1967 (1) TMI 69 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether transactions between cultivators and purchasers, along with acts done by the assessee, amount to passing of property in goods to purchasers by the assessee?
2. Whether the assessee should be considered a "dealer" under the U.P. Sales Tax Act?
3. Interpretation of the term "dealer" as per section 2(c) of the Sales Tax Act.
4. Determining if the assessees were acting as brokers or dealers based on the facts of the case.
5. Comparison of the present case with relevant case laws to establish the nature of the transactions involved.

Detailed Analysis:
1. The judgment concerns a reference under section 11(5) of the U.P. Sales Tax Act regarding transactions involving cultivators, purchasers, and the assessee. The assessees claimed they were mere brokers bringing buyers and sellers together and not liable for sales tax. The Sales Tax Officer assessed them as dealers based on issuing purchas and handling transactions. The Judge (Revisions) set aside the assessment, emphasizing completion of sales in the presence of buyers and sellers. The court analyzed the factors to determine if the assessees passed property in goods, concluding that the assessees acted as brokers in facilitating transactions.

2. The court examined the definition of "dealer" under the Sales Tax Act, emphasizing the role of a broker, commission agent, or mercantile agent in buying or selling goods on behalf of principals. The court noted that the assessees' issuance of purchas did not automatically classify them as dealers. It was crucial to establish if the assessees had authority to sell goods in their name and had possession over the goods. The court distinguished between a broker and a dealer, highlighting the obligation of a broker to bring parties together without assuming a buyer or seller role.

3. The court referred to the explanation to section 2(c) of the Sales Tax Act, which defines a "dealer." It discussed the addition of words through an amendment, emphasizing that a broker must engage in buying or selling goods on behalf of principals to qualify as a dealer. The court rejected the argument that issuing purchas indicated dealer status, stressing the need to assess actual possession and authority to sell goods.

4. The court analyzed the distinction between a broker and a dealer based on legal principles, citing Corpus Juris Secundum. It highlighted that acting as a broker involved facilitating transactions between parties without assuming a buyer or seller role. The court emphasized that issuing purchas did not override other factors indicating a broker-client relationship, such as sellers bringing goods and sales occurring in their presence.

5. The court compared the present case with a Mysore High Court decision, emphasizing similar facts where commission agents acted as brokers, not dealers. It differentiated cases cited by the Junior Standing Counsel, noting that maintaining two sets of accounts and selling goods as one's own distinguished a dealer from a broker. The court concluded that the assessees were not dealers based on the specific circumstances, aligning with the Mysore High Court's interpretation.

In conclusion, the court answered the reference against the department, emphasizing the broker-client relationship of the assessees and directing the department to pay the costs of the reference.