1961 (11) TMI 53 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the assessee to pay sales tax on sales of goods supplied by the Textile Marketing Organization.
2. Definition and scope of "dealer" under section 2(c) of the Orissa Sales Tax Act.
3. Nature of the relationship between the assessee and the Textile Marketing Organization.

Detailed Analysis:

1. Liability of the Assessee to Pay Sales Tax:

The primary question referred to the court was whether the assessee was liable to pay sales tax on sales of goods supplied by the Textile Marketing Organization. The Tribunal had previously held that there was no "sale" between the Textile Marketing Organization and the assessee, and that the assessee was not a commission agent of the Textile Marketing Organization. Consequently, the Tribunal concluded that the assessee was not liable to pay sales tax. This finding was upheld by the court, which agreed that the assessee was merely an ordinary agent carrying on the business of the Textile Marketing Organization and had no independent status in respect of those transactions.

2. Definition and Scope of "Dealer" under Section 2(c) of the Orissa Sales Tax Act:

The court examined the definition of "dealer" under section 2(c) of the Orissa Sales Tax Act, which includes any person who executes a contract or carries on the business of selling or supplying goods in Orissa, whether for commission, remuneration, or otherwise. The definition was amended in 1958 to include a Department of the Government that carries on such business. However, for the period in question (prior to the amendment), the Textile Marketing Organization was not liable to pay sales tax. The court noted that the expression "dealer" is wide and could include various classes of agents, but the Explanation to section 2(c) clarifies that a manager or agent of a dealer residing outside Orissa is deemed to be a "dealer" for the purposes of the Act. The court held that the expression "dealer" does not include a manager or ordinary agent of a dealer if the dealer resides in Orissa.

3. Nature of the Relationship Between the Assessee and the Textile Marketing Organization:

The court analyzed the nature of the relationship between the assessee and the Textile Marketing Organization based on the facts found by the Tribunal. The Textile Marketing Organization supplied goods to the assessee, maintained a separate personal ledger account, and provided cash memos to the assessee. The assessee sold the goods using these cash memos but removed the original labels and affixed his own labels, describing himself as "Lakshmi House, agent of the Textile Marketing Organization." The sale prices were remitted to the Textile Marketing Organization, and the assessee received a 5% commission on total sales, which covered his remuneration and expenses. The court concluded that the assessee was not carrying on his own business but the business of the Textile Marketing Organization. His position was akin to that of an ordinary agent or employee remunerated on a commission basis. Therefore, the assessee was not a "dealer" within the meaning of the Orissa Sales Tax Act.

Conclusion:

The court affirmed the Tribunal's decision that the assessee was not liable to pay sales tax for the quarters in question. The court emphasized that the liability to pay sales tax must be determined based on the provisions of the relevant statute and the facts found, irrespective of any opinion expressed by the Business Manager of the Textile Marketing Organization. The reference was answered in the affirmative, and the assessee was awarded costs of the reference.