2003 (5) TMI 520 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the opposite-party is a commission agent and consequently whether freight is part of his turnover.
2. Whether the Trade Tax Tribunal's findings regarding the opposite-party's status as a commission agent are legally justified.

Summary:

Issue 1: Status as Commission Agent and Freight as Part of Turnover
The sole question in this case is whether the Trade Tax Tribunal's finding that the opposite-party is a commission agent, and consequently that freight is not part of his turnover, is legally correct. The opposite-party claims to be a coal agent registered with the Trade Tax Department u/s the U.P. Trade Tax Act. He argued that he made purchases on behalf of principals, charging a purchase price and a 5% commission, and that freight was charged separately in the bills. The Assessing Officer and the First Appellate Authority did not accept this contention due to lack of material evidence, adding the freight to the turnover. However, the Tribunal accepted the opposite-party's claim, stating that purchases were made in the course of agency business.

Issue 2: Tribunal's Findings and Legal Justification
The Department argued that the Tribunal's finding regarding agency is perverse and based on no material, and that the burden of proof was wrongly placed on the Department. The Tribunal's decision was challenged on the grounds that it misinterpreted the facts and the law. The Department raised two questions:
1. Whether the Tribunal is legally justified to hold that the opposite-party is a commission agent despite lack of evidence or agreement.
2. Whether the Tribunal is legally justified to hold that inward freight is not part of turnover despite the dealer making payment of freight and other expenses on his own account.

The Tribunal's observation that the Department did not produce material to show that the dealer is engaged in the sale and purchase of coal was found to be contrary to the record. The dealer admitted to bearing the costs of coal and transportation until delivery to the purchasers, issuing Forms 31, 32, and Form-C. The Tribunal's finding that the dealer acted as an agent was deemed legally unsustainable due to lack of evidence supporting the agency relationship.

Legal Principles and Precedents
The judgment referenced several legal principles and precedents, including:
- The definition of an agent u/s 182 of the Contract Act.
- The distinction between a contract of sale and a contract of agency, as discussed in various Supreme Court cases (e.g., Bhopal Sugar Industries Ltd. v. Sales Tax Officer, Gordon Woodroffe and Co. v. Sheikh M. A. Majid and Co., and M/s. Sri Tirumala Venkateswars Timber and Bamboo Firm v. Commercial Tax Officer).

Conclusion
The High Court found that the dealer-opposite party failed to provide evidence of acting as an agent for brick-kiln owners. The Tribunal's finding that the dealer was an agent was legally unsustainable. The dealer's transactions were determined to be sales on his own account, with freight charges forming part of the turnover. Consequently, the revisions were allowed, the Tribunal's orders were set aside, and the First Appellate Authority's orders were restored.