1989 (9) TMI 358 - AT - VAT and Sales Tax

Issues Involved:
1. Clubbing of turnover of different principals for tax assessment.
2. Definition and liability of a "dealer" under the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of general law principles regarding agent and principal relationships.
4. Validity of assessing agents based on aggregate turnover of principals.

Issue-wise Detailed Analysis:

1. Clubbing of turnover of different principals for tax assessment:
The applicant contended that the assessing authority could not club together the turnover of different principals and fix liability for the aggregate amount on the applicant. The applicant argued that the turnover of each principal should be assessed separately. The Tribunal held that the turnover of each principal was liable to be clubbed together in the hands of the applicant, who acted as a commission agent for 24 disclosed principals. However, the court found that the authorities below acted in clear violation of law and the principles enunciated by the Supreme Court and different High Courts. The aggregate turnover for the impugned period was Rs. 1,58,38,724.54, which included sales on behalf of the principals. The court concluded that clubbing together the turnover of different disclosed principals is not permissible in law.

2. Definition and liability of a "dealer" under the Bengal Finance (Sales Tax) Act, 1941:
The term "dealer" is defined in section 2(c) of the BFST Act as any person who carries on the business of selling goods in West Bengal, including commission agents. The court noted that the definition includes a commission agent who has the authority to sell goods belonging to principals. The respondents argued that since the applicant is a "dealer," he cannot escape the liability of paying the turnover tax as assessed. However, the court found that the liability of the agent must be co-extensive with that of the principal, and the agent cannot be made liable for an amount larger than that of the principal.

3. Applicability of general law principles regarding agent and principal relationships:
The court referred to the case of Irri Veera Raju v. Commercial Tax Officer, where it was held that an agent should be deemed to be as many dealers as there are principals for whom he works. The court emphasized that under the general law, the right or liability of the agent must be co-extensive with that of the principal. The court also referred to the case of State of Madras v. Cement Allocation and Co-ordinating Organisation, where the Supreme Court observed that an agent merely represents his principal and acts for him. The court concluded that the agent is entitled to the same exemptions as his principal would have got had he dealt with the concerned goods himself.

4. Validity of assessing agents based on aggregate turnover of principals:
The court found that the aggregate of the turnover of the principals cannot be computed for assessing the agent for turnover tax under section 6B. The court noted that the method adopted by the authorities from the stage of assessment to the stage of revision before the Commercial Taxes Tribunal was incorrect. The court directed respondent No. 3 to make a fresh assessment for determination of liability under section 6B on the basis of the turnover separately in respect of the transactions of the different principals without aggregating or clubbing together the turnover of all the different disclosed principals.

Conclusion:
The court allowed the application, set aside the impugned orders, and remitted the matter back to the assessing authority for making a fresh assessment according to law and in light of the observations made. The court emphasized that the question of whether one is acting as an agent or not for and on behalf of a principal is a question of fact to be determined by the assessing authority at the appropriate stage in each case. The court made it clear that in the present case, the claim that the applicant is an agent of several disclosed principals was not controverted at any stage, and therefore, this question cannot be reopened in this case.

← Previous Next →