JUDGMENT Anshuman Singh, J.
1. These five revisions at the instance of the assessee are directed against the judgment dated 13th February, 1985, passed by the Sales Tax Tribunal, Kanpur, relating to assessment years 1973-74, 1974-75 and 1975-76 arising out of original assessment as well as proceedings under Section 21 of the U.P. Sales Tax Act (hereinafter referred to as the Act). Since all the five revisions arise out of a common order, they are being disposed of by a common judgment.
2. The applicant-assessee is an insurance company and, according to it, provides services of general insurance by covering risk of loss against accidents, fire, theft, etc. The business of the applicant is to provide insurance to the customers and indemnify them against loss, damage or theft of the insured property in terms of the insured contracts. It is also doing the workmen compensation insurance, third party insurance, sickness insurance, robbery, theft, etc. Some time in motor claims the assessee gets the salvage which is disposed of by inviting quotations periodically but the authorities under the Act levied sales tax on the amount received from the disposal of salvage. It is also alleged that the assessee is not a "dealer" and is not carrying on any business of buying or selling goods and as such no sales tax can be levied on it.
3. It is not necessary to go into the details of the facts of each case as they are not relevant for deciding the question of law as to whether the activities carried on by the applicant are "business" as defined in Section 2(aa) and it is a "dealer" within the meaning of Section 2(c) of the Act.
4. Before entering into the controversy it would be necessary to refer to the definitions given to the words "business" and "dealer" in Sections 2(aa) and 2(c) of the Act which, in so far they are relevant for the case, are as follows:
2. (aa) 'business', in relation to business of buying or selling goods 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 profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and
(ii) any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or by-products, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery, or any parts or accessories thereof or any waste or scrap or any of them, which is ancillary to or is connected with or is incidental to, or results from, such trade, commerce, manufacture, adventure or concern;
but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods.
2. (c) 'dealer' means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes--
(i) a local authority, body corporate, company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business;
...
5. Mr. Bharatji Agarwal, learned Counsel for the assessee, urged that the applicant was neither a "dealer" within the meaning of Section 2(c) of the Act nor was carrying on "business" as defined in Section 2(aa) of the Act and as such the levy of sales tax is wholly illegal and unwarranted under the law. In support of his contention he placed reliance on a decision of the Madras High Court in New India Assurance Company Limited v. Deputy Commercial Tax Officer, Esplanade Division I, Madras [1972] 29 STC 539 and submitted that the facts of that case and that of the present cases are identical and the applicant cannot be held to be a "dealer". In that case the New India Assurance Company Limited was an incorporated company under the Indian Companies Act doing general insurance business. In connection with the claims made on an insured motor car which was involved in an accident, the petitioner is said to have paid all the claims and taken over the damaged motor car. As the petitioner's only business was insurance, it had to sell away the said damaged motor car which came into its possession accidentally, by reason of the settlement of the claim in connection with an accident to that vehicle. The petitioner auctioned the said damaged motor car. The sales tax authorities under the Madras General Sales Tax Act, 1959, levied sales tax on the sale proceeds of the said damaged motorcar. The matter came up before the Madras High Court and the question arose whether the petitioner was a "dealer" within the meaning of Section 2(g) of the Madras General Sales Tax Act. The Madras High Court observed that "they do not buy or sell or supply or distribute goods either for cash or for deferred payment or for any other valuable consideration. Occasionally, when in the course of their activity they come into possession of a damaged vehicle over which they settle their claims under the insurance policy taken for the purpose and if in order to get rid of the damaged vehicle, they engage the services of an auctioneer and sell the same, they cannot even be characterised as casual traders". It relied on a decision of the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 (SC) in which it was held that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposed of for a price, articles discarded, surplus or unserviceable. Unless they are frequent, voluminous, continuous and regular, an inference that they were all undertaken in the course of trade, whether real or casual, cannot be properly drawn. Relying on the aforesaid decision of the Supreme Court the Madras High Court took the view that "the petitioner cannot come within the definition of Section 2(g) as a dealer".
6. On the other hand the learned standing counsel contended that the applicant is a "dealer" and placed reliance on a decision of the Supreme Court in District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC). He contended that the definitions to the words "dealer" and "business" given under the Act are in pari materia with the definition given to those words under the Rajasthan Sales Tax Act, 1954, and as such the aforesaid case of the Supreme Court is wholly applicable and on the strength of that case he contended that there was no room for doubt that the applicant in the present cases, though an insurance company, was a "dealer" and the transaction made by it of the salvage was exigible to sales tax. In that case the question was whether the appellant, the Northern Railway, Jodhpur, was liable to pay sales tax on the sales of unserviceable materials and scrap, etc., for the period in question, and the Supreme Court held that the sales of unserviceable materials and scrap by the Northern Railway, Jodhpur, were exigible to sales tax. The definition of the term "dealer" in Section 2(f) of the Rajasthan Sales Tax Act, so far as it is material, runs:
'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration and includes--
(i) the Central or a State Government or any of their departments, a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business ...
