1964 (7) TMI 33 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of whether the auctioneers are "dealers" under the Madras General Sales Tax Act, 1959.
2. The role and authority of auctioneers in the context of the auction sale.
3. The applicability of sales tax on the auction transaction.

Issue-wise Detailed Analysis:

1. Determination of whether the auctioneers are "dealers" under the Madras General Sales Tax Act, 1959:

The primary issue was whether Messrs Zackria Sons Private Limited, the auctioneers, could be classified as "dealers" under section 2(g) of the Madras General Sales Tax Act, 1959. The court analyzed the definition of "dealer" which includes an auctioneer or any other mercantile agent who carries on the business of buying and selling, supplying, or distributing goods on behalf of any principal. The court emphasized that the term "auctioneer" alone does not suffice to determine the nature and full incidents of the activity in which he is engaged. The determination must be based on the specific contract and surrounding circumstances.

2. The role and authority of auctioneers in the context of the auction sale:

The court examined the terms of the agreement between the auctioneers and the Women's Christian College. The auctioneers were engaged only for advertising the sale and securing the highest bid. They did not have dominion over the property sold, and the property in goods did not pass on the fall of the hammer but only when the representative of the College authorities accepted the highest bid. The court noted that the auctioneers acted merely as intermediaries who brought the highest bidder into contract with the College's representative, who then completed the sale. The auctioneers' role was limited to conducting the auction and billing the buyer under special instructions from the seller.

3. The applicability of sales tax on the auction transaction:

The court referred to the decision of the Calcutta High Court in Staynor & Co. v. Commercial Tax Officer, which held that an auctioneer with dominion and possession of goods is considered a dealer. However, in this case, the auctioneers did not handle the goods or effect delivery; they merely facilitated the auction process. The court also cited the subsequent Calcutta High Court decision in Chowringhee Sales Bureau Limited v. State of West Bengal, which differentiated between an auctioneer acting as a mere crier or broker and one with possession of goods. The court concluded that since the auctioneers in this case did not carry on the business of buying and selling goods, they could not be classified as dealers liable for sales tax.

Conclusion:

The court allowed the revision case, setting aside the assessment on the assessee on the disputed turnover. The auctioneers were not considered dealers for the purpose of sales tax liability as their role was limited to securing bids and facilitating the auction, without handling the goods or effecting delivery. The petition was allowed with no order as to costs.