DIRECTOR OF SUPPLIES & DISPOSALS, CAI,CUTTA versus MEMBER, BOARD OF REVENUE, WEST BENGAL, CALCUTTA

Citation: [1967] 3 S.C.R. 778 · Decided: 24-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

DIRECTOR OF SUPPLIES & DISPOSALs, CAI,CUTTA 
A 
v. 
MEMBER, 
BOARD 
OF 
REVENUE', 
WEST 
BENGAL, 
CALCUTTA 
April 24, 1967 
[J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.] 
Bengal Finance (Sales-tax) Act (6 of 1941), s. 2(c)-Dealer-Cen-
tral Government disposing of surplus war material-If liable to sales-tax 
as dealer. 
Section 2(c) of the Bengal Finance (Sales-tax) Act, 1941 defines a 
"dealer" as meaning any person who carries on the business of selling 
goods in West Bengal and as including the Government. The appellant 
was a widespread organisation of the Government of India set up for 
the disposal of surplus American war equipment which included goods 
of great diversity and which had been taken over by the Government 
of India after the Second World War. The Government of India receiv-
ed the equipment free of cost. A part of the equipment was appropriat-
ed by the Government of India to their own use, some elj.uipment was 
sold to the State Governments and other autonomous bodies, and 
the 
rest was sold to the ·public-. The sales were spread over a number of 
years and goods of the value of several lakhs had been sold in auctions 
held from. time to time. after advertising in newspapers. 
On t'he question whether the appellant wa8 a "dealer" and therefore 
liable to pay sales-tax, 
HELD: (Per Sikri and Ramaswami JJ.) : In disposing of the goods 
the appellant was not carrying on the business of selling goods, 
and 
therefore, the appellant was not a "dealer" within the meaning of s, 2(c) 
of the Act, and, the transactions of sale . were not liable to be taxed 
under the Act. The appellant was not selling the goods for profit but 
was merely disposing them of by way of 
realisation . of capital. [786 
B-D] 
Comniissioner of Taxes v. British Australian Wool Realisation Associa-
tion, [1931] A.C. 224 (P.C.) applied. 
State of Andhra Pradesh v. Ml s. Abdul Bakihi & Bros., 
(1964] 7 
S.C.R. 664; 15 S.T.C. 644 (S.C.) and State of Gujarat v. Raipur Manu-
facturing Co. Ltd., [1967] 1 S.C.R. 618; 19 S.T.C. 1 (S.C.), referred to. 
Per Shah J. (dissenting) : It could be inferred from the totality 
of circumstances that the appellant was ·not merely realising capital, but 
was carr1dng on bu'siness, and was ·therefore a deaJer within: the meaning 
of s. 2( c) of the Act and liable to be assessed to sales-tax. [780 A, HJ 
It cannot be soid that because the Government of India received the 
equipment free of cost it could not set up a business to dispose of that 
equipment. 
l11ere was an organised course of activity which was -sys .. 
tematic and with the set puroose of makin~ profit; and the tests of volume, 
frequency, continuity and system generally. applied for deciding whether 
there was an intention to carry on business were also 'Satisfied. [779 G-H; 
780 F-GJ 
N11rai11 Swadeshi Mills v. Commissioner of Excess Profit Tax, 
26 
I.T.R. 765 (S.C.) and State of Andhra Pradesh v. Abdul Bakshi & Bros., 
[196-11 7 S.C.R. 664; 15 S.T.C. 644 (S.C.) referred to. 
B 
c 
D 
E 
F 
G 
H 
\-
A 
B 
c 
D 
DIRECTOR, SUPPLIES V. BOARD OF REVENUE (Shah, /.) 779 
Commissioner of Taxes v. British Australian Wool Realisation Asso-
cil/tio11 Ltd. [1931] A. C. 224 (P.C.) explained and distinguished. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 616 of 
1966. 
Appeal by special leave from the judgment and order dated 
November 26, 1964 of the Calcutta High Court in Sales Tax 
Reference No. 4 of 1962. 
R. Ganapathy Iyer, V. D. Maha;an and S. P. Nayyar, for the 
appellant. 
B. Sen, P. K. Chatter;ee, G. S. Charter;ee for P. K. Bose, for 
the respondent. 
S!WI, J. delivered a dissenting Opinion. The Judgment of 
SIKRI and RAMASWAMI, JJ. was delivered by RAMASWAMI J. 
Shah, J. I regret my inability to agree with the view expressed 
by Ramaswami, J. 
Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941,. 
defines a "dealer" as meaning "any person who carries on the 
business of selling goods in West Bengal and as including the 
Government." 
The Government of India set up an organisation-the Direc· 
torate of Disposals (United States Transfer Directorate )-to dis-
E 
pose. of war equipment taken over by them from the American 
forces after the Second World War. This organisation had several 
branches under its control. A part of the equipment was appro-
priated by the Government of India to their own use; some equip· 
ment was sold to the State Governments and other autonomous 
F 
G 
H 
bodies; and the rest was sold to the public. The t
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