1961 (2) TMI 57 - HC - VAT and Sales Tax

Issues Involved
1. Whether the petitioner is a "dealer" within the meaning of section 2(c) of the Orissa Sales Tax Act, 1947, in respect of the supply of second-hand gunny bags to Orissa Cement Ltd.
2. Whether the petitioner's purchase of second-hand empty gunny bags from the Hirakud Dam Project Authorities and subsequent supply to Orissa Cement Ltd. amounts to a "sale" within the meaning of the Orissa Sales Tax Act, 1947, so as to attract the liability of the petitioner under the Act.

Issue-Wise Detailed Analysis

Issue 1: Dealer Status under Section 2(c) of the Orissa Sales Tax Act, 1947
The court examined whether the petitioner, who acted as an intermediary in supplying second-hand gunny bags to Orissa Cement Ltd., qualifies as a "dealer" under section 2(c) of the Orissa Sales Tax Act, 1947. The petitioner argued that he was merely an agent for Orissa Cement Ltd., purchasing the bags on their behalf and receiving a commission for his services. The Sales Tax Department, however, contended that there were two distinct transactions: one between the Project Authorities and the petitioner, and another between the petitioner and Orissa Cement Ltd.

The court emphasized that the true relationship between the petitioner and Orissa Cement Ltd. must be determined by examining the agreement (exhibit C) and the surrounding circumstances. The court noted that the terms "agent" and "commission" used in the agreement do not necessarily define the relationship, as they can be used loosely in commercial transactions. The court concluded that the petitioner was not merely an agent but acted as an intermediary buyer and seller, making him a "dealer" under the Act.

Issue 2: Nature of the Transaction as a "Sale"
The court analyzed whether the transaction between the petitioner and Orissa Cement Ltd. constituted a "sale" under the Orissa Sales Tax Act, 1947. The petitioner contended that the transaction was not a sale but a mere transfer of goods as an agent. The court scrutinized the agreement (exhibit C) and found several clauses indicative of a buyer-seller relationship rather than an agent-principal relationship.

Paragraphs 5 and 6 of the agreement were particularly significant. These clauses stated that the gunny bags would be sorted and scrutinized upon arrival at Rajgangpur, and only those deemed serviceable by Orissa Cement Ltd. would be accepted. The rejected bags had to be removed by the petitioner within two months and remained at his risk until removal. This arrangement indicated that the property in the goods remained with the petitioner until acceptance by Orissa Cement Ltd., characteristic of a sale transaction.

The court also referred to the Supreme Court's observation in Commissioner of Sales Tax v. Husseinali, which held that the property in goods transfers to the buyer upon examination and acceptance, further supporting the view that the transaction was a sale. The court found that the use of terms like "agency" and "commission" in the agreement was an attempt to disguise the true nature of the transaction to evade sales tax.

Conclusion
The court rejected the petitioner's application and held that:
1. The petitioner is a "dealer" within the meaning of section 2(c) of the Orissa Sales Tax Act, 1947.
2. The transaction between the petitioner and Orissa Cement Ltd. was a "sale" within the meaning of the Orissa Sales Tax Act, 1947, making the petitioner liable for sales tax.

The court assessed the hearing fee at Rs. 100. The reference was answered accordingly, with both judges in agreement.

← Previous Next →