The Judgment of the Court was delivered by
Dr. A.S Anand, C.J:— These three tax revision petitions arising out of a common order passed by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, dated 16th May, 1981, had been preferred by the Revenue and are being disposed of in common by this order. The assessment years in question are 1977-78 and 1978-79. A brief reference to the facts is necessary to appreciate the controversy raised before us.
2. The assessee is an association called Cement Research Institute of India. The objects of the association are to promote research and other scientific works connected with the cement trade or industry of trades and industries allied thereto, as also to maintain laboratories, workshops and conduct experiments. It is an institution initiated by the cement industry and supported by the Council of Scientific and Industrial Research of the Government of India. The organisation comes under the overall administrative control of the Government of India and is financed in equal proportion by the Government of India and its members. The assessee purchased raw materials like limestones, gypsum, laterite, sand, etc., for their day-to-day research activities. There is no dispute that the assessee consumed the raw materials in the course of their research and the purchase of the raw materials was only for the object of consuming them for research activities. The cement manufactured was disposed of as such to examine the improvement in the productivity and quality. The assessee also undertook testing and analysis of the samples and assisted the member-industries in the design and layout of their laboratories as well as in the selection of instruments and apparatus. The assessing authorities considered that the purchases of the raw materials and the sales effected by the organisation were in the course of normal trade activities. Before the Tribunal, the following three questions were considered:
1. Whether the appellants are dealers doing business and whether the transactions of the appellants are in the course of business?
2. Whether the assessment made under section 7-A on the purchase turnover is exigible to tax or not? and
3. Whether the enhancement petition of the learned State Representative for bringing in the turnover of Rs. 80,781.33 to tax under section 7-A in the assessment for 1978-79 is allowable?
3. The Tribunal after a detailed discussion and taking notice of the nature of the activities of the assessee came to the conclusion that there was no commercial activity at all carried on by the assessee in respect of the cement manufactured by consuming the raw materials purchased. The Tribunal found that an analysis of the transaction went to establish that the same did not result in any taxable event under the sales tax law. The Tribunal relying upon the law laid down by this court in Deputy Commissioner (C.T), Coimbatore v. South India Textile Research Association [1978] 41 STC 197 found in favour of the assessee on all the points.
4. The learned Government Advocate appearing for the Revenue submitted that the assessee is a dealer and his activity would be covered by section 2(d) of the Tamil Nadu General Sales Tax Act, 1959. It was submitted that though the assessee consumed the raw materials in the course of their research, the sale of the product of research was in the nature of a commercial activity of the assessees. It was also submitted that since the assessee had charged excise duty in their bills and also paid excise duties on the manufactured cement, it, therefore, was an additional evidence to hold that the assessees are dealers in cement. So far as the judgment reported in Deputy Commissioner (C.T), Coimbatore v. South India Textile Research Association [1978] 41 STC 197 (Mad.) is concerned, it was not disputed that the judgment was applicable to the case, but it was pleaded that a special leave petition had been preferred in the Supreme Court and is pending disposal.
5. In Deputy Commissioner (C.T), Coimbatore v. South India Textile Research Association [1978] 41 STC 197 (Mad.) it has been held that where an organisation is constituted solely and exclusively for the purpose of carrying on research, the purchase of products by that organisation for the purpose of carrying on research and the sale of the resulting products by that organisation cannot be said to be in the nature of trade or commerce so as to bring it within the definition of the term “business” contained in section 2(d) of the Act.
6. In the instant case also, on facts it has been found by the Tribunal, the final fact-finding authority, that the objects of the organisation are to promote research and other scientific works and that laboratories and workshops are maintained by the organisation to conduct experiments. It is also found as a fact that the assessee consumed the raw materials in the course of their research work only. The Tribunal found that the cement which was produced as a result of the research work was sold but that sale was considered as not a trading or a commercial activity. It was found that there was no commercial activity at all carried on by the assessee in respect of the cement manufactured by it. On these facts, the Tribunal considered whether the activity of the assessee can be said to be covered by the definition of the term “business” as contained in section 2(d) of the Tamil Nadu General Sales Tax Act, 1959, and found in the negative.
7. In our opinion also, the assessee cannot be said to be doing any business in the nature of trade or commerce and, therefore, the transactions cannot be brought within the definition of the term “business” as contained in section 2(d) of the Act. The mere fact that excise duty was charged and paid would not go to show that the assessee is a dealer within the meaning of the expression under the Sales Tax Act. An event attracting the excise duty is manufacture and since manufacture of cement during the research activities has taken place, the exigibility to the excise duty was well-based. But the mere fact that excise duty had been paid, without any further evidence that the assessee indulged in activities covered by section 2(d), cannot advance the case of the Revenue to hold that the assessee carried on any trade or commercial activity in the sale of cement manufactured during the research activities. The judgment of this Court in Deputy Commissioner (C.T), Coimbatore v. South India Textile Research Association [1978] 41 STC 197 is fully applicable to the facts of this case and we are in agreement with the view expressed by the Division Bench in that case.
8. Considered in the totality of the circumstances and on the facts of the present case, we are of the opinion that the Tribunal did not commit any error of law in coming to the conclusion that the assessee was not a dealer and, therefore, was neither exigible to the levy of sales tax nor the purchase tax under section 7-A. The appeals filed by the assessee were rightly allowed by the Tribunal and the enhancement petition was also rightly dismissed. We therefore do not find any cause to interfere. All the three revisions therefore fail and are dismissed. There shall be no order as to costs.
9. Petitions dismissed.