22. Whether the applicant is a dealer under section 2(11) read with Exception II to the definition of ‘dealer’ under the BST Act, 1959?

Transaction date : 28-3-2003

Held: Applicant is a dealer u/s 2(11)

Facts of the case

The applicant is a training and research centre promoted by various private trusts of a company M/s Lintas India Private Limited Company.

The applicant imparts management education in a variety of specialized fields of a world class standard under the control and supervision of their faculty. The company also provides lodging and boarding facilities on the campus premises.

The goal of the applicant is to establish a world class training facility to further the cause of executive development and growth both within and outside of M/s Lintas India Pvt. Ltd. group.

Submissions of the applicant and case laws relied upon

The applicant contended that the research centre is an educational institution covered by Exception II to the definition of ‘dealer’ under section 2(11) of the BST Act, 1959.

The applicant also submitted that the centre was imparting management education in a variety of specialized fields and as an educational institute it had to buy variety of goods and services to run the institution. It also earned income from rendering and making available educational services.

However, the applicant had not obtained any recognition from the Central or State Govt. since it did not seek financial aid. Also, it had not obtained any recognition from the University or any statutory bodies.

The applicant submitted that as per Exception II, an educational institute carrying on the activity of buying or supplying goods in the performance of its function for achieving its objects cannot be deemed to be a dealer. Thus, the applicant provided residential accommodation to the students and delegates in the course of business and it was not by way of business.

The applicant prayed that if he is considered to be a dealer then the order be given a prospective effect.

Case laws relied upon

1. T.M.A. Pai Foundation & Others vs. State of Karnataka & Othrs [Jt. 2002(9) SC 1]

2. State of Tamilnadu & Another vs. Board of Trustees of the Port of Madras (1999 114 STC 520 SC)

3. State of Bombay vs. Ahmedabad Education Society (7 STC 497)

4. Sai Publication Fund vs. Commr. of Sales Tax (SC 126 STC 288)

Views of the Department

The Commissioner observed from the bills submitted by the applicant that the applicant’s activity was as follows:

1. Making available premises to the clients.

2. Providing facilities of lodging and boarding, catering, transport, video shooting and photography, etc..

From the copies of purchase bills of the applicant it could be seen that items purchased included towels, napkins, cutlery items, wine glasses, etc. and also that the contract for food & beverages was given to the outside party.

Thus the applicant fulfilled all the criteria of a dealer; i.e., carrying on of business, receiving valuable consideration and sales and purchases of goods.

Also to get covered by Exception II the following 2 conditions are to be satisfied.

1. It should be an educational institution, and

2. Its activity of manufacturing, buying & selling of goods must be in the performance of its functions for achieving its objects.

To qualify for being an educational institute to be excluded from the purview of the definition of ‘dealer’ the five criteria to be satisfied are:

1. recognized as an educational institute by a University or the UGC.

2. have prescribed courses or syllabus

3. have a teaching staff on payroll

4. issue certificates to its students

5. conduct tests or exams.

The applicant is not a recognized institute and thus it does not satisfy the criteria for being qualified as an educational institute for the purpose of Exception II.

As regards the prospective effect to be granted, it can be seen that the applicant’s activity were from the start of incorporation of the company of a business nature. There was no statutory misguidance and therefore prospective effect could not be granted.

Held

The Commissioner held that the applicant was a dealer and was not covered by Exception II to the definition of ‘dealer’ under the BST Act,1959.

The applicant’s prayer for prospective effect was rejected.

[M/s Northpoint Training & Research Pvt. Ltd.. DDQ No. DDQ-11/2003/Adm-5/18/B-3 dated 14-9-2006]