1969 (11) TMI 64 - HC - VAT and Sales Tax

Summary

Issues:
- Exemption under the proviso to section 2(r) of the Madras General Sales Tax Act for the sale of agricultural produce by an agent of the principal.
- Interpretation of the proviso to section 2(r) regarding the eligibility for exemption.
- Whether the producer must also be a dealer to claim exemption.
- Determination of the status of a commission agent under the definition of a dealer.

Analysis:
The case involved an assessee who sold agricultural produce as an agent of the principal and claimed exemption under the proviso to section 2(r) of the Madras General Sales Tax Act. The Tribunal granted the exemption, leading to a tax case filed by the State against this decision. The State relied on a previous judgment, State of Madras v. T.C.M. Society Ltd., which favored the State's position. However, the court expressed disagreement with the interpretation in the previous judgment, stating that the agent should not be denied exemption merely because the principal produced the agricultural produce and sold it through the agent. The court found it unnecessary for the producer to also be a dealer to claim exemption, leading to a decision for the tax case to be decided by a Full Bench of three judges.

In the subsequent hearing before the Full Bench, it was argued that if the agent, who sold the agricultural produce, was also a dealer, he would not be entitled to the exclusion from the turnover of sales of agricultural produce unless he had grown the produce on his own land or land in which he had an interest. The court confirmed that the assessee was a dealer in chillies for the relevant year and that the turnover in question represented sales of agricultural produce. The court noted that the error made by the Tribunal was in assuming the assessee was a mere agent, as a dealer also includes a commission agent who has the property in the goods sold and effects sales on behalf of disclosed or undisclosed principals.

The court emphasized that the turnover in the proviso to section 2(r) relates to the sales effected by a dealer, and the proviso should be understood in connection with the turnover in the dealer's hands. The court aligned with the reasoning in State of Madras v. T.C.M. Society Ltd., agreeing that the analogy of another section would not assist in interpreting the proviso to section 2(r). Consequently, the tax revision case was allowed with costs, affirming that the agent, being a commission agent and a dealer, was not eligible for the exemption under the proviso to section 2(r).

In conclusion, the judgment clarified the interpretation of the proviso to section 2(r) regarding the eligibility for exemption for the sale of agricultural produce by an agent and highlighted the distinction between a mere agent and a commission agent under the definition of a dealer.