2003 (2) TMI 459 - HC - VAT and Sales Tax

Issues Involved:
1. Agency status claimed by the petitioner in transactions with M/s. Malayalam Plantations Ltd.
2. Claim for deduction of sales return and trade discount under the C.S.T. Act.

Issue-Wise Detailed Analysis:

1. Agency Status Claimed by the Petitioner:

The petitioner, M/s. Harrisons Crossfield Ltd. (now Harrisons Malayalam Ltd.), claimed that their transactions with M/s. Malayalam Plantations Ltd. were agency transactions under a managing agency agreement dated May 13, 1948. The assessing authority did not accept this contention, treating the transactions as sales and assessed turnovers under the K.G.S.T. Act and the C.S.T. Act.

The petitioner appealed to the Additional Deputy Commissioner (Appeals), who allowed their claim for some years under the K.G.S.T. Act but not for others. Both the petitioner and the department filed appeals before the Tribunal. The Tribunal dismissed most appeals, leading to the petitioner filing revisions.

The petitioner argued that they acted as agents under the managing agency agreement, purchasing goods only upon requisition from M/s. Malayalam Plantations Ltd. and charging only the actual purchase price plus a 2.5% commission and packing/loading charges. They contended that the transactions were agency transactions, not independent sales.

The Government pleader argued that the petitioner and M/s. Malayalam Plantations Ltd. were distinct entities, and the transactions involved two stages: purchase by the petitioner and sale to M/s. Malayalam Plantations Ltd. The pleader emphasized that the title to goods passed to the petitioner upon purchase, and the subsequent transfer to M/s. Malayalam Plantations Ltd. constituted a sale.

The court examined the managing agency agreement, particularly clauses 2(b), 2(d), 16, and item 3 of the schedule. Clause 16 allowed the petitioner to act as principals in certain circumstances, indicating that not all transactions were agency transactions. The Tribunal had concluded that the transactions were independent sales based on the agreement's language and the nature of the transactions.

The court found that the Tribunal's approach was flawed. The agreement appointed the petitioner as a buying agent, and the transactions should be examined in light of the agreement and the actual conduct of the parties. The court noted that the petitioner purchased goods in its own name, which was inconsistent with agency transactions. Clause 16 and item 3 of the schedule suggested that agency transactions were limited to certain types of purchases.

The court directed the assessing authority to reconsider the agency status claim, examining the agreement, correspondence, purchase bills, debit notes, and the provisions of Explanation 5 of Section 2(xxi) of the Act.

2. Claim for Deduction of Sales Return and Trade Discount:

The petitioner claimed deductions for sales return and trade discount for certain years under the C.S.T. Act. This claim was not made before the assessing authority but was raised for the first time before the appellate authorities, which rejected it on procedural grounds.

The petitioner argued that they were entitled to make this claim at any stage of the proceedings, citing the Supreme Court's decision in National Thermal Power Co. Ltd. v. Commissioner of Income-tax [1998] 229 ITR 383, which allowed raising additional grounds before the Tribunal.

The court agreed with the petitioner, noting that the appellate authorities should have considered the claim despite it not being raised initially. The court directed the assessing authority to consider the claim for deduction of sales return/trade discount afresh, following the principles laid down by the Supreme Court.

Conclusion:

The court set aside the orders of the appellate authorities and directed the assessing authority to reassess the agency status claim and the claim for deduction of sales return/trade discount, considering the relevant agreement, correspondence, purchase bills, debit notes, and legal provisions. The revisions were disposed of accordingly.

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