In this Act, unless the context otherwise requires--

(a) “appropriate State” means--

(i) in relation to a dealer who has one or more places of business situate in the same state, that state;

(ii) in relation to a dealer who has 2[***] places of business situate in different states, every such state with respect to the place or places of business situate within its territory.

Explanation.

[[aa] “business” includes-

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

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or

concern;]

 

NOTES

This term, used in the definition of ‘dealer’ in clause (b) of this Section, is defined here so that all the trading activities of a dealer are brought within the scope of taxation by this Act, be they of goods dealt with by him in the normal course of his business or of other goods sold by him occasionally or casually. The use of the word ‘and’ (and not the word ‘or’) between the two clauses of this definition is significant; both the conditions must be satisfied before a dealer can be charged with tax under this Act on the latter transactions. That is, if the main activity of a dealer cannot be brought under clause (i) of this definition, he may not be subjected to tax in respect of incidental or ancillary transactions mentioned in clause (ii). If the main activity of a person is not business, an incidental or ancillary part of such activity

cannot amount to a business, such as when a Temple sells prasadams or provides accommodation or other services to a devotee [Thirumalai Tirupati Devasthanam vs. State of Madras (1972) 29 STC 226 Madras; Arulmigu Dandayuthapani Tirukoil vs.Commercial Tax

Officer (1998) 108 STC 114 Madras, followed in (2001) 124 STC 553 Madras], or when a religious or other organization sells books etc. to spread its message [Commissioner of Sales Tax vs. Sai Publication Fund, (2002) 126 STC 288 SC]. If the main activity of a dealer is

business, a subsidiary business or commercial activity, whether or not forming an integral part of the main business, will constitute a business by itself, such as when a dealer sells unwanted or surplus goods [State of Tamil Nadu vs. Burma Shell Oil, Storage and Distributing Co, (197) 31 STC 426 SC; State of Orissa vs. Orissa Road Transport Corporation (1977) 107 STC 204 SC]; even if such disposals were made before the commencement of the regular business [State of Tamil Nadu vs, Shakti Estates (1989) 73 STC 209 SC]; and even if no profit accrued on such transactions.

 

[ab] “Crossing the customs frontiers of India” means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.

Explanation: - For the purposes of this clause, “customs station” and “customs authorities”, shall have the same meanings as in the Customs Act, 1962 (52 of 1962);]

 

NOTES

The terms “Customs Area” and “Customs Station” , used in this definition, are defined in clauses (11) and (13) of Section 2 of Customs Act (52 of) 1962, as under:-

(11) “Customs Area’ means the area of a Customs Station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities.

(13) “Customs Station” means any Customs Port, Customs Airport or land Customs Station.”

Sections 44 to 51 of that Act lay down the procedure for the Customs clearance of goods, imported or exported. As explained by the Andhra Pradesh High Court, in Minerals and Metals Trading Corporation of India vs. State of Andhra Pradesh (1998) 110 STC 394 at page 399, the goods will cross the limit of the area of the Customs Station only on clearance by Customs Authorities, which (in the case of imports) will be after filing by the importer of the Bill of Entry and after the assessment of Duty, whether the Duty is paid or not. But, this view has not been agreed to by the Madras High Court in State Trading Corporation of India vs. State of Tamil Nadu (2003) 129 STC 294 in which it has been held that the goods cannot be regarded as having crossed the customs barrier until the duty is paid and the goods are brought out of the limits of the customs station. That is, the goods must have physically moved out of the customs station before they could be considered as having crossed the customs area. In the case of exports, the assessment of Duty will be made after the exporter

files the Shipping Bill but the payment of Duty will have to be made after that assessment before the goods, are allowed to cross the Customs Area (See Section 51 of that Act), Section 59 of the Customs Act permits the imported goods being kept in a bonded warehouse after the Duty thereon had been assessed but not paid and Section 68 allows the goods being cleared from the warehouse after the payment of the dues.

 

[[b] “dealer” means any person who, carries on (whether regularly or otherwise] the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes -

(i) a local authority, a body corporate, a company, any cooperative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business;

(ii) a factor, broker, commission agent, del credere agent, or any other mercantile agent, by whatever name called, and

whether of the same description as herein before mentioned or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal whether disclosed or not; and

(iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal.

