Case: State Of Madras Vs. M/S.K.C.P. Ltd

of a manufacturing process leading to the production of such saleable commodity."The facts in the decision of the Court under discussion were different and distinguishable from the present case. The tanning bark was actually consumed in the process of manufacturing another commodity and it was either used as an ingredient or for adding the process of manufacture which cannot be said about the arc furnaces which were indisputably bought for being installed in the foundry as a part of the manufacturing plant. The words "in aid of a manufacturing process" have to be read in the context in which they appear in passage extracted above and cannot be taken to mean that even a part of manufacturing plant will become a saleable commodity if it is found to be unusable or no longer required. Such a view is untenable and cannot be regarded as sustainable in the light of the decision of this Court. In State of Gujarat v. Raipur Manufacturing Co. Ltd., 1967-19 STC 1 = (AIR 1967 SC 1066 ), the tribunal had held that where a cotton textile mill had managed to collect unserviceable articles in the course of manufacture of cloth which were sold, sales of these articles must be regarded as part of the business of the textile mill if the transactions of sale were large and frequent. After referring to the definition and the expression "dealer" in Section 2 (6) of the Bombay Sales Tax Act 1953 and the other relevant provisions of that Act as also the law laid down in 1964-15 STC 644 = (AIR 1965 SC 531 ) it was observed that by the use of the expression "profit motive" it was not intended that profit must, in fact, be earned nor did the expression cover a mere desire to make some monetary gain out of the transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions effected by the person in the course of his activity. Where a person came to own, in the course of his business of manufacturing or selling a commodity, some other commodity which is not a by-product or a subsidiary product of that business and he sold that commodity, cogent evidence that he had the intention to carry on the business of selling that commodity would be required.It was further observed that where a person in the course of carrying on the business was required to dispose of what might be called his fixed assets or his discarded goods acquired in the course of business, an inference that he desired to carry on the business of selling his fixed assets or discarded goods would not ordinarily arise.In the State of Gujarat v. Vivekananda Mills, 1967-19 STC 103 (SC) the assessee was carrying on the business of manufacturing cotton fabrics. It had agreed to purchase under users import licence 300 bales of Californian cotton in January 1953. Believing that the shipment would arrive after six months the assessee made arrangement to purchase 300 bales of similar cotton to meet its immediate requirements. The consignment of Californian cotton arrived unexpectedly in April 1953. A large sum of money belonging to the assessee was blocked up and with the sanction of the authorities the assessee sold 411 bales of this cotton to other mills. It was held that in selling the cotton with a view to avoid locking up of funds, it could not be inferred that the assessee had sold the goods with the intention to carry on the business of selling cotton and the sales were not liable to tax. It was clear from the supplemental statement of the case which had been submitted that though the assessee had been selling cotton from the year 1946 onwards except for three intervening years the sales were in respect of goods purchased for the business of manufacturing cotton cloth and the sales had been effected either because the cotton was surplus or the assessee had to accommodate its sister concern or with the view that the finances were not blocked up by detaining cotton which the assessee did not need for its business.4. The facts and circumstances which have been established in the present case are stronger than those in the previous decisions of this Court. The furnaces were admittedly imported for the purpose of being installed as a part of the plant in the foundry of the assessee. There is no material whatsoever to show that there was any intention at the time when the furnaces were purchased of selling them at a profit. According to Mr. Sen himself the assessee decide to sell the furnaces because it was discovered that they were too big to be installed in the manufacturing plant. The case of the assessee throughout was and no evidence or material to the contrary existed that the furnaces had been shown in the books of the assessee under the classification "workshop equipment."The same entries in the balance sheet. Although the assessee was dealing in the sale of heavy machinery and machinery parts it was nowhere proved that furnaces were ever manufactured or sold by it or were part of its business or ingrained therein. The arc furnaces were either fixed assets or discarded goods which had been found to be unserviceable or unsuitable. The assessee could therefore hardly be said to be a dealer within the definition given in S. 2 (b) of the Central Act which is:"dealer means any person who carries on the business of selling goods, and includes a Government which carries on such business".This definition has to be read in the light of the principles which have been laid down by this court in the cases referred to above.5. It must therefore be held that the High Court rightly came to the conclusion that the sale proceeds of the furnaces could not be included in the turnover the assessee for the purpose of determining the liability of the assessee to sales tax.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The facts in the decision of the Court under discussion were different and distinguishable from the present case. The tanning bark was actually consumed in the process of manufacturing another commodity and it was either used as an ingredient or for adding the process of manufacture which cannot be said about the arc furnaces which were indisputably bought for being installed in the foundry as a part of the manufacturing plant. The words "in aid of a manufacturing process" have to be read in the context in which they appear in passage extracted above and cannot be taken to mean that even a part of manufacturing plant will become a saleable commodity if it is found to be unusable or no longer required. Such a view is untenable and cannot be regarded as sustainable in the light of the decision of thiswas further observed that where a person in the course of carrying on the business was required to dispose of what might be called his fixed assets or his discarded goods acquired in the course of business, an inference that he desired to carry on the business of selling his fixed assets or discarded goods would not ordinarily arise.The facts and circumstances which have been established in the present case are stronger than those in the previous decisions of this Court. The furnaces were admittedly imported for the purpose of being installed as a part of the plant in the foundry of the assessee. There is no material whatsoever to show that there was any intention at the time when the furnaces were purchased of selling them at a profit. According to Mr. Sen himself the assessee decide to sell the furnaces because it was discovered that they were too big to be installed in the manufacturing plant. The case of the assessee throughout was and no evidence or material to the contrary existed that the furnaces had been shown in the books of the assessee under the classification "workshop equipment."The same entries in the balance sheet. Although the assessee was dealing in the sale of heavy machinery and machinery parts it was nowhere proved that furnaces were ever manufactured or sold by it or were part of its business or ingrained therein. The arc furnaces were either fixed assets or discarded goods which had been found to be unserviceable or unsuitable.It must therefore be held that the High Court rightly came to the conclusion that the sale proceeds of the furnaces could not be included in the turnover the assessee for the purpose of determining the liability of the assessee to sales tax.