1974 (8) TMI 86 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the respondent, acting as the agent of the State Government in procuring and distributing foodgrains, is exempt from sales tax liability under the Karnataka Sales Tax Act, 1957.
2. Whether the respondent can be considered a "dealer" under section 2(k) of the Act, thereby attracting sales tax liability.

Analysis:

1. The revision petition was filed by the State challenging the Sales Tax Appellate Tribunal's order exempting the respondent from sales tax liability. The respondent had acted as the agent of the State Government in procuring and distributing foodgrains. The assessing authority had initially assessed a tax amount, which was upheld on appeal. However, the Tribunal ruled in favor of the respondent, stating that the distribution of foodgrains was done through the instrumentality of the State for public welfare, and the respondent acted as an agent of the Government. The Court noted the common ground that the respondent acted as the purchasing and selling agent of the State Government during the relevant period.

2. The key issue was whether the respondent could be considered a "dealer" under section 2(k) of the Act, thus attracting sales tax liability. The Act defines a "dealer" as any person carrying on the business of buying, selling, or distributing goods. The Court observed that the State Government, as per section 19 of the Act, is not considered a "dealer" and is entitled to collect tax only when selling goods. Since the State Government is not liable to tax under section 5(1) of the Act, its agent cannot be made liable as the agent's liability is coextensive with that of the principal. Therefore, the Court upheld the Tribunal's decision that the respondent was not liable to pay tax for the relevant period.

In conclusion, the High Court dismissed the revision petition, affirming the Tribunal's decision that the respondent, acting as the agent of the State Government in procuring and distributing foodgrains, was exempt from sales tax liability under the Karnataka Sales Tax Act, 1957. The Court also clarified that since the State Government is not considered a "dealer" under the Act, its agent cannot be held liable for sales tax.