1972 (10) TMI 76 - SC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the assessee acting as commission agent was liable to pay sales tax in the years 1960-61 and 1961-62 on the turnover of khandsari sugar manufactured by his principals? Held that - Appeal dismissed. Khandsari sugar with which we are concerned in this case was manufactured in U.P. That being so we are in agreement with the High Court that only the sales by the manufacturers are liable to be brought to tax under the notification.

Summary

Issues:
1. Interpretation of a notification under the U.P. Sales Tax Act, 1948 regarding liability to pay sales tax on khandsari sugar turnover.
2. Whether a commission agent is liable to pay sales tax on khandsari sugar turnover sold on behalf of principals who are manufacturers.
3. Applicability of section 3 of the Act in determining the liability to pay sales tax.
4. Comparison of relevant case laws to the current scenario.

Detailed Analysis:
1. The Supreme Court analyzed the interpretation of a notification under the U.P. Sales Tax Act, 1948, concerning the liability to pay sales tax on khandsari sugar turnover. The notification superseded previous notifications and specified that turnover on certain goods, including khandsari sugar, would be taxed only at the point of sale by the manufacturer. The Court focused on the wording of the notification to determine the scope of liability for sales tax.

2. The case involved a commission agent conducting business in Varanasi, dealing with khandsari sugar on behalf of principals who were manufacturers in Uttar Pradesh. The dispute arose regarding the liability of the commission agent to pay sales tax on the turnover of khandsari sugar sold on behalf of the principals. The Court emphasized that as the khandsari sugar was manufactured in U.P., only sales by the manufacturers were liable to be taxed under the notification, not the commission agent.

3. The Court delved into the applicability of section 3 of the U.P. Sales Tax Act in determining the liability to pay sales tax. The assessee contended that, as per a specific notification, the turnover relating to khandsari sugar manufactured in the State was only liable to tax at the point of sale by the manufacturer, thereby exempting the commission agent from tax liability. The Court agreed with this interpretation, holding that the notification excluded the commission agent from the purview of section 3 of the Act.

4. The appellant's counsel cited various High Court decisions, such as Irri Veera Raju v. Commercial Tax Officer and others, Ramalakshmana & Company v. State of Madras, and Commissioner of Sales Tax v. Ganga Ram Ghurey Lal. However, the Court found that these decisions were not relevant to the issue at hand and did not support the appellant's arguments. In fact, the Court noted that the decision in Irri Veera Raju's case contradicted the appellant's contentions. Ultimately, the Court dismissed the appeals, emphasizing the lack of merit in the appellant's arguments and upheld the decision of the High Court regarding the liability to pay sales tax on khandsari sugar turnover.