1971 (11) TMI 154 - HC - VAT and Sales Tax

Summary

Issues:
Whether additional tax under section 5-A of the Andhra Pradesh General Sales Tax Act can be assessed against the principal when sales are effected by an agent on behalf of the principal.

Analysis:
The petitioners, resident dealers, sold goods through local commission agents and submitted certificates indicating that tax on sales had been paid by the agents. However, the petitioners were assessed for additional tax under section 5-A of the Act. The main legal question was whether the principal could be held liable for this additional tax under section 5-A despite the provisions of section 11 of the Act. The court clarified that the additional tax under section 5-A is similar to the tax under section 5. The court emphasized that principals are primarily liable for tax on their turnover, and section 11 is a mechanism for tax collection. The section states that tax due in a transaction by an agent on behalf of a resident principal shall be collected from the agent, but the tax can also be recovered from the principal as per the proviso. The court examined the interpretation of the word "shall" in section 11 and concluded that it should be construed as directory, not mandatory, considering the context and purpose of the provision.

The court referred to legal principles regarding the interpretation of statutory provisions and highlighted that the recovery from the agent is a convenient mode of tax collection but does not absolve the principal of primary liability. The court rejected the argument that principals cannot be assessed for additional tax under section 5-A based on the interpretation of section 11. The court directed the taxing authorities to verify if the agents had paid the additional tax under section 5-A and revise the assessments accordingly. Ultimately, the court dismissed the revision petitions, holding against the petitioner-principals, with limited relief for providing proof of payment by their agents for the additional tax under section 5-A. The court also ordered the petitioners to pay costs and advocate's fees.