1965 (2) TMI 90 - HC - VAT and Sales Tax

Issues Involved:
1. Liability for payment of sales tax.
2. Definition and scope of "dealer" under the Rajasthan Sales Tax Act.
3. Impact of exemption certificate under Section 4(2) of the Rajasthan Sales Tax Act.
4. Whether the commission agent's exemption affects the principal's tax liability.
5. The nature and implications of the exemption fee paid by the commission agent.

Detailed Analysis:

1. Liability for Payment of Sales Tax:
The primary issue was whether the sales tax on sales amounting to Rs. 96,992 of hydrogenated vegetable edible oils, belonging to the assessee and sold by their commission agent, was chargeable to the assessee. The court examined the relevant provisions of the Rajasthan Sales Tax Act to determine who is liable for the payment of sales tax. The court concluded that the primary liability to pay the sales tax lies with the seller, which in this case is the assessee.

2. Definition and Scope of "Dealer":
The term "dealer" was defined under Section 2(f) of the Act as any person who carries on the business of selling or supplying goods in the State, either on commission or for remuneration or otherwise. The court noted that both the assessee and the commission agent carried on business in Rajasthan, and thus, the explanation in Section 2(f) did not directly assist in determining liability. The court emphasized that the ownership of the goods resided with the assessee, and the agent merely performed the physical act of transferring the property on behalf of the principal.

3. Impact of Exemption Certificate under Section 4(2):
The commission agent held a valid exemption certificate under Section 4(2) of the Act, which exempted them from paying sales tax on the condition that they sold goods on behalf of known principals and included the sale amounts in the turnover of the principals. The court examined the conditions under the exemption notification and concluded that the exemption was granted to the commission agent on the basis that the principal (assessee) included the sales in their turnover.

4. Whether the Commission Agent's Exemption Affects the Principal's Tax Liability:
The court distinguished the present case from other cases where the commission agent acted without disclosing the principal's name. It held that the exemption under Section 4(2) applied only to transactions where the principal was disclosed and included the sales in their turnover. Therefore, the exemption granted to the commission agent did not absolve the principal (assessee) from their tax liability.

5. Nature and Implications of the Exemption Fee:
The assessee argued that the exemption fee paid by the commission agent was effectively a consolidated sales tax, and thus, the demand for sales tax from the assessee amounted to double taxation. The court rejected this argument, clarifying that the exemption fee was distinct from sales tax and was a fee for the exemption granted under specific conditions. The court noted that the fee was regulated by the turnover but capped at Rs. 500, and such graduated fees were not unusual in law.

Conclusion:
The court concluded that the sales tax in respect of the sales amounting to Rs. 96,992 of hydrogenated vegetable edible oils, effected by the commission agent and belonging to the assessee, was chargeable to the assessee. The commission agent's exemption under Section 4(2) did not transfer the tax liability away from the principal. The reference was answered accordingly, and the assessee was ordered to pay costs to the State.

← Previous Next →