1971 (9) TMI 161 - SC - VAT and Sales Tax

Whether an agent of a principal who is also a dealer under Madras General Sales Tax Act, 1959 is entitled to the same rights as his principal has under the Act? Whether the principal is entitled to the exemption claimed has been left open by the High Court? Held that - Appeal dismissed. The determining factor in all such cases is whether the buyer directly or by implication agree to buy and the seller agree to sell separately the packing material. In this case we are not called upon to go into that question. We merely indicated the approach as a matter of guidance. The question for decision by us lies within a narrow compass and that question is whether the assessee is entitled to claim exemption in respect of packing charges if his principal could have claimed it had it sold the cement itself. On that question, we agree with the view taken by the High Court.

Summary

Issues:
1. Whether an agent is entitled to the same rights as his principal under the Madras General Sales Tax Act, 1959.
2. Whether the packing charges should be included in the taxable turnover of the assessee.
3. Whether the department must establish that a particular turnover constitutes a part of the taxable turnover.
4. Whether the assessing authority should consider various aspects before deciding if certain charges are exempt from tax.

Analysis:
1. The judgment addresses the issue of whether an agent is entitled to the same rights as his principal under the Madras General Sales Tax Act, 1959. The court held that under the general law, an agent represents his principal and can exercise the same rights as the principal within the scope of the agency. However, the court emphasized that unless otherwise provided in the Act, the agent is considered to represent the principal and is entitled to the same exemptions as the principal. The court clarified that the provision treating agents as dealers under the Act does not convert an agent into a principal for all purposes under the Act.

2. The court examined whether the packing charges should be included in the taxable turnover of the assessee. The assessee claimed that it was entitled to deduct the packing charges from its total turnover under rule 6(c) of the Rules framed under the Madras General Sales Tax Act, 1959. The High Court allowed the petition, stating that the assessee could deduct the turnover relating to the packing charges if its principal would have been entitled to the same deduction. The court agreed with the High Court's view and dismissed the appeal, holding that the assessee is entitled to claim exemption in respect of packing charges if the principal could have claimed it.

3. The judgment also discussed the department's obligation to establish that a particular turnover constitutes a part of the taxable turnover. Referring to the Hyderabad Deccan Cigarette Factory case, the court emphasized that the department must consider all facts and circumstances of the case before concluding that a specific turnover is taxable. The department may request the assessee to provide relevant material in their possession. The court highlighted the importance of examining whether the parties intended to sell or buy the packing materials separately, emphasizing the need to consider various factors before deciding on the taxability of certain charges.

4. Lastly, the court addressed the assessing authority's responsibility to consider various aspects before deciding if certain charges are exempt from tax. The court provided guidance on how the authorities should approach the question of whether packing charges are exempt from tax, emphasizing the importance of determining whether the buyer and seller agreed to sell and buy the packing material separately. The court clarified that the decision in this case was limited to whether the assessee could claim exemption for packing charges if the principal could have claimed it, and agreed with the High Court's view on the matter.