2005 (7) TMI 627 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 2(ee) in relation to the first sale of goods.
2. Tax liability of a dealer acting as an intermediary in the sale of goods.
3. Application of legal precedents in determining tax liability on goods purchased from farmers.

Analysis:
The revision before the court involved a question of law regarding the tax liability of a dealer under the U.P. Sales Tax Act, 1948. The revisionist challenged the order of the Sales Tax Tribunal, which held that the purchases made by the dealer directly from agriculturists were not subject to tax. The key issue was whether the dealer, who received goods from farmers through mandi samiti, acted as a selling agent or as a manufacturer making the first sale of goods in the State.

The dealer contended that no tax was liable on the turnover of dry ginger as he purchased it through mandi samiti. The department argued that the dealer sold the goods to himself, which was impermissible. Legal precedents were cited to support the argument that if a dealer acts as an intermediary without completing the sale, they are not liable to tax. The court referred to cases like C.V. Ramaswamy Goundar Sons v. Deputy Commercial Tax Officer and Commissioner of Sales Tax v. Sunil Kumar & Company to analyze the dealer's role in the transaction.

The court examined the definition of "manufacturer" under section 2(ee) of the Act, which refers to the dealer making the first sale of goods in the State. Since the dealer could not have made a sale to himself, the court concluded that he could not be considered the manufacturer. Therefore, the court upheld the Sales Tax Tribunal's decision that the dealer was not liable to pay tax on the goods purchased from cultivators and sent outside U.P. The court emphasized that there was no purchase tax on the purchaser for the relevant assessment year.

In conclusion, the court answered the question of law in favor of the assessee and dismissed the revision, affirming that the dealer was not liable to pay tax on the goods in question. The judgment highlighted the distinction between acting as a selling agent and a manufacturer under the relevant legal provisions, ultimately determining the tax liability of the dealer in the specific transaction.