1971 (9) TMI 180 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of Rs. 6,75,890.17 from 1st October, 1958, to 31st March, 1959, represented sales in the course of inter-State trade and commerce.
2. Whether the assessee was liable to pay tax under the Central Sales Tax Act on the aforesaid amount.

Issue-Wise Detailed Analysis:

Issue 1: Inter-State Trade and Commerce
The primary issue was whether the turnover in question represented sales in the course of inter-State trade and commerce. The court noted that the assessee procured orders from buyers in Uttar Pradesh (U.P.) and the manufacturers despatched the goods to various destinations in U.P. in execution of those orders. The movement of goods took place from one state to another pursuant to contracts of sale. According to Section 3(a) of the Central Sales Tax Act, a sale or purchase of goods is deemed to take place in the course of inter-State trade or commerce if it occasions the movement of goods from one state to another. Therefore, the court concluded that the sales in question were indeed inter-State sales and thus liable to tax under the Central Sales Tax Act.

Issue 2: Liability to Pay Central Sales Tax
The second issue was determining who was liable to pay the Central sales tax-the manufacturers or the assessee. The court examined the terms and conditions of the agreement between the assessee and the manufacturers, which indicated that the property in the goods remained with the manufacturers until it was transferred to the buyers. The assessee was acting merely as an agent of the manufacturers and not as an independent seller. The court highlighted several key points from the agreement:
- The assessee was required to sell the products under the direction of the manufacturers.
- The manufacturers fixed the price of the products.
- The assessee received a commission on gross realizations.
- The manufacturers bore all expenses related to rebates, insurance, leakage, wastage, freight, customs, and clearing charges.
- The assessee submitted sales statements and remitted 75% of actual sales to the manufacturers.

The modus operandi adopted by the assessee further supported this conclusion. The assessee secured orders from buyers within U.P. and forwarded them to the manufacturers' factory for execution. Goods were despatched under railway receipts made out in the name of the manufacturers and negotiated through banks. The assessee prepared invoices based on pro forma chalans from the manufacturers and collected 'C' forms from the buyers. All money realized was deposited in the account of the manufacturers.

Given these facts, the court concluded that the assessee was merely a selling agent and not engaged in the business of selling its own goods. Therefore, the assessee was not liable for the payment of tax under the Central Sales Tax Act.

Conclusion:
- Question 1: Answered in the affirmative. The turnover represented sales in the course of inter-State trade and commerce.
- Question 2: Answered in the negative. The assessee was not liable to pay tax under the Central Sales Tax Act.

The court awarded the assessee costs assessed at Rs 100. Reference answered accordingly.