A division bench of the Delhi High Court, on Tuesday, referred the matters relating to imposition of sales tax on the sale of unserviceable aircraft and unserviceable stores, scrap and spare parts by Air India.
A bench of Justice S Muralidhar and Justice Prathiba M Singh was hearing a bunch of litigations wherein the levy of sales tax on the above was challenged.
The Petitioners contended before the High Court that they are not ‘dealer’ under the Delhi sales Tax Act. Further, the business for which the Petitioner is registered is not in any manner connected with the sale of old aircraft and scrap. It contended that its main activity is of running the aircraft and providing services of carriage of passengers and goods, which does not constitute sale of goods in Delhi. Hence it was not amenable to sales tax. According to them, the sales of spare parts etc. and scrap, which was incidental and ancillary to its main activity, would also therefore not be amenable to sales tax. Moreover, the predominant activity in terms of the test as laid down in the DTC (supra), being civil aviation, the sale of scrap and old aircraft is only ancillary thereto and not amenable to sales tax. The predominant activity being non amenable to sales tax the sale of scrap and spare parts is also not amenable to sales tax.
Rejecting the above contentions, the appellate Tribunal concluded the matter in favour of the Revenue. The Tribunal, further refused to apply the decision in DTC to the present case and also held that the said transactions of sales are incidental and ancillary to or in connection with the Petitioner’s ‘business’ as an airline as established in the decisions in DTC and AP Road Transport Corporation.
While referring the matter to the full bench, the Court observed that the decision in DTC is in the context of road transport. It was related to the context of the DTC being a statutory corporation.
“Here we are clearly with a company, which has ceased to be a statutory corporation. The activity of operating aircrafts to carry passengers and cargo is no doubt a commercial activity but it is not the ‘business’ for which the petitioner is registered as a dealer under the DST Act. However, the sale of scrap is not merely occasional but a regular and routine activity which will continue so long as the Petitioner continues to provide air transportation services. The important question thus, is whether the ‘dominant activity’ test would be a relevant criteria for determining whether under Section 2 (c) (ii) the sale of scrap constitutes ‘business’? This question does not appear to have arisen in the context of air transport earlier. It appears to the Court that the decision in DTC (supra) will need to be reconsidered.”
In the light of the above discussion, the bench referred the matter for the consideration of the Full Bench of this Court.
Read the full text of the Order below.