Section 2(cc) of the aforesaid Act defines "business" and provides:
'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 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;
but does not include activities of sale, supply or distribution of goods carried on without any profit-motive by--
(i) any charitable or religious institution in the performance of its functions for achieving its avowed objects; and
(ii) an educational institution, where such sale, supply or distribution is made to its students.
In that case the Supreme Court observed:
We also think that there is no fallacy in thinking that the railway since it is concerned in the activity of transportation is engaged in commerce within the meaning of Clause (i) of the definition and that the sale of unserviceable materials and scrap-iron, etc., is transaction in connection with or ancillary to such commerce within Clause (ii) of that definition.
7. The aforesaid observation of the Supreme Court clearly indicates that while determining whether the railway was a "dealer" and the transaction made by it amounted to "business", the paramount consideration which weighed with it appears to be the nature of the activity carried on by the railway. The dominant purpose of establishing railways is to provide transportation facilities to the public at large. The railways are engaged in the activity of transportation and are also engaged in commerce, and the sale of unserviceable materials is ancillary to commerce carried on by the railways. So far as the insurance companies are concerned, the nature of the activity is neither of buying nor of selling. They render services to their customers and indemnify them by making general insurance particularly of vehicles, sale of salvage of which has been subjected to tax. For instance if any vehicle is insured by an insurance company and is involved in some accident, the company under the contract undertakes to get it repaired and thereby compensate the owner of vehicle. Some times in rare cases if the vehicle becomes wholly unserviceable, the company pays the claim and salvage, which comes in its possession by reason of the settlement of the contract, is disposed of and that too by inviting quotations. In view of the nature of business or the activity carried on by the General Insurance Company, in my opinion, it cannot be equated with that of the railways and on this analogy it would not be safe to hold that the insurance company is a "dealer" within the meaning of Section 2(c) of the Act and the case of Northern Railway, Jodhpur [1976] 37 STC 423 (SC) is distinguishable.
8. Learned standing counsel has also placed much emphasis on the definition of the word "business" as provided in Section 2(aa) of the Act. On the other hand learned Counsel for the assessee has vehemently urged that the activity carried on by the applicant is a mere service and is neither profession nor commerce. In support of his contention he has invited my attention to a decision of the Gujarat High Court in Mehsana District Shanker-4 Seeds Produce and Sale Cooperative Society Ltd. v. State of Gujarat [1982] 51 STC 289. In that case the question for consideration was:
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the applicant-society was a dealer within the meaning of Section 2(10) of the Gujarat Sales Tax Act, 1969, and it was liable to pay sales tax on the sales of cotton-seeds effected by it ?
9. A Division Bench of. that Court after considering the definitions of "dealer" and "business" in the Gujarat Sales Tax Act in detail answered the question "in the negative, that is, in favour of the assessee-society and against the State Government". While dealing with the term "business" particularly the activity which is in the nature of mere service or profession which has been excluded from the category of business activity, the Gujarat High Court discussed in detail various authorities and statutes on the subject including Corpus Juris Secundum, Volume 79, and observed:
The marginal line between the transactions which are purely in the nature of sale and those involving service simpliciter is very thin but fine one. On principle and authority, it is well-settled that 'the classification of such transactions should ordinarily be determined by the dominant factors involved therein. If the value of the property or materials furnished is the dominant and paramount factor in the gross charge and the service rendered in connection therewith is only incidental thereto, the transaction should generally be regarded as sale; but, if the service involved is the dominant and most important factor and the value of the materials used is only incidental thereto and constitutes only a minor part of the gross charge, the transaction should be classified as service': vide Corpus Juris Secundum, Volume 53, pages 576-577. It is equally well-settled that 'the classification of a business as one of making sales or of selling service cannot be determined solely by the ratio of the sales made to the services rendered...': vide Corpus Juris Secundum, Vol. 53, page 577.
10. I find myself in full agreement with the view taken by the Gujarat High Court. While dealing that a particular person is a dealer or the activity which is being carried on by him is a business or commerce will always vary from the nature of the activity carried on by him and the crux would be as to whether the activity carried on by him is a service or business. Some times even a company or association has to sell or buy articles in order to provide service to its customers. The act of buying and selling would not detract such activity from its real nature which must be of service only. In the instant cases the object of the insurance company which has been nationalised by passing of an Act under Article 39 of the Constitution of India is to provide service to its customers by insuring their vehicles against theft, accident, fire, etc. The nature of activity itself clearly indicates that it does not engage itself either in buying or selling.
11. In view of the facts stated earlier I am of the opinion that the applicant is not a "dealer" within the meaning of Section 2(c) of the Act and its activity does not come within the purview of "business" as defined in Section 2(aa) of the Act and as such no tax could be levied on the transaction of sale of salvage made by the assessee which is purely occasional.