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SUPREME COURT OF INDIA
MAHADAYAL PREMCHANDRA
Versus
Commercial Tax Officer, Calcutta
Decided on April 15, 1958
SALES TAX - Dealer - Commission agent - Turnover - Sales effected by principal - Whether commission agent can be deemed to be dealer and liable to pay sales tax - Bengal Finance (Sales-tax) Act (Ben. VI of 1941), Ss. 2(c), 2(g), 5(1).
Fact of the Case:
The appellants, commission agents of a Kanpur-based woolen mill, were assessed to sales tax by the Commercial Tax Officer on transactions valued at Rs. 6,21,369-10-3, amounting to Rs. 27,816. The assessment was made on the ground that the appellants were deemed to be dealers under Explanation 3 to Section 2(c) of the Bengal Finance (Sales-tax) Act, 1941, as they were agents of a dealer residing outside West Bengal and carrying on the business of selling goods in West Bengal.
Finding of the Court:
The court found that the appellants did not fall within the definition of "dealer" under Explanation 3 to Section 2(c) of the Act, as they did not carry on the business of selling goods in West Bengal. The court also found that the sale price of the goods delivered by the mill to customers in West Bengal could not be included in the gross turnover of the appellants, as the goods were directly supplied by the mill to the customers and the sale price was received by the mill through banks.
Issues: 1. Whether the appellants, as commission agents of a dealer residing outside West Bengal, could be deemed to be dealers and liable to pay sales tax under Explanation 3 to Section 2(c) of the Bengal Finance (Sales-tax) Act, 1941? 2. Whether the sale price of goods delivered by the mill to customers in West Bengal could be included in the gross turnover of the appellants.
Ratio Decidendi: 1. Explanation 3 to Section 2(c) of the Act applies only to agents who carry on the business of selling goods in West Bengal. The appellants did not carry on such business, as they merely canvassed orders and forwarded them to the mill, which accepted and executed them. The privity of contract was between the customers and the mill, and the business was one of selling goods in Kanpur and dispatching them to West Bengal for consumption. 2. The sale price of the goods could not be included in the gross turnover of the appellants, as the goods were directly supplied by the mill to the customers and the sale price was received by the mill through banks. The appellants did not handle the goods or receive the sale price.
Final Decision: The court allowed the appeal, set aside the assessment order, and directed the refund of the sales tax paid by the appellants. The appellants were also awarded costs.
Judgment-
N. H. BHAGWATI
( 1 ) THIS appeal with Special Leave is directed against the order dated 15/01/1955, passed by the Commercial Tax Officer, Canning Street (District I) Charge, Calcutta, assessing the appellants to sale-tax in respect of transactions valued at Rs. 6,21,369-10-3 and assessing sales-tax thereon at 9 pies in the rupees Rs. 27,816, under the provisions of the Bengal Finance (Sales-tax) Act (Ben. VI of 1941) hereinafter referred to as "the Act. "
( 2 ) THE appellants carry on the business of (1) selling goods or of dealers, partly in wholesale and partly retail, of woollen and cotton fabrics and other products; (2) as well as of commission agents of wollen and cotton fabrics and in their latter capacity are and have been the agents or representatives of the British India Corporation Ltd. , Proprietor, The Kanpur Wollen Mills, both at Kanpur in Uttar Pradesh, for the territory comprising West Bengal and Assam and parts of Bihar and Orissa under the terms of an agreement between themselves and their principles dated 2/06/1952, supplemented by a letter dated 7/07/1952, addressed to them by the principals.
( 3 ) THE appellants are duly registered as "dealers" in West Bengal under the provisions of the Act with respect to their aforesaid business of wholesale and retail distribution or sale of goods and their certificate of Registration is numbered O. S. 1/1630a. On or about 15/12/1952, the appellants submitted to the 1st respondent their return for sales-tax in the prescribed form for the return period ending Dewali 2009 Sambat corresponding to 17/10/1952 (i. e. for the year 1951-52 ).
( 4 ) THE gross turnover in the said return was calculated at Rs. 1,25,24,883-14-3 and after allowing therefrom the permissible exemptions and deductions the taxable turnover amounted to Rs. 2,42,480-10-3 on which sales-tax at 9 pies in the rupees under the provisions of S. 5 (1) of the Act amounting to Rs. 11,366-5 was duly paid by the appellants.
( 5 ) IT appears that in the course of examination of books of account and Purchase Vouchers of M/s. Khubiram Dhansiram of Calcutta, and unregistered dealer, it came to the notice of the Assistant Commissioner. (C. S.) that the said dealer had purchased woollen goods worth Rs. 59,530-13 during the period from 20/11/1952, to 18/12/1952, from M/s. British India Corporation Ltd. , Kanpur Woolen Mills Branch. Invoices copies of which were enclosed therewith, had been drawn by the British India Corporation Ltd. , for Kanpur Woollen Mills from Kanpur and the goods in question were reported to have been despatched to M/s. Khubiram Dhansiram from Kanpur. Orders Nos. quoted in the invoices were the Nos. of orders placed to Kanpur Woollen Mills by their sole agents in West Bengal; the appellants herein and the Assistant Commissioner (C. S.) was of the opinion that under Explanation 2 of S. 2 (g) of the Act, the sales of Kanpur Woolen Mills from Kanpur as referred to above should be deemed to have taken place in West Bengal and under Explanation 3 of S. 2 (c) of the Act the appellants should be deemed to be the dealer in West Bengal on account of the sales of Kanpur Woollen Mills and as such were liable to pay the tax at that end. The Assistant Commissioner (C. S.), therefore, asked the first respondent by his letter dated 21/01/1953, to verify as to whether the appellants had accounted for those transactions in their books of account and had paid the taxes due by them.
( 6 ) ON 3/02/1953, the first respondent issued a notice under Ss. 11 and 14 (1) of the Act stating that he was not satisfied that the return filed by the appellants for the year ending 17/10/1952, was correct and complete and asked the appellants to produce before him their books of account.
( 7 ) THE representatives of the appellants had an interview with the first respondent on the said date and on 16/02/1953, the appellants submitted to the first respondent a statement in connection with their agency transactions with the Kanpur W
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