1981 (9) TMI 270 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the purchases made by the assessee as a commission agent of ex-U.P. principals are exempt from tax as they were in the course of inter-State trade and commerce?

Analysis:
The judgment by the High Court addressed the issue of whether purchases made by the assessee, acting as a commission agent for ex-U.P. principals, were exempt from tax as they were considered to be in the course of inter-State trade and commerce. The Tribunal had initially rejected the assessee's claim for exemption, citing the absence of a purchase and sale agreement between the assessee and its ex-U.P. principals. It was argued that an agent cannot make purchases or sales to their principal, and therefore, purchases made by the assessee on behalf of ex-U.P. principals were deemed to be made in its own capacity. However, the High Court disagreed with this interpretation, emphasizing the principle that a commission agent acts on behalf of the principal and any purchases made by the agent are considered to be on behalf of the principal. The Court referred to previous decisions to support this position, including the case of Himatsingka Timber Co. Ltd. v. State of Orissa, which established that purchases made by a registered dealer to fulfill obligations to constituents outside the State are considered to be in the course of inter-State trade or commerce.

The High Court further criticized the Tribunal's reliance on certain decisions, such as Panna Lal Babu Lal's case, to argue that purchases made by a commission agent on behalf of the principal are not considered the agent's own purchases. The Court clarified that a commission agent is merely an extension of the principal and any transactions conducted by the agent are on behalf of the principal. Therefore, purchases made by the agent for the principal should not be treated as the agent's own purchases. The Court also highlighted the distinction between purchases made for export purposes and purchases made in the course of inter-State trade or commerce, emphasizing that in this case, the movement of goods was a result of an agreement between the principal and the seller through the agent's agency, falling under the purview of inter-State trade.

Regarding the submission of form III-C(1) as evidence of purchases, the Court acknowledged its significance but emphasized that the nature of the transaction as inter-State trade and commerce should not be negated by the form's submission. The Court concluded that the purchases of foodgrain, oil-seeds, and mahua flower made by the assessee on a commission agency basis were indeed in the course of inter-State trade and commerce for the assessment year in question. Consequently, the Court allowed the revision, ruling that no tax could be levied under the relevant sections of the Act. The Court directed the Tribunal to take appropriate action and awarded costs to the assessee.