1999 (2) TMI 655 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the assessee is a procurement agent or a dealer under Section 2(g) of the Tamil Nadu General Sales Tax Act, 1959.
2. Taxability of the turnover of Rs. 19,41,609 at 5 percent and the consequential levy of surcharge, additional surcharge, and additional sales tax.

Detailed Analysis:

1. Whether the assessee is a procurement agent or a dealer under Section 2(g) of the Tamil Nadu General Sales Tax Act, 1959:

The assessee, Tvl. Parikh Metal Corporation, claimed exemption on the turnover of Rs. 19,41,608.61, asserting it acted as a procurement agent for M/s. Universal Radiators Limited under an agreement dated June 20, 1984. The Commercial Tax Officer and the Appellate Assistant Commissioner rejected this claim, identifying the assessee as a dealer under Section 2(g) of the Tamil Nadu General Sales Tax Act, 1959. The Appellate Tribunal, however, ruled in favor of the assessee, granting the exemption.

Upon review, it was found that the agreement's clauses cumulatively indicated that the assessee had the right of disposal of goods and acted as a dealer. The assessee purchased the goods in its own name, stored them in its godown, and subsequently sold them to the ultimate buyer. The assessee fixed the prices considering the prevailing market rates and conditions, and the ultimate buyer reimbursed the expenses only after receiving the goods. The assessee's role involved purchasing goods with its own funds and selling them to the ultimate buyer, which aligns with the definition of a dealer under Section 2(g) of the Act.

2. Taxability of the turnover of Rs. 19,41,609 at 5 percent and the consequential levy of surcharge, additional surcharge, and additional sales tax:

The Tribunal examined whether the common order of the Appellate Tribunal exempting the turnover from tax was in accordance with the law. The agreement and the nature of transactions indicated two distinct transactions: the purchase by the assessee from the seller and the sale by the assessee to the ultimate buyer. The assessee utilized its own funds for the purchases and had the right to dispose of the goods, confirming its status as a dealer.

The Tribunal referenced the Supreme Court decision in Bagal Kot Cement Co. v. State of Mysore, which supported the view that a commission agent with control over goods and authority to pass the property in goods is considered a dealer. This principle, along with the Full Bench decision of the Madras High Court in Kandula Radhakrishna Rao v. Province of Madras, was applicable to the present case.

The Tribunal concluded that the assessee is liable to pay tax on the second transaction, which involves the sale to the ultimate buyer. Consequently, the turnover of Rs. 19,41,609 is subject to tax at 5 percent (multi-point), along with surcharge, additional surcharge, and additional sales tax as ordered by the first appellate authority.

Conclusion:

The Tribunal set aside the Appellate Tribunal's order and restored the order of the first appellate authority, confirming the assessee's liability to pay tax on the turnover of Rs. 19,41,609 at the rate of 5 percent, along with the applicable surcharges and additional taxes. The tax revision petitions were allowed, and the order was to be observed and executed by all concerned.