2015 (1) TMI 637 - HC - VAT and Sales Tax

Nature of cooperative society, dealer or not - Whether the respondent/society, which is a co-operative marketing society, is a dealer falling within the definition of Section 2(g) of the TNGST Act and liable to pay tax under the provisions of the TNGST Act Held that - Tribunal was right in setting aside the turnover relating to auction sale of agricultural produce by the assessee who had acted as agents of agriculturists with complete dominion over the goods - In The Tiruchengode Co-operative Marketing Society Limited Versus The State of Tamil Nadu 1977 (3) TMI 144 - MADRAS HIGH COURT wherein the assessee rightly contended that in respect of the sales covering the turnovers in dispute, the society merely acted as an intermediary, bringing together the agriculturist-principals and the respective purchasers is auction held in the presence of the members and that the society did not actually do any business of purchasing or selling to make itself liable to assessment under the TNGST Act - the respondent/society acted as an intermediary, bringing together the agriculturists-principals and the buyer, and they have no authority to sell the goods and, therefore, the respondent/ society is not a dealer as defined under Section 2(g) of the TNGST Act - as the respondent/society has not effected any sale, they have not acquired any turnover liable to sales tax Decided against revenue.

Summary

Issues:
1. Interpretation of the definition of 'dealer' under Section 2(g) of the TNGST Act.
2. Tax liability of a cooperative marketing society acting as an intermediary.
3. Authority of cooperative societies to sell agricultural produce.
4. Applicability of sales tax on auction sales of agricultural produce.
5. Validity of penalty under Section 12(5)(iii) of the TNGST Act.

Issue 1 - Interpretation of the definition of 'dealer' under Section 2(g) of the TNGST Act:
The primary issue in the revisions was whether the respondent society, a cooperative marketing society, falls within the definition of 'dealer' under Section 2(g) of the TNGST Act and is thus liable to pay tax. The Tribunal, relying on a previous decision, concluded that the society did not qualify as a dealer under the Act. The High Court analyzed the definition of 'dealer' under the Act, emphasizing that the society acted as an intermediary without the authority to sell goods, and hence, did not meet the criteria of a dealer. The court referred to past judgments to support this interpretation.

Issue 2 - Tax liability of a cooperative marketing society acting as an intermediary:
The court examined whether the respondent society, by acting as an intermediary between agriculturists and buyers, could be considered a dealer for tax purposes. It was established that the society's role was limited to facilitating transactions and did not involve actual sales of goods. As a result, the court held that the society did not engage in activities that would make it liable for sales tax under the TNGST Act.

Issue 3 - Authority of cooperative societies to sell agricultural produce:
The court considered the authority of cooperative societies to sell agricultural produce and highlighted that in this case, the society did not have the power to sell goods without the consent of the agriculturist-members. The court emphasized that the society's lack of authority to transfer property in the goods indicated that no sale transactions took place, thus exempting the society from sales tax liability.

Issue 4 - Applicability of sales tax on auction sales of agricultural produce:
The court addressed the specific scenario of auction sales of agricultural produce by the society. It was established that since the society did not have the authority to sell goods independently and the sales were contingent upon the consent of agriculturist-members, no taxable turnover was generated. The court cited previous decisions to support the conclusion that such auction sales did not attract sales tax liability.

Issue 5 - Validity of penalty under Section 12(5)(iii) of the TNGST Act:
The court also examined the validity of the penalty levied under Section 12(5)(iii) of the TNGST Act. It was found that since the society was not considered a dealer and did not have taxable turnover, the penalty imposed was not sustainable. The court dismissed the revisions, ruling in favor of the society and against the Department on the questions of law raised in the case.