1959 (11) TMI 53 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Bombay Export Company had a branch in Hyderabad during the assessment period.
2. Whether the assessee firm acted as a financier or an agent.
3. Whether the purchases were made within Hyderabad State or in Bombay.
4. Whether the transactions were part of inter-State trade and commerce under Article 286(2) of the Constitution.
5. Whether the assessment was correctly made in relation to the assessee's business and that of non-resident dealers.

Issue-wise Detailed Analysis:

1. Bombay Export Company's Branch in Hyderabad:
The first ground was whether the Bombay Export Company had its branch in Sultan Bazar, Hyderabad, during the assessment period. The Appellate Tribunal considered this question of fact at length, examined the evidence, and ruled against the petitioners. The court held that the plea for further opportunity to adduce proof was untenable because the party had already availed the opportunity to present evidence.

2. Assessee Firm as Financier or Agent:
The assessee firm claimed it was merely a financier entitled to interest and that the goods were pledged with it. However, the court referred to the tripartite agreement between the assessee, the Bombay Export Company, and the guarantor, which clearly established the firm as the company's agent. The agreement vested the firm with vast powers over the goods, including taking delivery, storing, and even selling the goods under certain conditions. The court held that the firm's role as an agent was consistent with the provisions of the Contract Act, and the incidental aspect of being a financier did not derogate from its character as an agent.

3. Purchases Made Within Hyderabad State or Bombay:
The assessee argued that the purchases were made in Bombay, not Hyderabad. The court noted that the goods were delivered within Hyderabad State, and the balance of the purchase price was paid there. The Tribunal had rightly held that the delivery orders handed over in Bombay did not render the sale an outside sale when the actual delivery occurred in Hyderabad.

4. Transactions as Part of Inter-State Trade and Commerce:
The petitioners contended that the transactions were part of inter-State trade and commerce under Article 286(2) of the Constitution. The court analyzed the facts and concluded that the sale did not necessarily occasion the export of goods. The delivery and subsequent movement of goods to Bombay were contingent upon the terms of the tripartite agreement, independent of the sale transaction. The court held that the sale was not in the course of inter-State trade or commerce and thus not protected by Article 286(2). Additionally, even if assumed to be inter-State trade, the transactions were protected by the President's Sales Tax Laws Validation Act (VII of 1956), which was upheld as valid by the Supreme Court.

5. Correctness of Composite Assessment:
The assessee argued that the assessment was a composite one, mixing their business as dealers with that of non-resident principals. The court found that the assessee had businesses in various commodities and acted as agents for non-resident principals in castor seed transactions. The rule 14 notices issued were specific and provided the basis for the tax liability under section 18 of the Act. The court held that the petitioners had sufficient opportunity to know and contest the case against them, and the requirement of law for reasonable opportunity was fulfilled.

Conclusion:
The court dismissed both petitions, upholding the assessments made for the years 1953-54 and 1954-55. The pleas advanced by the petitioners were found to be without merit, and the court ruled that the transactions were taxable under the Hyderabad General Sales Tax Act. The petitions were dismissed with costs, including an advocate's fee of Rs. 250 in each case.

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