both a  person and a Government will be within the ambit  of  the  definition  of  “dealer”  subject  to  the

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following distinction: a person to be a “dealer”  should carry on the business of buying, selling  etc.,  whether  regularly  or  otherwise,  but  a  Government  which  buys,  sells  etc.  (whether  in  the course of business or otherwise) will be a  “dealer” for purposes of the U.P. Act. Inasmuch  as  the  definition  of  “sale”  includes  any  transfer of property in the goods and a transfer  of the right to use any goods for any purpose,  DoT which engages in transfer of right to use  any goods will be a “dealer” within the meaning  of sub-clause (iv) of clause (c) of section 2 of  the U.P. Act.”

38. In State of T.N. v. Shakti Estates, (1989) 1 SCC  

636, this Court while ascertaining whether the assessee  

could be treated as a dealer gave a wide import to the  

term under the Tamil Nadu General Sales Tax Act, 1959.  

The Court observed as follows:

“10. Moreover, we have also to give full effect  to  the  definitions  in  the  statute  we  are  concerned with. The definition of a “business”  also  includes  “any  transaction  in  connection  with or incidental to or ancillary” to a trade  and thus, even on the assessees’ own arguments,  these activities were incidental and ancillary  to the business which the assessee was carrying  on or definitely intended to carry on. It is  also  immaterial,  on  this  definition  that  the  assessees may not have had a “motive of making a  profit or gain” on these sales though on the  facts, it is clear that such motive must have  existed and, in any event, could not be ruled  out. The reference to a “casual” dealer in the  second  definition  also  renders  it  immaterial  that the assessees may not have intended to be  regular dealers in sleepers, timber, firewood or  charcoal but that this was something casual or  incidental to the acquisition and exploitation

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of a forest for running a plantation.”

39. In  State of T.N. v. M.K. Kandaswami, (1975) 4  

SCC 745, this Court while determining the interpretation  

of the term “dealer” under the Madras General Sales Tax  

Act, 1959 gave a broad interpretation to include a person  

who not only carries on business of “selling, supplying  

or distributing” goods but also the one who carries on  

the business of “buying” only.

40. In  Karya  Palak  Engineer,  CPWD  v.  Rajasthan  

Taxation Board, (2004) 7 SCC 195, this Court held that a  

contractor, despite not being the owner but merely the  

custodian of the goods, as a dealer under the Rajasthan  

Sales Tax Act, 1994.  

41. In  State of Orissa v. Titaghur Paper Mills Co.  

Ltd., 1985 Supp SCC 280, while ascertaining whether the  

Central Government or its agents could be treated as be  

“dealer”, this Court observed as follows:

“26. What is pertinent to note about the new  definition of “dealer” is that in the case of  the  Central  Government,  a  State  Government  or  any  of  their  employees  acting  in  official  capacity on behalf of such Government, it is not  necessary  that  the  purchase,  sale,  supply  or  distribution of goods should be in the course of  business, while in all other cases for a person  to  be  a  dealer  he  must  be  carrying  on  the  business  of  purchasing,  selling,  supplying  or

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distributing goods.”  

42. In Food Corporation of India v. State of Kerala,  

(1997) 3 SCC 410, this Court was ascertaining whether the  

procurement of food grains by the Food Corporation of  

India, pursuant to levy orders could amount to  sale or  

purchase to incur sales/ purchase tax liability as levied  

by the States. This Court held that since there was no  

statutory compulsion in the matter of sale or purchase of  

fertilizers and parties had the discretion to enter into  

consensual  contractual  agreements  subject  minimal  

restrictions such as price fixation, quota requirements,  

etc., there is no hesitation in holding that the activity  

of distribution of fertilizers, pursuant to levy orders  

would  amount  to  sale  which  is  eligible  to  incur  tax  

liability. This Court stated that supply or distribution  

of  goods  need  not  be  in  course  of  business  to  be  

considered a sale.

