LexSTATE OF MADRAS versus M/S. K. C. P. LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
STATE OF MADRAS
v.
MIS. K. C. P. LTD.
A ug11st 20, 1968
[J. C. SHAii V. RAMASWAMI AND A. N. GROVER. JJ.]
Central Sales Tax Act LXX/V. of 1956-Ss. 2(b) and 9(3)-Assessee
engaged in 111anufact11re and salt• of
nuichinery
parts-Purc:/lasing
fur-
naces for irs foundry----011 their being found 1111sui1ab/e selling thern at a
profit-If a 'dealer' in respect of such sale-Whether sales tax payable on
such sale.
The respondent Company carried on business of manufacture and
sale of machinery and parts of machinciry etc.
For its manufacturing
activities, it maintained a foundry and in 1952 it
purchased
two
arc
furnaces for use in this foundry.
As the furnaces were found unsuitable
they wcr~ sold to a purchaser at a profit.
For the assc~nmcnt year 1958-
59 the s;de.s tax a.'scssing authorities included the sale price of the furn-
aces in the turnover of the Company allhouJ?h it \\·as maintained by the
Company that the sale represented an isolated sale of itc; fixed
capi~al
assets.
An appeal to !he Sales Tax Appellate Tribunal wa.' rejected but
the High Court allowed a revision pcti1ion on the view that it wac; im-
possible to hold that the sale of the arc furnaces
was
either
ingrained
in the business activity of the asscssce or would constitute its
normal
business activity; and that the mere fact !hat the sale price exceeded the
cost price of the arc furnaces was not sufficient to establish
that the
sale was a business activity or that ir wac; nctuatOO by the profit motive.
On appeal to this Court.
HELD : The High Court had rightly concluded that the sale proceeds
of the furnaces could not be included in the turnover of the
assessee
for dctcrminin2 ils Jiahilitv to sales tax.
The furnaces were
admittedly imported for the
purpo!'e of
bein~
installed as a part of the plant in the foundry of 1he asses.see.
There
was no material to show that there was any intention at the time when the
furnaces were purchased
of selling
them al a profit.
Although
the
assessec was dealing in the sale of heavy machinery and machinery parLo;
it was nO\\.·here proved that furnaces were ever manufactured or sold by
it or were part of its business or ingrained
therein.
The arc
furnaces
\\"Crc either fixed assets or <liscarckd goods \vhich had been found lo be
unserviceable dr unsuitable.
The asses.sec could not thcrcfora be said
to be a dealer within the definition g·ven in '· 2(b) of the Central Act.
[783 F-784 BJ
State of Andhm Pradesh v. Ahdul Bc.kshi & Bros., 15 S.T.C. 644 and
State of Gujarn.t v. Raipur Manufacturing
Co.
f.td.,
19
S.T.C.
I;
distinguished.
Ambica Mills I.tel. v. State of Gujarat.,
15 S.T.C. 367,
Stat~ of
A
B
c
D
F
G
Gujarct v. Vivekananda Mills. 19 S.T.C. 103, referred to.
H
C1vn, APPEi.LATE JURISDICTION; Civil Appeal No. 731 of
1966.
•
A
'. I
c
I
D
E
F
G
H
MADRAS v. K. C. P. L'J'D. (GtGlY~r, J.)
779
Appeal by special leave from . the judgm~nt and order dated
October 22, 1964 of the Madras High {:ourt in Tax Case No.
197 of 1963 (Revision No. 126).
·
A. K. Sen and A. V. Rangam, for the appellant.
S. T. Desai and T. A. Ramachand~an, for the respondent.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave in which the
>Ole question for decision is whether the respondent
comp~ny
was liable to pay sales tax on an am~unt of Rs. 4,20,000 ben~g
the sale-price of two arc furnaces which had been purchased m
1952 and sold in 1958.
·
The respondent company carried on business at 38, Mount
Road, Madras.
Its main business being the manufacture and
sale of machinery and parts of machinery and accessories.
For
manufacturing parts of the machinery, the company maintained
a foundry and in 1952 it purchased two arc furnaces for a sum
of Rs. 2,13,512.81 for the purpose of using the same in its foun-
dry.
In the account books and the balance sheet of the com-
pany these furnaces were shown under the heading "workshop
equipment".
According to the company the furnaces were found
to be unsuitable for the purpose for which they had been pur-
chased and therefore they were disposed of in 1958 to a purchas-
er in Calcutta for a sum of Rs. 4,20,000.
For the assessment
year 1958-59 the assessing authorities sought
10 include the
amount of Rs. 4,20,000 in the turnover of the company although
it was maintained by the cOtjlpany that the sale represented an
isolated sale of its fixed capital assets.
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