1997 (3) TMI 505 - SC - VAT and Sales Tax

Liability to pay sales tax of agent - Held that - Appeal allowed. The West Bengal Act is on similar lines as the Kerala Act. An agent as a dealer has been made directly liable to pay sales tax for good reasons. The Act has not provided for splitting of the sales made by the dealer for and on behalf of different principals and make separate assessment on the dealer. It is the total turnover of the dealer which has been brought to tax under the Act. In making the assessment of the dealer the Commercial Tax Officer does not have to find out what was the exact quantum of sales effected on behalf of each principal and what was the liability if any of that principal. The liability to pay tax imposed by section 6B is on the dealer himself and not on the principal through the dealer. For computing his liability the taxable turnover of the dealer has to be found out. The agent may sell goods on account of others. But that will not absolve the agent from the liability to pay tax on such sales. Otherwise the imposition of tax by section 6B on an agent who is a dealer will become meaningless. Thus Taxation Tribunal clearly fell into error in holding that the aggregate of the turnover of the principals cannot be computed for assessing the agent for turnover tax under section 6B. The judgment and order dated September 20 1989 of the Tribunal is set aside.

Issues Involved:
1. Liability of a commission agent for sales tax on sales made on behalf of principals.
2. Interpretation of the definition of "dealer" and "turnover" under the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of section 6B of the Bengal Finance (Sales Tax) Act, 1941 to commission agents.
4. Comparison with sales tax laws of other states and judicial precedents.

Detailed Analysis:

1. Liability of a Commission Agent for Sales Tax on Sales Made on Behalf of Principals:
The primary issue was whether a commission agent is liable to pay sales tax on sales made on behalf of disclosed principals. The West Bengal Taxation Tribunal concluded that the firm should only be assessed for sales made on its own behalf, not for sales made as a commission agent for 24 principals. The Tribunal's view was based on the definition of "dealer" in the Bengal Finance (Sales Tax) Act, 1941, which did not explicitly include sales made on behalf of others within the agent's turnover.

However, the Supreme Court disagreed, stating that agents of all types are included in the definition of "dealer" under Section 2(c) of the Act. The Court emphasized that the Legislature intended to levy tax on agents even when selling goods on behalf of disclosed principals, and there has to be only one assessment on the agent in respect of his total turnover.

2. Interpretation of the Definition of "Dealer" and "Turnover" Under the Bengal Finance (Sales Tax) Act, 1941:
The Court analyzed the definitions provided in the Act:
- "Dealer" includes any person who sells goods in West Bengal, including agents such as commission agents, del credere agents, and auctioneers.
- "Turnover" means the aggregate of the sale prices receivable by the dealer during a period, without any deduction for sales made on behalf of principals.

The Court highlighted that the Act does not allow for the exclusion of sales made on behalf of others from the agent's turnover. The agent, being treated as a dealer, is liable for the total turnover, including sales made on behalf of principals.

3. Applicability of Section 6B of the Bengal Finance (Sales Tax) Act, 1941 to Commission Agents:
Section 6B imposes a turnover tax on every dealer whose gross turnover exceeds a specified amount. The Court clarified that this section applies to agents as well, as they fall under the definition of "dealer." The liability to pay turnover tax is on the dealer, regardless of whether the sales were made on their own account or on behalf of others.

The Court rejected the argument that the agent's liability should be limited to the principal's liability, stating that the Act imposes the tax directly on the agent. The agent's liability is independent of the principal's and is determined by the agent's total turnover.

4. Comparison with Sales Tax Laws of Other States and Judicial Precedents:
The Court referred to the case of Cardamom Planters' Association v. Deputy Commissioner of Sales Tax, where a similar issue was addressed under the Kerala General Sales Tax Act. The Kerala Act, like the Bengal Act, treated commission agents as dealers and made their aggregate turnover liable to tax.

The Court noted that the West Bengal Act is similar to the Kerala Act in this respect. The Act does not provide for splitting the sales made by a dealer for different principals. The agent is liable for the total turnover, and the tax is imposed directly on the agent.

The Court also referred to decisions from the Mysore and Karnataka High Courts, which held that the liability of a commission agent should be based on the turnover of the principals. However, the Supreme Court found these decisions erroneous, emphasizing that the agent's liability must be determined based on the provisions of the Sales Tax Act itself, not on general principles of agency.

Conclusion:
The Supreme Court set aside the judgment of the West Bengal Taxation Tribunal, holding that the aggregate turnover of the principals can be computed for assessing the agent for turnover tax under section 6B. The agent is liable to pay sales tax on the total turnover, including sales made on behalf of principals. The appeals were allowed with no order as to costs.

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