1991 (6) TMI 227 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of transactions involving a co-operative society under the Gujarat Sales Tax Act, 1969.

Analysis:
The case involved a reference under section 69 of the Gujarat Sales Tax Act, 1969, concerning a co-operative society formed to promote the interests of farmers by pooling unginned cotton, ginning it, and selling the cotton, cotton-seeds, and oil. The Sales Tax Officer initially treated the transactions as sale and purchase, leading to a tax assessment. The Tribunal, after considering the facts, concluded that the transactions were not sales but activities carried out on behalf of the members. The Tribunal's decision was based on the nature of the agreement between the society and its members, following the Supreme Court's decision in a similar case.

The Tribunal's decision was influenced by the Supreme Court's ruling in a previous case, emphasizing that co-operative societies act as agents for illiterate farmers to prevent exploitation. The Tribunal compared the bye-laws of the society with a similar case considered by the Supreme Court, finding them to be similar in key aspects related to ginning, advances, profit distribution, and sales. This comparison led to the conclusion that the society's activities were in line with its bye-laws and the spirit of the Supreme Court decision.

The Tribunal also considered the provision in the society's bye-laws regarding loss-sharing among members, indicating an agent-principal relationship. The society was registered with the specific purpose of acting as an agent, and there was no evidence of it contravening this condition. The Tribunal's decision aligned with the principles established by the Supreme Court and the nature of the society's operations as per its bye-laws.

The Revenue argued that a Full Bench decision of the High Court should have been followed, which laid down principles to determine whether a transaction is a sale or agency. However, the Tribunal's decision was deemed correct as it correctly applied the Supreme Court's precedent to the case at hand, emphasizing that the property did not pass to the society, and any loss was to be borne by the members, indicating an agency relationship.

In conclusion, the Tribunal's decision was upheld, affirming that the transactions between the co-operative society and its members were not sales but activities conducted on behalf of the members, in line with the society's bye-laws and the nature of its registration as an agent.

End of Analysis