43. Thus, on perusal of the aforesaid decisions of  

this Court, we are of the view that the definition of  

“dealer” under various sales tax legislations has been  

given a broad and inclusive interpretation. It would be  

gainsaid  to  state  that  such  a  broad  and  expansive

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interpretation is in consonance with what the legislature  

intended with regard to imposing sales tax liability on  

all transactions of sale of goods. Therefore, it can be  

concluded that the definition of a “dealer” under the  

Act, 1963, would include persons, if they are involved in  

carrying on any business or trading activity, such as the  

sale of machinery as in the present case. Therefore, as a  

necessary  sequitur,  the  Company  in  liquidation,  whose  

assets are sold by way of an auction, would be a “dealer”  

under the Act, 1963.

44. Section  5  of  the  Act,  1963  is  the  charging  

provision  with  regard  to  imposition  of  sales  tax.  It  

envisages levy of tax on sale or purchase of goods by a  

dealer. Section 5(1) of the Act, 1963 imposes liability  

on every dealer whose total turnover for one year is not  

less than Two Lakh rupees. Section 5(1)(i) enumerates tax  

liability in case of goods specified in the First or  

Second Schedule to the Act, 1963 at the rates and only at  

the  points  specified  against  such  goods  in  the  said  

Schedules.  Serial  No.84(i)  of  the  First  Schedule  

stipulates the rate of tax payable on sale of,  inter  

alia, machinery. In this regard, the point of levy of

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sales tax is at the point of first sale in the State by a  

dealer who is liable to tax under section 5 of the Act,  

1963.

45. Thus, pursuant to section 5 of the Act, 1963, in  

the  case  of  goods  specified  in  the  First  and  Second  

Schedule, the single point tax could be levied only at  

the rates and points specified against such goods in the  

said  Schedules.  The  First  Schedule  specifies  that  the  

point of levy of tax for the goods in question could be  

only at the point of first sale in the State by a dealer.  

In the instant case, the dealer under the Act, 1963 would  

be liable to pay sales tax for the machinery sold at the  

point of first sale, as per section 5 read with the First  

Schedule of the Act, 1963. In light of the above, we are  

of  the  considered  opinion  that  the  transaction  in  

question in the present appeal would be exigible to tax  

under Section 5(1) of the Act, 1963.

46. Section 5-A of the Act, 1963 stipulates certain  

situations wherein purchase tax could be imposed on any  

dealer who purchases any goods, either from a registered  

dealer or from any other person, the sale or purchase of  

which is liable to tax under Act, 1963. The aforesaid

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provision however will apply only in circumstances when  

no tax is payable under sub-sections (1),(3),(4),(5) of  

section  5.  However,  as  noticed  hereinabove,  the  given  

transaction is exigible to tax under Section 5(1) of the  

Act, 1963, and therefore tax liability under Section 5A  

of the Act, 1963 would not apply to the said transaction.

47. Before  delving  into  whether  the  Official  

Liquidator could also be treated as a “dealer” under the  

Act, 1963, it would be apposite to take into account the  

powers of the Official Liquidator, as provided under the  

Act, 1956. The Official Liquidator, in generic terms, is  

an officer appointed to conduct the proceedings and to  

assist the Court in the winding up of a company.  

48. In A. Ramaiya, Guide to the Companies Act, 16th  

Edition  (2004),  while  interpreting  the  powers  of  the  

Official Liquidator under section 457 of the Act, 1956  

observed as follows:

“A  liquidator  is  an  agent  employed  for  the  purpose  of  winding  up  of  the  company.  His  principal  duties  are  to  take  possession  of  assets,  to  make  out  the  requisite  lists  of  contributors and of creditors, to have disputed  cases  adjudicated  upon,  to  realise  the  assets  subject to the control of the court in certain  matters  and  to  apply  the  proceeds  on  the  payments of the company’s debts and liabilities  in due course of administration, and having done

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that,  to  divide  the  surplus  amongst  the  contributories and to adjust their rights.”

