A ..

VISHWANATH JHUNJHUNWALA v.

STATE OF UTT AR PRADESH AND ANR.

APRIL 16, 2004

(S. RAJENDRA BABU AND G.P. MATHUR, JJ.]

U.P. Sales Tax Act, 1948:

Ss. 2(aa) and 28-A(l)-"Business "-Import of coalin connection with- C Declaration in Form-31-Firm engaged in refining of oil on its own account as also on job work basis-Not allowed to use the coal imported on Form-31 for job work-Held, concept of business would not exclude processing materials-Coal imported/or processing raw material is included in definition of "business" under s. 2(aa)-Activities of the firm include job work which D involve purchase of coal and fall outside exclusionary clause in the definition of "business".

Appellant-firm was engaged in refining of oil on its own account as also on job work basis. For this purpose, the appellant was importing coal from Central Coal Fields by road. When the appellant applied for issue E of 1300 Forms-31 as prescribed under U.P. Sales Tax Act, 1948, respondent No. 2, the Assistant Commissioner (Assessment), issued a notice requiring the appellant to show cause as to why penalty should not be imposed on the firm as the coal which was being imported on Form-31 was being used for job work whereas it should be used for its own business.

The appellant was directed not to use the coal imported on Form 31 for F job work. The High Court upheld the order holding that since the coal

intended to be imported by the appellant for job work was not in connection with his business, Form 31 could not be issued for the same.

Hence the appeals.

G Allowing the appeals~ the Court

HELD: ].I. Admittedly coal is purchased and imported by the appellant from outside the State of Uttar Pradesh and, therefore, necessarily it involves purchase and sale of goods, if not, anything less.

The concept of "business"· as per the definition would not exclude H 296

V. JHUNJHUNWALA v.STATE [RAJENDRA BABU, J.] 297

'processing materials' inasmuch as the appellant utilizes the coal imported A by him for processing of raw material and such activity is also included in the definition of"business" under s.2(aa) of the U.P. Sales Tax Act, 1948. (299-E-Hl

Ganesh Prasad Dixit v. Commissioner of Sales Tax, Madhya Pradesh,. [1969) 1SCC492 and The State of Andhra Pradesh v. H. Abdul Bakshi and B Bros., 15 STC 644, relied on.

1.2. When activities of the appellant would necessarily include job, work done by him and he cannot do this job work except after purchase of coal, his activities even if stated to be one in the nature of mere service, C would involve purchase of coal and in that event it falls outside the. exclusionary clause in the definition of "business". [300-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 164of1997.

From the Judgment and Order dated 24.5.96 of the Allahabad High D Court in C.M.W.P. No. 1065 of 1994.

WITH

C.A. Nos. 165-166 of 1997.

Sunil Gupta and Ms. Meenakshi Arora for the Appellants in C.A. No. .E 64/97.

Mis. J.B. Dadachanji & Co, (NP) for the Appellants in C.A.Nos. 165- 166/97.

R.C. Verma, Mukesh Verma and Manish Shanker for the Respondents. F

The Judgment of the Court was delivered by

RAJENDRA BABU, .J. At the outset, we make it clear that the learned counsel are not clear as to the amendments that have been effected to the Statutes in question. We are constrained to proceed upon the material placed before us and on the basis of the stand taken by them.

The appellant before us is a partnership firm registered as a dealer under the provisions of the UP Sales TaX Act, 1948 (for short 'the Act') and

the Central Sales Tax Act. The firm is engaged in refining of oil on its own account and also on job work basis. For this purpose the firm required steam H

A coal in huge quantity to be used as fuel for manufacturing the refined oil. In order to bring coal by road from Central Coal Fields, Ranchi to Varanasi, where the appellant's factory is situate, the appellant required Form 31 as prescribed under the Act and requested the Assistant Commissfoner (Assessment) I Trade Tax Varanasi, respondent No. 2 herein, to issue 1300 B Forms 31, who instead of issuing Form 31 initiated proceedings under Section

15-A(l)(r) of the Act asking the appellant to show cause as to why penalty be not imposed as coal which was being imported by the appellant on Form 31 was being used on job work while it should be used for his own business.

The appellant replied to the aforesaid show cause notice and an order was passed directing the appellant not to use the coal imported on Fonn 31 for C job work.

'-ii The High Court held that Section 28-A sub-section (l) of the Act

make~ it clear that an importer who intends to bring, import or otherwise receive into the State from any place outside the State any goods liable to tax under the Act in such quantity or measure or of such value as provided under D this provision in connection with his business, he shall obtain the prescribed declaration in Form 31 and if he intends to bring, import or receive such goods otherwise than in connection with business, he may, in the like manner, obtain the prescribed form of certificate, that is, Form 30. There was nn dispute before the Court that transactions of sale and purchase of coal were E subject to tax and the appellant was importing coal in excess of the limits mentioned under Section 28-A and, therefore, the appellant should have obtained Form 31 if he intended to bring or import coal in connection with his business and if he intended to bring or import coal otherwise than in connection with his business, he may obtain Form 32.

p The case set up before the Court by the respondents is that the coal imported by the appellant is not only in connection with his business but also for job work. Therefore, the High Court, after adverting to the definition of

"business", held that the appellant is engaged in the business of manufacture and sale of refined oil and, in addition, the appellant also refined oil on job work basis; that the term "business" would not include job work, that is, an G activity which is in the nature of mere service which does not involve the purchase or sale of goods; that, similarly, the coal intended to be imported by the appellant for being used on job work is not in connection with his business and hence Form No. 31 cannot be issued for the same.

H It is against this order of the High Court that the appellant has come up

V. JHUNJHUNW ALA v. ST A TE [RAJENDRA BABU, J.] 299

in appeal.

The term "business" is defined under Section 2(aa) of the Act and reads as follows :-

"business" in relation to business of buying or selling goods, includes:•

(I) any trade, commerce or manufacture or any adventure or concern' in the nature of trade, commerce, manufacture, adventure or concern. is carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and

any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or by-products, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery or any parts

or accessories thereof or any waste or scrap or any of them (or any other transaction whatsoever) which is ancillary to or is connected D with or is incidental to, or results from, such trade, commerce, manufacture, adventure or concern;

but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods."

E The High Court placed emphasis on the fact that the term "business" would 'not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods'. In the present case, admittedly coal is purchased and imported by the appellant from outside the State of Uttar Pradesh and, therefore, necessarily it involves purchase and sale of goods, if not, anything less. The concept of "business" as per the F definition would not exclude 'processing materials' inasmuch as the appellant utilises the coal imported by him for processing of raw material and such activity is also included in the definition of "business".

In explaining the meaning of expression "business" this Court in Ganesh G Prasad Dixit v. Commissioner of Sales Tax, Madhya Pradesh, [1969) 1 SCC 492, quoted the following observations made in The State of Andhra Pradesh

v. H. Abdul Bakshi and Bros., 15 STC 644 :-

"A person to be a dealer must be engaged in the business of buying or selling or supplying goods. The expression 'business' though H

extensively used is 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, i.e. 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 5(2) must be in the course of business, i.e. must be for sale 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."

E When activities of the appellant would necessarily include job work done by him and he cannot do this job work except after purchase of coal, his activities even if stated to be one in the nature of mere service would involve purchase of coal and in that event it falls outside the exclusionary clause in the definition of "business".

p In that view of the matter, the view taken by the High Court is not correct and is set aside and in tum the view taken by the Assistant Commissioner (Assessment) also stands set aside. The appeals are allowed.

R.P.

Appeals allowed.