2008 (3) TMI 630 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstance of the case, the Tribunal is legally justified in confirming the levy of tax on the purchases of raab galawat and raab salawat at ₹ 1,56,935.89 made on behalf of the ex-U.P. principals? Whether the view of the Tribunal is based on relevant consideration and on correct facts? Whether the view of the Tribunal that after making the purchases the entry was made on its own account, treating the purchases as own purchases while the fact is to the contrary, namely, that after making the purchase in Satti Bahi the entry was made in the account of ex-U.P. purchaser and in the purchase bahi and after making the purchases, the goods were despatched to the ex-U.P. principal outside the State of U.P.? Held that - The dealer by means of the documents has established that the local purchases made and the despatches were inseparable as the quantity despatched, the time taken in the despatch and further only commission was charged clearly showed that they were made for and on behalf of ex-U.P. principals.Thus, there does arise question of law warranting interference in revisional jurisdiction. Revision is accordingly allowed. The impugned orders are set aside and demand of tax raised for the transaction amounting to ₹ 1,56,935.89 treating them to be local purchases on its own account is accordingly set aside. Any amount of tax deposited in excess shall be refunded to the dealer in accordance with law.

Summary

Issues Involved:
1. Dispute regarding levy of tax on purchases made by a dealer for ex-U.P. principals.
2. Failure to establish prior purchase orders and agent status.
3. Consideration of oral orders as prior purchase orders.
4. Rejection of dealer's contention based on lack of written record of orders.
5. Establishment of local purchases made for and on behalf of ex-U.P. principals through conduct.

Analysis:

1. The dispute in this case revolves around the levy of tax on purchases made by the dealer for ex-U.P. principals. The dealer claimed to be a commission agent and showed transactions of purchases made for and on behalf of its ex-U.P. principals. However, the assessing authority held these purchases to be made for the dealer's own account, leading to a tax demand.

2. The dealer failed to establish prior purchase orders from ex-U.P. principals, which was a crucial aspect in determining the nature of the transactions. The authorities questioned the agent status of the dealer as per the Contract Act, 1972, highlighting the lack of material supporting the dealer's claim.

3. The issue of considering oral orders received on telephone or through representatives as prior purchase orders was raised. The dealer argued that such oral orders should be accepted as valid prior purchase orders, even without a written record, especially considering the specific quantities of goods purchased and dispatched on the same day.

4. The rejection of the dealer's contention based on the absence of a written record of orders was challenged. The court noted that maintaining a record book for oral orders may not be necessary in cases where orders are limited and executed promptly on the same day, as observed from the evidence presented during assessment proceedings.

5. Through the documents provided, the dealer successfully demonstrated that the local purchases made and despatches carried out were inseparable, indicating that they were indeed made for and on behalf of ex-U.P. principals. The court found merit in the dealer's argument and allowed the revision, setting aside the tax demand and ordering refunds if applicable.