49. Section 457(3) of the Act, 1956 expressly states  

that the powers of the liquidator are subject to control  

by the court. The powers conferred upon the liquidator  

can be exercised by him alone and he cannot authorise any  

other  person  to  exercise  those  powers.  The  expression  

‘control  by  court’  was  discussed  by  this  Court  in  

Navlakha  &  Sons  v.  Ramanuja  Das,  (1969)  3  SCC  537,  

wherein  it  was  observed  that  when  the  liquidator  

exercises or proposes to exercise any of the powers, a  

creditor  or  contributory  may  apply  to  the  Court  with  

respect of such exercise. It is the duty of the Court to  

safeguard the interests of the company and its creditors  

and  satisfy  itself  with  the  adequacy  of  the  price  

fetched. It may also be appropriate to consider Rule 232  

of  the  Rules,  1959  which  enumerates  the  duty  of  an  

Official Liquidator in the collection and application of  

the assets of the company, which is discharged by him as  

an officer of the Court.

50. In the case of Hari Prasad Jayantilal & Co. v.  

V.S. Gupta, Income Tax Officer, Ahmedabad & Anr., AIR  

1966 SC 1481, this Court held that the liquidator is

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merely an agent of the company to administer its property  

for the purposes prescribed by the Act, 1956. The Court  

held  that  while  distributing  the  assets,  including  

accumulated  profits,  the  liquidator  acts  merely  as  an  

agent or administrator for and on behalf of the company.  

The Court observed as follows:

“7. ...The property of the Company does not vest  in the liquidator: it continues to remain vested  in  the  Company.  On  the  appointment  of  a  liquidator,  all  the  powers  of  the  Board  of  directors  and  of  the  managing  or  whole-time  directors,  managing  agents,  secretaries  and  treasurers  cease  (s.  491),  and  the  liquidator  may  exercise  the  powers  mentioned  in  s.  512,  including the power to did such things as may be  necessary  for  winding  up  the  affairs  of  the  Company  and  distributing  its  assets.  The  liquidator appointed in a members' winding up is  merely an agent of the Company to administer the  property of the Company for purpose prescribed  by  the  statute.  In  distributing  the  assets  including  accumulated  profits  the  liquidator  acts merely as an agent or administrator for and  on behalf of the Company.”  

51. In Ajay G. Podar v. Official Liquidator of J.S.  

& W.M. & Others, (2008) 14 SCC 17, this Court considered  

the question pertaining to bar of limitation under the  

Act,  1956  for  misfeasance  proceedings  filed  by  the  

Official Liquidator. While discussing the powers of the  

Official  Liquidator  under  section  457(1)  of  the  Act,  

1956,  the  Court  was  of  the  view  that  the  Official

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Liquidator must be authorised to take steps for recovery  

of assets by the Company Court under the winding up order  

and the said proceedings must be initiated in the name of  

the company and on behalf of the company to be wound up.  

This  Court  had  further  opined  that  the  Official  

Liquidator derives his authority from the provisions of  

the Act, 1956.

52. It would be beneficial to notice the views of  

Courts  in  England  insofar  as  powers  of  the  Official  

Liquidator during winding up proceedings. In  Re Mesco  

Properties, (1980) 1 All ER 117, the Court of Appeal was  

ascertaining  as  to  whether  a  company  could  incur  tax  

liability in consequence of the realization of its assets  

after  a  winding  up  order  was  passed  and  whether  the  

Official Liquidator was the proper officer to incur such  

liability. The Court, in the  Re Mesco Properties case  

(supra), at p. 120, observed as follows:

“...  It  must,  in  my  view,  be  open  to  a  liquidator to apply to the court for guidance  upon the question whether, if he discharges a  certain liability of the company in liquidation,  the  payment  will  be  a  necessary  disbursement  within the meaning of rule 195. That is what the  liquidator is doing in this case. The company is  liable for the tax which is due. The tax ought  to be paid. The liquidator is the proper officer  to pay it. When he pays it, he will clearly make

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a  disbursement.  In  my  judgment  it  will  be  a  necessary disbursement within the meaning of the  rule. Moreover common sense and justice seem to  me to require that it should be discharged in  full in priority to the unsecured creditors, and  to  any  expenses  which  rank  lower  in  priority  under rule 195. The tax is a consequence of the  realisation of the assets in the course of the  winding up of the company. That realisation was  a necessary step in the liquidation; that is to  say,  in  the  administration  of  the  insolvent  estate. The fact that in the event there may be  nothing  available  for  the  unsecured  creditors  does not, in my view, mean that the realisation  was not a step taken in the interests of all who  have  claims  against  the  company.  Those  claims  must  necessarily  be  met  out  of  the  available  assets in due order of priority. Superior claims  may  baulk  inferior  ones,  but  the  liquidator's  duty is to realise the assets for the benefit of  all  in  accordance  with  their  rights.  If  in  consequence  of  the  realisation,  the  company  incurs  a  liability,  the  discharge  of  such  liability  must,  in  my  judgment,  constitute  a  charge  or  expense  incurred  in  the  winding  up  within section 267 of the Companies Act 1948 and  must also, in my view, fall within rule 195.”

