NATIONAL CASHEW CO QUILON Vs. STATE OF KERALA

JUDGEMENT

(1.) THE assessee is a firm doing business in cashew. He claimed that no tax can be levied in respect of the turnover relating to the sales of gunny bags, containers, tin cuttings, shells, etc. , on the ground that he was not a dealer in respect of the above commodities. In respect of the gunny bags, the turnover fixed by the Sales Tax Officer was Rs. 87,523. 25, that in respect of sundry items including shells was Rs. 1,12,591. 34 and that in respect of the cashew kernels (rejections) was Rs. 40,785. 90. THE claim was overruled by the Sales Tax Officer. THE Appellate Assistant Commissioner allowed the claim in respect of the tin cuttings. THE claims in respect of other items were disallowed by the Appellate Assistant Commissioner on the ground that they were ancillary goods and by-products. THE Tribunal upheld the Appellate Assistant Commissioner's findings. THE Tribunal found as follows : " THE gunny bags sold fetch considerable value and the sales are effected regularly and in the course of business and hence they cannot be treated as disposal of discarded and unserviceable articles. So also cashew shells are by-products and hence liable to the levy of tax. " THE assessee has therefore come to this court raising the following two questions : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is a dealer in gunny bags and cashew shells ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the turnover relating to the discarded and unserviceable articles are taxable at the hands of the assessee when the firm is not a dealer in those goods ?"

(2.) THE answer to the second question depends upon the answer to the first question. THE answer to the first question is covered by the ruling of the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. ([1967] 19 S. T. C. 1 (S. C.)) This is what the Supreme Court said in that decision : " But where a person comes 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 sells that commodity, cogent evidence that he has intention to carry on business of selling that commodity would be required. Where a person in the course of carrying on a business is required to dispose of what may 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. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist. But no test is decisive of the intention to carry on the business : in the light of all the circumstances an inference that a person desires to carry on the business of selling goods may be raised. " Earlier in that decision it was said : " 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. "