Indian Express (P) Ltd. v. State Of T.N, Supreme Court Of India, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

C.A No. 1633 of 1985

Disposition

dismissed

Judges

Justice R.S. Pathak
Justice Sabyasachi Mukherjee

Acts

Tamil Nadu General Sales Tax Act, 1959
Section 2 of the Act
Section 5, Subsection 2 of the 1983 Income Tax Act

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Smart Summary

Factual and Procedural Background

The appellant, engaged in the business of printing and publishing newspapers, routinely found itself with unsold copies of its papers. These surplus copies were sold by weight in the market as waste paper. For the Assessment Year 1965-1966, the Deputy Commercial Tax Officer treated the turnover from these sales as taxable under the Tamil Nadu General Sales Tax Act, 1959.

On appeal, the Appellate Assistant Commissioner affirmed the assessment on the ground that selling old newspapers was an activity ancillary to the main newspaper-publishing business. However, the Sales Tax Appellate Tribunal reversed that finding, holding that the appellant was not in the business of selling waste paper and that the goods sold were no longer “newspapers.”

The State of Tamil Nadu sought revision before the High Court of Madras. The High Court set aside the Tribunal’s order and reinstated the original assessment, concluding that the appellant was indeed carrying on a business in selling old newspapers and that such activity was ancillary to its main business. The present appeal by special leave challenges the High Court’s decision.

Legal Issues Presented

Whether surplus copies of newspapers, sold as waste paper, retain the character of “newspapers” so as to be exempt from sales tax under the Tamil Nadu General Sales Tax Act, 1959.
Whether the appellant’s disposal of unsold newspapers constitutes a “business” activity within the meaning of Section 2(d) of the Act, thereby attracting sales tax on the turnover.

Arguments of the Parties

Appellant's Arguments

Surplus copies continued to be “newspapers” at the time of sale; hence their turnover was exempt under the Act.
Because the items sold were old newspapers—still newspapers in form—the exemption granted to newspapers should apply irrespective of their condition or the purpose for which purchasers acquired them.
Reliance was placed on the Supreme Court decisions in C.P. Timber Works v. CST and State of T.N. v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. to support the claim of exemption.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
C.P. Timber Works v. CST, (1967) 20 STC 335 (SC)	Invoked by the appellant to show that certain sales fall outside the ambit of “business” for sales-tax purposes.	The Court held that, given the statutory definition then in force, the case did not assist the appellant and was distinguishable.
State of T.N. v. Burmah Shell Oil Storage and Distributing Co. of India Ltd., (1973) 3 SCC 511; (1973) 31 STC 426	Relied on to argue that ancillary or incidental transactions may not constitute a taxable business.	The Court found the precedent inapplicable to the facts and statutory context of the present case.

Court's Reasoning and Analysis

1. The Court distinguished between “newspapers” and “old newspapers.” It reasoned that newspapers are purchased for their news content, which is valuable only while the information is fresh. Once the information becomes stale, the items lose their essential character as newspapers.

2. Because the surplus copies were sold strictly as waste paper, by weight rather than by copy, the Court concluded that the subject of sale was not “newspapers” but waste paper, which is not exempt under the Act.

3. Addressing the statutory definition of “business” in Section 2(d), the Court observed that the appellant’s disposal of unsold copies was a regular, profit-oriented activity incidental to its primary business of publishing newspapers. Regularity and the profit motive brought the transactions squarely within the statutory meaning of “business.”

4. The Court agreed with the High Court that the appellant’s own application for registration under the Act, stating it dealt in old and unsold newspapers, corroborated the conclusion that it was carrying on a business in that commodity.

5. The precedents cited by the appellant were held to be distinguishable in light of the statutory language operative during the relevant assessment year; consequently, they did not undermine the assessment.

Holding and Implications

Appeal Dismissed.

The Court affirmed the High Court’s reinstatement of the sales-tax assessment on turnover from the sale of old newspapers. The immediate effect is that the appellant remains liable for tax on such sales for the assessment year in question. The decision turns on a fact-specific application of the statutory definition of “business” and does not purport to establish a new legal principle beyond confirming that sales of old newspapers as waste paper are taxable when conducted as a regular, profit-making activity.