53. Further, the House of Lords in Ayerst (Inspector  

of Taxes) v. C & K (Construction) Ltd., (1975) 2 All ER  

537, held that a company, pursuant to a winding up order,  

ceases to have the custody and control of its assets  

which  are  thereafter  administered  exclusively  for  the  

benefit of those persons who are entitled to share in the  

proceeds of realisation of the assets. The House of Lords  

elaborately discussed the role of the Official Liquidator

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in this regard and observed, at p. 177, as follows:

“The  functions  of  the  liquidator  are  thus  similar to those of a trustee (formerly official  assignee) in bankruptcy or an executor in the  administration  of  an  estate  of  a  deceased  person. There is, however, this difference: that  whereas the legal title in the property of the  bankrupt  vests  in  the  trustee  and  the  legal  title to property of the deceased vests in the  executor, a winding-up order does not of itself  divest the company of the legal title to any of  its assets. Though this is not expressly stated  in the Act it is implicit in the language used  throughout Part V, particularly in sections 243  to 246 which relate to the powers of liquidators  and refer to 'property ... to which the company  is...  entitled,'  to  'property...  belonging  to  the company,' to 'assets... of the company' and  to acts to be done by the liquidator 'in the  name and on behalf of the company.”  

54. In  light  of  the  aforesaid,  we  would  conclude  

that an Official Liquidator- (i) derives its authority  

from the provisions of the Act, 1956; (ii) acts on behalf  

of the company in liquidation for the purposes prescribed  

by the Act, 1956; (iii) is appointed by and is under the  

control and supervision of the Court while discharging  

his duties.

55. Having  determined  the  status  of  an  Official  

Liquidator  under  the  Act,  1963,  it  would  now  be  

appropriate for this Court to look into the nature of  

liability, if any, imposed on the Official Liquidator for

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the purposes of taxation. For this purpose, we require to  

consider  Rule  54  of  the  Rules,  1963  which  imposes  

liability, inter alia, on a receiver or manager or other  

person appointed by an order of the court, in the event  

that a business owned by a dealer, is under the control  

of the said receiver or manager or person, whatever be  

his  designation,  who  in  fact  manages  the  business  on  

behalf  of  the  dealer.  The  aforesaid  rule  expressly  

provides that tax shall be levied upon and recoverable  

from such receiver, manager, etc., in the same manner, as  

it  would  be  leviable  upon  and  recoverable  from  the  

dealer. Such tax liability may be incurred by any person  

managing  or  conducting  the  business  on  behalf  of  the  

dealer. The tax liability incurred by such person will be  

equivalent to the liability which would be levied upon  

the dealer if he were conducting such business. Further  

that under Rule 233 of the Rules, 1959, for the purposes  

of acquiring and retaining possession of the property of  

the company in liquidation, the Official Liquidator would  

be in the same position as a receiver.  

56. Since  the  Official  Liquidator  is  akin  to  an  

agent  employed  for  the  purpose  of  winding  up  of  a

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company, he steps into the shoes of the Directors of the  

said  Company  for  the  purposes  of  discharging  the  

statutory  functions  of  an  Official  Liquidator.  Thus,  

during  the  said  proceedings,  the  Directors  cease  to  

exercise  any  functions  from  the  date  on  which  the  

Official  Liquidator  is  appointed  and  all  powers  and  

functions for carrying on the business of the company  

thereafter vest with the official liquidator.  

57. Having glanced through the settled principles of  

law,  we  would  revert  back  to  the  controversy  in  the  

present appeals. The first issue canvassed before this  

Court by the learned counsel for the parties to the lis,  

is  whether  the  Official  Liquidator  herein  would  fall  

under the purview of a “dealer” as defined under the Act,  

1963. And secondly, whether the Official Liquidator would  

be liable to pay sales tax in respect of sales effected  

by him pursuant to winding up proceedings.

