2017 (8) TMI 51 - HC - VAT and Sales Tax

Validity of agency agreement - whether the agency agreement entered into between the petitioner and M/s Saroj Sales Corporation and M/s Kulliyath Steel Traders in Kerala and the transactions of consignment transfer made by the petitioner to the said agent can be disbelieved for the reason assigned by the third respondent? - Held that - under sub-section 1 of section 6(A) Central Sales Tax Act and Form F prescribed under Rule 12 (5) of the Central Sales Tax (Registration and Turnover Rules), 1957, there is no need or necessity for the agency to be always evidenced by a document in writing, but, it may also be oral and such an agency is deducible from the very nature of the transaction that took place between two different individuals and that the information required on the body of Form F as to the date from which registration is valid and the first proviso to Rule 12(5) of Rules construed has to be considered in a liberal manner so as to foster or develope inter-state trade or commerce. Petition allowed - decided in favor of petitioner.

Summary

Issues involved:
Interpretation of agency agreement for consignment transactions.

Analysis:
The High Court of Madras considered a writ petition involving a narrow issue concerning the validity of an agency agreement for consignment transactions. The primary question was whether the agreement between the petitioner and two agents in Kerala could be disbelieved based on the reasons provided by the tax authorities. The Appellate Assistant Commissioner had reversed the assessment order, emphasizing that the agreement should be considered valid until mutually canceled or in accordance with its terms. It was noted that the Assessing Officer was satisfied with the consignment transactions, supported by relevant documentation like Form 'F' and other records.

The Appellate Assistant Commissioner highlighted the importance of having an agreement, whether oral or written, for consignment agency requirements. The Court emphasized that the nature of transactions with a dealer does not change based on the date of agreement. Evidence was presented showing that consignments were delivered to agents who then sold them to buyers, remitting taxes accordingly. Despite the satisfaction of the Assessing Officer and the verification of relevant documents, the third respondent raised concerns about the disposal of goods by two agents within a short period, lacking records for certain aspects.

Referring to a previous Division Bench decision, the Court clarified that there is no strict requirement for a written agency agreement under the Central Sales Tax Act. The judgment highlighted the liberal interpretation of Form 'F' declarations and the need to foster inter-state trade. Based on this legal precedent, the Court found in favor of the petitioner, setting aside the impugned order and directing the adjustment of taxes paid in subsequent assessments. The decision emphasized the importance of considering the nature of transactions and relevant documentation rather than strict formalities in agency agreements for consignment sales.

In conclusion, the judgment provided clarity on the legal requirements for consignment transactions under the Central Sales Tax Act, emphasizing the need for a liberal interpretation of relevant forms and fostering inter-state trade. The decision highlighted the significance of documentary evidence and the nature of transactions over formalities in determining the validity of agency agreements for consignment sales.