Case: Director Of Supplies &amp; Disposals, Calcutta Vs. Member, Board Of Revenue, West Bengal,Calcutta

13. The Director of Disposals, the United States Transfer Directorate, is an organisation of the Government of India. It is responsible for the disposal of surplus American war equipment which had been taken over by the Government of India. When the equipment was substantially disposed of, its work was reduced to a great extent and, therefore, it merged with the office of the Regional Commissioner (Disposals) on January 11, 1950. Later on the Supply and Disposal Services of the Government of India were merged and the department was redesignated as Directorate of Supplies and Disposals. The function of this directorate was to dispose of surplus goods and to purchase goods on behalf of the Government of India. The Director of Supplies and Disposals (hereinafter called the appellant) was asked by the Sales tax officials of the West Bengal Government to get himself registered as a dealer under the Act. The appellant declined to do so, contending that he was not a dealer and that he was not engaged in the business of buying and selling and was, therefore, not liable to pay any sales tax, but the contention of the appellant wasd and he was assessed to sales tax for three periods from April 1st, 1949 up till May 31, 1951. The appellant took the matter in appeal to the Assistant Commissioner of Commercial Taxes, Calcutta who modified the orders of assessment, holding that the supplies made by the appellant were liable to be taxed except those which were proved to be mere transfers to its sister departments in the Government of India. The appellant filed revision petitions to the Commissioner of Commercial Taxes and to the Board of Revenue, but these petitions were dismissed. As directed by the High Court, the Board of Revenue referred the following question of law for the decision of the High Court under S. 21 (3) of the Act:"Whether the Director of Supplies and Disposals, United States Transfer Directorate having his office situated at No. 6, Esplanade East, Calcutta carries on the business of selling goods in West Bengal and is, therefore, a Dealer, within the meaning of S. 2 (c) of the Bengal Finance (Sales Tax) Act, 1941 ?"By its judgment. dated November 26, 1964, the High Court answered the question in the affirmative and against the appellant.

Reasoning: 16. Having examined the facts found by the High Court in the present case we are satisfied that the appellant was not carrying on the business of buying or selling goods within the meaning of S. 2 (c) of the Act. It is not disputed that large quantities of war material were handed over to the Government of India under the provisions of the. S. agreement for the prosecution of the war. A part of the war material was used by the Government for defence and military activities and there was a huge surplus left with the Government of India which was either no longer useful or had become obsolete. We are of the opinion that in disposing of this surplus war material the appellant was not carrying on the business of selling goods and the transactions of sale were not liable to be taxed under the provisions of the Act. In our opinion, the appellant was not selling surplus goods for profit but he was merely disposing of the surplus material by way of realisation and the transactions were, therefore, not taxable as sales falling within the provisions of thee view that we have expressed is borne out by the decision of the Judicial Committee in 1931 AC 224, in which the respondent company was incorporated in 1920 in Victoria pursuant to an agreement between the Imperial and Commonwealth Governments, for the purpose of selling the undisposed of surplus of wool acquired for the war and distributing the proceedsThe material facts of this case are closely parallel to those in the present case and it must be held that the appellant was not carrying on the business of selling goods and was not a "dealer" within the meaning of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941)17. For these reasons we hold that the appellant did not carry on the business of selling goods in West Bengal and, therefore, was not a dealer within the meaning of Section 2 (c) of the Act and the question referred to the High Court under S. 21 (3) of the Act must be answered in the negative and in favour of the appellant.