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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.

1. 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.

2. The question that arises for consideration

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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.

3. 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

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in the instant appeal for the assessment years 1990-91, 1994-95 and 1997-98.

4. 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.  

5. 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

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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.  

6. 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

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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.  

7. 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

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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.  

8. 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.

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

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10. 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.

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11. 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.

12. 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

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thereunder. 13. 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

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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)

14. 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

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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

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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.”

15. 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,

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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.”

16. 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

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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

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are not pari materia.

20. 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

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reach  the  conclusion  of  the  Trust  not  being exigible  to  tax,  cannot  be  accepted  in  the instant case.

21. 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.

22. 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

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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

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25. 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.

26. 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.