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Indian Express (P) Ltd. v. State Of T.N

1. This appeal by special leave is directed against the judgment of the High Court of Madras allowing a revision petition filed by the respondent in a case arising out of an assessment under the Tamil Nadu General Sales Tax Act, 1959.

2. The appellant carries on the business of printing and publishing newspapers. It appears that some copies of the newspapers remain unsold, and these surplus copies are disposed of in the market as waste paper. The sales of the old newspapers are made by weight. In assessment proceedings for Assessment Year 1965-1966 the Deputy Commercial Tax Officer assessed the turnover of unsold newspapers to tax under the Tamil Nadu General Sales Tax Act, 1959.

3. In appeal before the Appellate Assistant Commissioner of Commercial Taxes, the appellant dealer claimed that it was not carrying on the business of selling old newspapers and, therefore, it could not be assessed to tax on such turnover. The Appellate Assistant Commissioner rejected the contention and held that the sales were taxable as the transactions were ancillary to the business of publishing newspapers. But a further appeal before the Sales Tax Appellate Tribunal, Madras was allowed in the view that the unsold newspapers had been sold as waste paper and that what was sold was not a product of the newspaper business and further that the appellant could not be said to be carrying on any business in the sale of such waste paper.

4. The State of Tamil Nadu applied in revision to the High Court, and the High Court allowed the revision petition and setting aside the order of the Sales Tax Appellate Tribunal it restored the assessment order made by the Deputy Commercial Tax Officer. The High Court held on the material before it that in selling unsold newspapers as waste paper the appellant could be said to be carrying on a business. It referred in this connection to the application for registration made by the appellant under the Tamil Nadu General Sales Tax Act in which the appellant had clearly stated that it was carrying on business in old and unsold newspapers. It observed that the transactions of sale could be regarded as an ancillary business connected with the main business of printing and publishing newspapers.

5. In this appeal the learned counsel for the appellant contends that when the surplus copies of the newspapers were sold they possessed the character of newspapers and were, therefore, exempt from sales tax. It seems to us clear that when newspapers are sold to the reading public they are sold as a medium containing information regarded as news. They are purchased by members of the public to acquaint themselves with the current news. Information is news when it is fresh and new. With the lapse of time it ceases to be news. So when newspapers become old, they carry information which is no longer news, and therefore they lose their character as newspapers. When they are disposed of as waste paper, their sale cannot be regarded as the sale of newspapers. They are not sold for the purpose of reading the news printed in them. It will be noted that the surplus copies are sold by weight and not per copy. What is exempt from sales tax is the turnover of newspapers and not the turnover of old newspapers or waste paper.

6. It is also clear from the material on the record that the transactions of sale of the surplus copies must be regarded as a business carried on by the appellant. It was an activity which it pursued regularly, and the motive was to earn a profit. It was incidental to the business carried on by the appellant of printing and publishing newspapers. In the course of carrying on the business of printing and publishing newspapers, it is inevitable that a number of copies should remain surplus and that they should, therefore, be sold as waste paper. The business of selling the surplus copies as waste paper attracted sales tax, having regard to the terms of clause (d) of Section 2 of the Act, which defines the expression “business”, as it stood at the relevant time.

7. In our opinion, the High Court is plainly right in maintaining the sales tax assessment on the turnover of the surplus copies of newspapers sold as waste paper.

8. The learned counsel for the appellant relies on the decisions of this Court in C.P Timber Works v. CST (1967) 20 STC 335 (SC) and State of T.N v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. (1973) 3 SCC 511, (1973) 31 STC 426 Having regard to the state of the law at the relevant time, these decisions do not, in our opinion, assist the appellant.

9. In the result, the appeal fails and is dismissed but without any order as to costs.

Indian Express (P) Ltd. v. State Of T.N

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Indian Express (P) Ltd. v. State Of T.N

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