 

Explanation1 : Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as -

(i) a mercantile agent as defined in the State of Goods Act,1930 (3 of 1930) , or

(ii) an agent for handling of goods or documents of title relating to goods, or

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State, shall be deemed to be a dealer for the purposes of this Act.

 

Explanation 2 : A Government which, whether or not in the course of business, buys, sells, supplies or distributes, goods directly or otherwise, for cash or for deferred payment or for commission, remunerations or other valuable consideration, shall, except in relation to any sale, supply or distribution of surplus, unserviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act.]

 

NOTES

1.The dealer, defined in this clause, is the assessee under this Act (as is the case in the State laws of Sales Tax) and is solely liable to pay tax under this Act, whether, or not, he is allowed by the law or contract to pass on, or actually passes on, the liability to his customers. Section 9A of this Act permits the dealer to pass on his actual liability to tax to the buyers. The dealer is liable to pay the tax even if the goods sold by him do not belong to him so long as he has the right of disposal over them and can pass a valid title over them to the buyers. It is because of this that various persons like Commission agents, Brokers and others, who do not normally own the goods sold by them, are also brought by this definition within the meaning of the term ‘dealer’. But, before such persons could be saddled with the liabilities under this Act, it should be proved by the assessing authorities that they either own the goods or have the right to dispose them by passing a valid title over them to the purchases [Kandula Radhakrishna Rao vs, Province of Madras, (1952) 3 STC 121 Madras,

approved by the Supreme Court in Bagalkot Cement Co vs. State of Mysore (1976) 37 STC 73]. Thus, brokers who merely bring the sellers and the buyers together or auctioneers who only cry out the bids without having the right to pass the property over the goods cannot be considered as dealers [Kanadula’s case cited above; Chowringhee Sales Bureau vs. Commissioner of Income Tax (1973) 31 STC 254 Sc]. An agriculturist who sells goods produced by him, even if he converts the produce before its sale into a marketable commodity, is nota dealer for the purposes of this Act, though he may be one under the State Act [Kanyakumari Dt. Planters Association vs. DCTO (2003) 130 STC 166 Madras]. A Central or State Government Department, is a dealer in terms of Explanation II below this definition, even if it does not carry on the business of buying and selling goods but makes purchase and sales of goods (except sales of unwanted stores, etc.); the condition in the main part of goods is not applicable in its case [Vrajlal Manilal & Co. vs. State of Madhya Pradesh (1986) 63 STC 

I SC. An illegal partnership is also a dealer wunder this Act liable for tax [M.V. Ganesh vs. C.T.O (2005) 141 STC 236 Madras].

2. he onus of proving that a person sought to be treated as a dealer is one who comes within the definition in this clause, is on the assessing authorities [Nilambur Rubber Co vs. State of Kerala(1999) 112 STC 654 SC]

(c)“declared goods” means goods declared under Section 14 to be of special importance in inter-state trade or commerce;

(d)“goods” includes all materials, articles, commodities and all other kinds of movable property, but does not include Newspapers,

actionable claims, stocks, shares and securities;

 

NOTES

1.This definition, being only inclusive and not exhaustive, can include other concrete as well as abstract or incorporeal goods like copyright [A.V. Meiyappan vs. Commissioner of Commercial Taxes (1967) 20 STC 115 Madras, affirmed by Supreme Court in State of Tamil Nadu vs. Devar Films (1991) 80 STC 391], electricity, steam, gas etc. [Commissioner of Sales Tax vs. Madhya Pradesh Electricity Board (1970) 25 STC 188 SC], import licenses, Exim scrips etc. [Vikas Sales Corporation vs. Commissioner of Commercial Taxes (1996) 102 STC 106 SC], Duty Entitlement Pass Books [Philco Exports vs. Sales Tax Officer (2001) 124 STC 503 Delhi] the telephone system with its accessories [State of Uttar Pradesh vs. Union of India (2003) 130 STC 1 SC] SIM Cards to telephone subscribers [Escotal Mobile Communications vs. Union of India (2002)126 STC 475 Kerala] and branded software programmes on floppies or discs [Tata Consultancy Services vs. State of Andhra Pradesh (1997) 137 STC 620 SC]. The goods must, however, be capable of being sold or marketed as suchand not merely intermediate products not having an existence [Mithal Engineering Works vs. Collector of Central Excise

