Appeal No 473 of 1963
Appeal by special leave from the judgment and order March 22 1960 of the Andhra Pradesh High Court in Tax Revision Case No 88 of 1960
A Ranganadham Chetty B R G K Achar and R N Sachthey for the appellant
The respondent did not appear
665 April 8 1964
The Judgment of the Court was delivered by SHAH J
The respondents who are registered as dealers under the Hyderabad General Sales Tax Act 1950 carry on the business of tanning hides and skins and of selling the tanned skins in the town of Hyderabad
For the purposes of their business the respondents purchase undressed hides and skins and also tanning bark and other materials required in their tannery
For the assessment year 1954 55 the Sales tax Officer Circle IV Hyderabad found that the total turnover of the respondents was Rs 570417 12 4 OS in respect of the hides skins wool and tanning bark
The respondents disputed their liability to pay tax on Rs 61431 14 9 OS included in the turnover contending that this amount represented the price paid for buying tanning bark required in their tannery
They submitted that tanning bark was bought for consumption in the tannery and not for sale and they were accordingly not dealers in tanning bark and therefore the price paid for buying tanning bark was not liable to duty under the Hyderabad General Sales Tax Act
The Sales tax Officer rejected the contention of the respondents and his order was confirmed in appeal by the Deputy Commissioner C T Hyderabad Division and also by the Sales Tax Appellate Tribunal Hyderabad
But the High Court of Andhra Pradesh in a petition under section 221 read with rule 40 framed under the Andhra Pradesh General Sales Tax Act VII of 1957 modified the order passed by the taxing authorities and excluded from the computation of the taxable turnover the price paid by the respondents for the tanning bark used in the tannery
With special leave the State of Andhra Pradesh has appealed to this Court
Section 2e of the Hyderabad General Sales Tax Act defines dealer as meaning any person
local authority company firm Hindu undivided family or any association or associations of persons engaged in the business of buying selling or supplying goods in the Hyderabad State whether for a commission remuneration or otherwise and includes a State Government which carries on such business and any society club or association which buys or sells or supplies goods to its members
Section 2m defines turnover as meaning an aggregate amount for which goods are either bought by or sold by a dealer whether for a cash or for de ferred payment or other valuable consideration
section 4 a tax at the rate of three pies in the rupee in I G currency on so much of the turnover for the year is is attributable to transactions in goods other than exempted goods is imposed
Rule 51 provides that save as provided in sub rule 2 the turnover of a dealer for the purpose of the rules shall be the amount for which goods are sold by the dealer
Rule 52 provides that in the case of certain commodities the turnover 666 of a dealer for the purpose of the rules shall be the amount for which the goods are bought by the dealer
Those commo dities are a Groundnut shelled or unshelled b Bidi leaves c Tarwar and other tanning barks d Til karad and castor seed e Cotton including kappas f Linseed turmeric dhania and other agricultural produce including all kinds of dhals and paddy husked or unhusked not otherwise exempted under the said Act but excluding cotton seed sugarcane tea and coffee seeds g Hides and skins h Wool bones and horns
The High Court of Andhra Pradesh rejected the claim of the taxing authories to tax the tanning bark bought by the respondents on the ground that a purchaser is liable to pay tax under Rule 52 only when he is carrying on business of buying and selling a commodity specified in the sub rule 2 and not when he buys it for consumption in a process for manufacturing an article to be sold by him
Therefore in the view of the High Court if a dealer buys any commodity included in Rule 52 for consumption in his business but not for sale he is not to be regarded as engaged in the business of buying selling or supplying that commodity and the price paid for buying the commodity is not liable to tax
We are unable to agree with this view of the High Court
A person to be a dealer must be engaged in the business of buying or selling or supplying goods
The expression busi ness though extensively used 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 ie 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 52 must be in the course of business ie must be for sale 667 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
It cannot be said in the present case that the tanning bark was bought by the respondent for any purpose unconnected with the business carried on by them viz manufacture and sale of dressed hides and skins
Consumption in the business and not sale of the commodity bought therefore does not exclude the respondents from the definition of dealer aua the tanning bark
This is the view which has in our judgment been rightly taken by the Madras Hight Court in the interpretation of a similar statute in operation in the State of Madras in LMS Sadak Thamby and Company vs The State of Madras1
The appeal is therefore allowed and the order passed by the High Court is set aside and order passed by the Sales tax Appellate Tribunal restored
No order as to costs
Appeal dismissed


Summary:
The respondents are registered dealers carrying on the business of tanning hides and skins and selling the tanned skins
The authorities under the Hyderabad General Sales Tax Act 1950 assessed the respondent for the total turnover which included the price paid by the respondent for purchasing tanning bark used in the tanning process
The respondent contended that the price paid for the purchase of tanning bark should be excluded from the taxable turnover because the tanning bark was bought by the respondent for consumption and not for sale and hence the respondent was not dealer qua the tanning bark
His contention was not accepted by the Tax authorities
In a petition to the High Court under section 221 of the Hyderabad General Sales Tax Act the contention of the respondent was accepted and the assessment was modified
In appeal filed with special leave Held The High Court was in error in holding that a purchaser is liable to pay tax under r 52 of the Sales Tax Rules only when he is carrying on a business of buying and selling a commodity specified in sub r
2 and not when he buys it for consumption in a process for manufacturing a commodity to be sold by him
ii To regard an activity as a business there must be a course of dealing 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
The Act requires merely that buying of the commodity mentioned in r 52 must be in the course of business that is it must be for sale or use with a view to take 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
iii In the present case the tanning bark was not bought by the respondent for any purpose unconnected with the business
Consumption of the tanning bark in the manufacturing process did not therefore exclude the respondents from the definition of dealer qua the tanning bark
Sadak Thamby and Company vs State of Madras 14 STC 753 approved