1957 (1) TMI 20 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the respondent-company is a "dealer" under section 2(c) of the Bombay Sales Tax Act, 1946, and/or section 2(6) of the Bombay Sales Tax Act, 1953.
2. Whether the business activities of the respondent-company constitute a sale or supply or purchase of goods under the aforementioned Acts.
3. Whether the respondent-company is liable to pay tax and register under the aforementioned Acts.

Issue-wise Detailed Analysis:

Issue 1: Definition of "Dealer"
The primary issue was whether the respondent-company (the assessees) qualifies as a "dealer" under section 2(c) of the Bombay Sales Tax Act, 1946, and section 2(6) of the Bombay Sales Tax Act, 1953. The definition of a "dealer" under section 2(6) of the 1953 Act includes any person who carries on the business of selling or buying goods in the State of Bombay, whether for commission, remuneration, or otherwise.

The Sales Tax Tribunal found that the assessees were acting merely as agents for their principals (advertisers) when they procured blocks from block-makers for advertising purposes. The Tribunal observed that the commission received from block-makers was in the nature of brokerage, and the assessees did not have dominion over the blocks as a purchaser would. Therefore, the assessees were not considered dealers.

The learned Advocate-General argued that the Tribunal erred in its decision, asserting that the assessees were indeed purchasers of the blocks and, even if they acted as agents, they should be regarded as commission agents and thus dealers under the Act.

Issue 2: Business Activities and Sale or Supply of Goods
The Advocate-General presented four documents to support the contention that the assessees were purchasers of blocks:
- Exhibit A: A form of contract between the advertiser and the assessees, authorizing the assessees to secure advertisement space and stating that the estimates did not cover production charges like type-setting, art-work, and blocks.
- Exhibit B: An order from the assessees to a newspaper for advertisement on behalf of an advertiser.
- Exhibit C: An order form from the assessees to an engraver for preparing blocks, mentioning the advertiser's name.
- Exhibit D: A bill from the assessees to the advertiser, including sales tax on materials charged by block-makers.

The Court found that these documents did not conclusively prove that the assessees were purchasers of the blocks. The documents were consistent with the assessees acting as agents for the advertisers. The assessees' averments that they acted as agents were not challenged by the Sales Tax Department, and the documentary evidence did not contradict this claim.

Issue 3: Liability to Pay Tax and Registration
The Advocate-General further contended that even if the assessees were agents, they should be considered commission agents buying goods and thus liable as dealers. However, the Court noted that this argument was not raised before the lower authorities. The assessees claimed they received commission from block-makers for rendering technical services, not for buying goods on behalf of advertisers. This claim was not denied by the Collector.

The Court concluded that the assessees acted in a dual capacity: as agents for advertisers and as service providers for block-makers. Since the assessees were not buying goods as commission agents, they could not be considered dealers under the Act.

Conclusion
The Court held that the assessees were not dealers within the meaning of section 2(c) of the Bombay Sales Tax Act, 1946, or section 2(6) of the Bombay Sales Tax Act, 1953, for the periods between 1st April, 1951, and 31st October, 1952, and between 1st November, 1952, and 31st March, 1954. The reference was answered in the negative, and the Collector of Sales Tax was ordered to pay the costs of the hearing. The Court's opinion was based solely on the admitted facts and the four documents presented, without considering any new evidence.

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