(1997) 106 STC 201 SC] Delivery orders, railway or other transport receipts are documents of title over the goods mentioned therein and transfer of property over those goods can validly be effected by transfer of these documents by endorsements [Bayyanna Bhimayya vs.

Government of Andhra Pradesh (1961) 12 STC 147 SC]. These transfers of the documents must however, result in actual delivery of goods to the ultimate buyer and if no such delivery had taken place, all the intermediate transactions will not be sales of goods [Raghunath Prasad Poddar vs. Commissioner of Income Tax (1973) 90 ITR 140 SC; Satyanarayan Bagla vs. Commissioner of Commercial Taxes (1992) 84 STC 368 WBTT.

2.Actionable claims, which do not amount to goods as per this definition, include claims for unsecured debts and for beneficial interest in goods not in possession of the buyer [Anraj vs. State of Tamil Nadu (1986) 61 STC 165 SC],forward contracts for sale or purchase of goods [Sales Tax Officer vs. Budh Prakash Jai Prakash (1954) 5 STC 193 SC], damages for breach of contracts (ibid), damages for loss of goods in transit, or by fire, floods etc. [Vania Silk Mills vs. Commissioner of Income Tax (1991) 191 ITR 647 SC], unless the damaged goods were sold by the dealer himself on behalf of the Insurance Company and the sale proceeds appropriated by him towards compensation payable by the latter [Tata Tea vs. State of Karnataka (2001) [2] STC 299 Karnataka]. Lottery tickets have now been held to be actionable claims, with effect from 28th April 2006, in Sunrise Association vs. Government of NCT of Delhi (2006) 145 STC 576 SC, overruling the earlier decision to the contrary in Anraj’s case cited above.

3. As this definition mentions only movable property, sales of goods as a part of immovable property were not covered by it and hence, goods sold in the execution of works contracts involving sale of immovable property did not come within this definition. But, see clause

(g)(ii) of this section, as amended from 11th May 2002.

 

[dd] “Place of business “ includes -

(i) In any case where a dealer carries on business through an agent by [whatever name called], the place of business of such agent;

(ii) a warehouse, godown or other place where a dealer stores his goods ‘ and

(iii) a place where a dealer keeps his books of account;]

(e) “Prescribed” means prescribed by rules made under this Act;

(f) “registered dealer” means a dealer who is registered under Section 7;

2[(g)]“sale”, with its grammatical variations and cognates expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,

(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(iii) a delivery of goods on hire-purchase or any system of payment by installments;

(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash deferred payment or

other valuable consideration;

(vi) a supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods.

(h) “sale price” means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount

according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respective of the goods at the time of or before the delivery there of other than the cost of the freight or delivery or the cost of the installation in cases where such cost is separately charged;

Provided that in the case of a transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract, the sale price of such goods shall be determined in the prescribed manner by making such deductions from the total consideration for the works contract as may be prescribed and such price shall be deemed to be sale price for the purposes of this clause.

(i) “sales tax law” means any law for the time being in force in any State or part there of which provides for the levy of taxes on the sale or

purchases of goods generally or on any specified goods expressly mentioned in that behalf and includes value added tax law and “general sales tax law” means the law for the time being in force in any State or part thereof which provided for the levy of tax on the sale or purchase of goods generally and includes value added tax law;

(j) “turnover” used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period 1[and determined in accordance with the provisions of the Act and rules made there under]1.

(ja) “works contract” means a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property;

 

NOTES

This clause was added by Section 89© of the Finance Act (18 of) 2005 with effect from 13th May 2005.

(k) “year” in relation to a dealer, means the year applicable in relation to him under the General Sales Tax law of the appropriate State, and where there is no such year applicable, the financial year.