58. In the present case, the Official Liquidator had  

issued a notice inviting tenders for the sale of the  

assets of the Company. The offer of the auction purchaser  

was  accepted  and  duly  confirmed  by  the  High  Court.  

However,  the  dispute  herein  arose  in  respect  to

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determination of which party would be exigible to sales  

tax.  

59. From the discussion in the preceding paragraphs,  

we can conclude an Official Liquidator is an officer of  

the  Court  and  that  for  the  purpose  of  discharging  

statutory obligations imposed under the Act, 1956, the  

Official Liquidator merely steps into the shoes of the  

company in liquidation. By virtue of the notice issued by  

the  Official  Liquidator  for  inviting  tenders,  dated  

26.11.2001,  it  is  amply  evident  that  the  liquidator  

intended  to  conduct  a  transfer  of  the  said  goods  in  

liquidation.  Since  the  conduct  of  an  auctioned  sale  

involved  transfer  of  goods,  it  falls  within  the  wide  

ambit of section 2(viii)(f) of the Act, 1963.  

60. The observation of the Court of Appeals in the  

Re  Mesco Properties case  (supra),  would  appear  to  be  

squarely applicable to be present factual matrix, that  

is, during a winding up proceedings, if tax requires to  

be  collected  from  the  Company  in  liquidation,  the  

liquidator would be the proper officer to pay the same.

61. This  Court  has  noticed  hereinabove  that  the  

Company in liquidation is a “dealer” with regard to the

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sale of its assets by way of an auction under a winding  

up order. Further, we have noticed the settled law that  

an  Official  Liquidator  steps  into  the  shoes  of  the  

Director of the company in liquidation and performs his  

statutory functions in accordance with the directives of  

the  Court.  Furthermore,  Rule  54  of  the  Rules,  1963  

contemplates  a  situation  where  a  business  owned  by  a  

dealer, is under the control of a receiver or manager or  

any other person, irrespective of his designation, who  

manages the business on behalf of the said dealer. In the  

said scenario, the said person, in-charge of the business  

on behalf of the dealer, would be exigible to sales tax  

in the same manner as it would have been leviable upon  

and recoverable from the dealer itself. Therefore, it can  

be concluded that the liability to pay sales tax, in the  

present case, would be on the Official Liquidator in the  

same  manner  as  the  dealer,  that  is,  the  Company  in  

liquidation.

62. Pursuant  to  section  5  of  the  Act,  1963,  the  

Company in liquidation, as a dealer, will incur liability  

to pay sales tax at the point of first sale as incurred  

by  any  other  dealer  under  the  said  Act.  By  placing

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reliance upon Rule 54 of the Rules, 1963, the liability  

to pay sales tax is borne by the Official Liquidator as a  

manager or receiver of the property of the company in  

liquidation. Therefore, we are of the considered opinion  

that the Official Liquidator would be required to pay the  

tax payable on the sale of the assets of the company in  

liquidation.

63. As  regards  the  liability  of  the  auction  

purchaser, this Court, in an order passed in Civil Appeal  

No.5048 of 2003, has observed that in view of facts and  

circumstances of the case, the auction purchaser would  

not be liable to pay sales tax. The offer of the auction  

purchaser,  as  accepted  by  the  Official  Liquidator  and  

confirmed by the High Court, was inclusive of all taxes.  

It  would  have  been  the  bounden  duty  of  the  Official  

Liquidator to have separated an amount for the payment of  

taxes under the Act, 1963 to avoid any liability. It  

would  be  gainsaid  in  repeating  that  the  Special  

Government  Pleader  (Taxes),  on  behalf  of  the  Revenue,  

before the learned Single Judge of the High Court had  

clearly stated that the liability to pay sales tax would  

be on the Official Liquidator.

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64. In the result, we allow these appeals and set  

aside the impugned judgments and orders passed by the  

High Court.

Ordered accordingly.

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

                        ................... .J.

[S.A. BOBDE] NEW DELHI, JANUARY 13, 2015.