2002 (11) TMI 748 - HC - VAT and Sales Tax

Issues Involved:
1. Determination of the legal relationship between the petitioner and Universal Radiators Ltd.
2. Applicability of sales tax under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act).
3. Jurisdiction of the High Court under Article 226 of the Constitution of India.
4. Compliance with Rule 26(6)(b) of the Tamil Nadu General Sales Tax Rules.

Detailed Analysis:

1. Determination of the Legal Relationship:
The core issue in these writ petitions is the determination of the exact legal relationship between the petitioner, a partnership firm dealing in non-ferrous metals, and Universal Radiators Ltd. The petitioner claimed to be a buying agent for Universal Radiators, asserting that transactions were not on a principal-to-principal basis but rather in the capacity of an agent to principal, thus not attracting sales tax.

The assessing officer and the Appellate Assistant Commissioner held that the relationship was principal-to-principal, implying sales by the petitioner to Universal Radiators, which attracted sales tax. The Tamil Nadu Sales-tax Appellate Tribunal, however, concluded that the petitioner acted as an agent under the agreement dated 20.6.1984. The Special Tribunal reversed this decision, reaffirming the principal-to-principal relationship and the consequent applicability of sales tax.

2. Applicability of Sales Tax under TNGST Act:
The Special Tribunal's order, which is under challenge, held that the transactions between the petitioner and Universal Radiators were sales, thereby attracting sales tax under the TNGST Act. The Tribunal based its conclusion on the interpretation of the agreement dated 20.6.1984, which it construed as establishing a principal-to-principal relationship.

The High Court examined the relevant clauses of the agreement, noting that despite the petitioner being described as a "procurement agent," the clauses indicated that the petitioner had significant control over the goods until delivery to Universal Radiators. The petitioner bore the risk and cost of procurement, storage, and transport, and was reimbursed only upon delivery. The Court found that these factors supported the principal-to-principal relationship, thereby justifying the levy of sales tax.

3. Jurisdiction of the High Court under Article 226:
The High Court emphasized that its jurisdiction under Article 226 of the Constitution to issue a writ of Certiorari is limited. It cannot act as an appellate court to re-evaluate facts or evidence. The Court can only interfere if there is an error of law, a mistake apparent on the record, or if the findings are unreasonable or perverse.

The Court found that the Special Tribunal's conclusion was reasonable and based on evidence. It noted that multiple views were possible regarding the relationship between the petitioner and Universal Radiators, and therefore, it would not interfere with the Tribunal's order unless there was a clear legal error, which was not established in this case.

4. Compliance with Rule 26(6)(b) of the Tamil Nadu General Sales Tax Rules:
The learned Special Government Pleader argued that the Special Tribunal correctly found non-compliance with Rule 26(6)(b). However, the High Court disagreed, noting that the Sales Tax Appellate Tribunal had found compliance based on the facts. There were no new materials before the Special Tribunal to justify a different conclusion on this matter.

Conclusion:
The High Court upheld the Special Tribunal's order, concluding that the relationship between the petitioner and Universal Radiators was on a principal-to-principal basis. The petitioner was not merely an agent, and therefore, the transactions were subject to sales tax under the TNGST Act. The Court found no justifiable reason to interfere with the Tribunal's order, dismissing the writ petitions without costs.

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