1954 (8) TMI 24 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether principals can be assessed for sales made by commission agents who have obtained a license under section 9 of the Mysore Sales Tax Act.
2. Whether both principals and agents are liable to pay sales tax on turnover when sales are made by agents without a license under section 9.

Analysis:
The case involved a dispute regarding the liability of principals for sales made by commission agents under the Mysore Sales Tax Act. The respondent, a merchant, claimed exemption for sales made on commission basis within and outside the State. The Sales Tax Officer granted exemption for sales outside the State but disallowed it for sales within the State, holding the principal liable for tax regardless of the agent's licensing status under section 9 of the Act.

The Deputy Commissioner upheld the decision, stating that both principal and agent are liable to pay tax if the agent does not have a license under section 9. The respondent then filed a revision petition, which was dismissed, leading to a reference to the High Court under section 16 of the Act. The High Court considered two key questions raised: the liability of principals for sales by licensed agents and the liability of both parties when the agent is unlicensed.

The Court held that every dealer is obligated to pay tax on their turnover under section 3 of the Act, regardless of the method of selling goods. An agent acting on behalf of a principal is exempt from tax if the transaction is included in the principal's turnover and the principal is known. However, an unlicensed agent is deemed a dealer and must pay tax, with the responsibility falling on either the principal or the agent, not both, for the same transaction.

The Court clarified that if an unlicensed agent pays the tax, the principal is exempt, provided the payment is proven. The burden of proof lies with the dealer to show exemption. The Court ruled that principals are liable for tax on sales through licensed agents, even if they have not collected sales tax or included commission sales in their turnover. Sales by unlicensed agents are taxable, making both principal and unlicensed agent liable, but tax cannot be collected twice for the same transaction.

In conclusion, the Court answered both questions, stating that principals are liable for sales through licensed agents and both principal and unlicensed agent are jointly liable for tax on sales made without a license. The respondent was ordered to pay costs to the State of Mysore.