1964 (8) TMI 55 - HC - VAT and Sales Tax

Issues Involved:
1. Nature of transactions by Tiruchengode Co-operative Marketing Society.
2. Interpretation of the proviso to section 2(r) of the Madras General Sales Tax Act, 1959.
3. Application of the definition of "dealer" under section 2(g)(iii) of the 1959 Act.
4. Applicability of exemptions under section 2(r) for agricultural produce sales.

Issue-wise Detailed Analysis:

1. Nature of Transactions by Tiruchengode Co-operative Marketing Society:
The primary issue was whether the transactions conducted by the Tiruchengode Co-operative Marketing Society constituted sales by the Society or merely agency sales on behalf of its agriculturist members. The Sales Tax Appellate Tribunal had not conclusively determined whether the Society acted as a dealer or merely facilitated the sale of agricultural produce. The Society contended that it did not directly undertake any purchases or sales but acted on behalf of its members to secure the best prices for their produce. The Tribunal was tasked with examining the exact nature of these transactions to determine if the Society was functioning as a dealer or merely an intermediary.

2. Interpretation of the Proviso to Section 2(r) of the Madras General Sales Tax Act, 1959:
The proviso to section 2(r) exempts the proceeds of the sale of agricultural produce grown by the seller from being included in the turnover for sales tax purposes. The Tribunal's interpretation of this proviso was challenged. The Court emphasized that the exemption applies only if the produce is grown by the dealer or on land in which the dealer has an interest. The Court referenced several precedents, including Kanyakaparameswari etc. Oil Mill v. State of Madras and Konduri Buchirajalingam v. State of Hyderabad, to highlight that the exemption is applicable only to those who are both agriculturists and dealers.

3. Application of the Definition of "Dealer" under Section 2(g)(iii) of the 1959 Act:
The Court examined whether the Society could be classified as a "dealer" under the expanded definition in section 2(g)(iii), which includes commission agents, brokers, auctioneers, and other mercantile agents. The Court noted that even if the Society functioned as an agent transferring property in the goods to the purchaser, it would still be considered a dealer and liable for sales tax. The turnover in such cases would be considered the Society's own turnover, not that of the principal agriculturist.

4. Applicability of Exemptions under Section 2(r) for Agricultural Produce Sales:
The Court clarified that the exemption under section 2(r) could only be granted if the produce was grown by the dealer or on land in which the dealer has an interest. The Court also pointed out that if the principal (agriculturist) is not a dealer but merely selling surplus produce, the agent (Society) cannot claim the exemption. The Court referenced the decision in Nagarajan v. State of Madras, which stressed that the sale must be in the course of business for the exemption to apply.

Conclusion:
The High Court remanded the case back to the Appellate Assistant Commissioner for a detailed examination of the nature of the Society's transactions. The Court set aside the Tribunal's interpretation of the proviso to section 2(r) and provided guidelines for determining the applicability of exemptions. The Appellate Assistant Commissioner was instructed to dispose of the case in light of these remarks, ensuring a thorough analysis of the Society's role and the relevant by-laws. The appeal was ordered without any costs.

Case Remanded:
The case was remanded for fresh disposal with specific instructions to reassess the nature of the transactions and the applicability of the exemptions under the proviso to section 2(r) of the Madras General Sales Tax Act, 1959.

← Previous Next →