1967 (4) TMI 176 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of a commission agent for sales tax on the total turnover of multiple principals.
2. Interpretation of relevant provisions of the Andhra Pradesh General Sales Tax Act, 1957, and associated rules.
3. The applicability of section 11 of the Act to commission agents.
4. The practice and precedent in assessing sales tax on commission agents.

Detailed Analysis:

1. Liability of a Commission Agent for Sales Tax on the Total Turnover of Multiple Principals:
The primary issue was whether a commission agent's total turnover, derived from transactions on behalf of multiple principals, is liable to be assessed for sales tax. The court concluded that the turnover of each principal should be considered separately. The agent is deemed to be a dealer for each principal, and only if a principal's turnover exceeds Rs. 10,000, the agent would be liable for tax on that principal's behalf. The court emphasized that the agent's total turnover from all principals should not be aggregated to determine tax liability.

2. Interpretation of Relevant Provisions of the Andhra Pradesh General Sales Tax Act, 1957, and Associated Rules:
The court examined sections 2(1)(e), 5, and 11 of the Act, along with Rule 17 and Rule 17-A of the Andhra Pradesh General Sales Tax Rules. Section 2(1)(e) defines a "dealer" to include commission agents. Section 5 mandates that every dealer with a turnover of Rs. 10,000 or more is liable to pay tax. Section 11 specifies that tax due on transactions by an agent on behalf of a resident principal shall be assessed, levied, and collected from the agent if the principal is liable. The court interpreted these provisions to mean that the agent's liability is contingent upon the principal's liability, and each principal's turnover must be assessed individually.

3. The Applicability of Section 11 of the Act to Commission Agents:
Section 11 was pivotal in determining the agent's liability. The court noted that the section uses the term "transaction" rather than "turnover," indicating that tax liability arises from individual transactions rather than the aggregate turnover of multiple principals. The agent is liable only if the principal's turnover exceeds Rs. 10,000. The court also highlighted the proviso to section 11, which allows the assessing authority to recover tax from the principal instead of the agent, reinforcing that the agent's liability is tied to the principal's tax liability.

4. The Practice and Precedent in Assessing Sales Tax on Commission Agents:
The court reviewed past practices and precedents, including cases cited by the Government Pleader, which were found to be either irrelevant or supportive of the petitioner's contention. The court referred to the Madras High Court's decision in India Coffee and Tea Distributing Co. Ltd. v. State of Madras, and the Supreme Court's ruling in State of Mysore v. Hussain Kunhi & Co., which supported the view that an agent is a dealer for each principal separately. The court also noted a recent amendment to the Act, which clarified that the turnover of an agent should not be aggregated for tax purposes if each principal's turnover is below the taxable limit.

Conclusion:
The court concluded that the Commercial Tax Officer was not justified in assessing the total turnover of the petitioner commission agent for tax purposes. The turnover of each principal must be considered separately, and the agent is liable only if a principal's turnover exceeds Rs. 10,000. The writ petitions were allowed, and the tax revision case was dismissed, with the court prohibiting the Commercial Tax Officer from acting contrary to this interpretation.

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