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TMI Blog1976 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... een appointed perhaps to conduct a survey and decide the nature of plan. As per the recommendations of this committee, Co-operative societies of cotton growing agriculturist were to be formed where the agriculturist were to become the members of such Co-operative Societies. Accordingly the appellant society, namely, Mehsana District Shankar-4 Seeds Produce and Sales Co-operative Society Ltd. was formed. This society has been registered under the Bombay Co-operative Societies Act, 1925. As per the directions given by the Government, the production of Shanker-4 quality of cotton seeds was undertaken by this society. For this purpose, the procedure adopted was as under. An agriculturist having a cotton producing agricultural land desirous of producing Shanker-4 quality of cotton was to become a member of this society. A list of such members was to be sent to Government authorities which supplied to the societies the seeds for growing Shanker-4 quality of cotton as per specified quantity based on the total cultivable land of the individual agriculturist member. On receipt of the seeds, the production of cotton therefrom was under the supervision of an expert appointed by the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his amount comprised of Rs. 2.90 per kilogram being the expenses towards grading, ginning and insurance, Rs. 2 per kilogram as supervision charges and Rs. 1 as administrative and other expense. In this way, the appellant society received Rs. 1 by way of administrative expenses from which the actual expense incurred by the appellant society were met with. Thus, while supplying the cotton-seeds to the agriculturist as received from the Government at Rs. 25 per kilograms, the society received Rs. 5 per kilogram and from the sale proceeds of cotton-seeds which sales were effected on behalf of the agriculturist members the society received Rs. 1 per kilogram. After meeting with the total expenses, the amount left over have been treated as appellant society's profit. The method and manner of distribution of cotton-seeds are laid down in the bye-laws of the society. The bye-laws meant for similar producing societies as adopted by this society inter alia provide as under. The relevant bye-law is Bye law No. 2 and it is, in so far as material, in these terms : (Hindi version} The member-agriculturist were paid in advance Rs. 5 per kilogram for the quantity of cotton-seeds received on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant society is formed to fulfil the policy of the Government for regulating the production of Shanker-4 quality of cotton. The main purpose of the society was to regulate the supply of cotton-seeds. The supply of seeds as required for this purpose, initially received from the Government for member-agriculturists at the controlled price and it was necessary to see that the members are given proper guidance for proper growth of this quality of cotton. Besides helping the members in purchase and sale of their seeds for which certain amounts are received towards the administrative and other incidental expenses, the society has collected nothing from these members. All along, the cotton-seeds and cotton remained with the members and, therefore, it is not proper to say that the appellant society either purchased or sold the goods. These arguments did not find favour with the Sales Tax Officer who assessed the appellant society and also with the learned Assistant Commissioner before whom the first appeals were preferred, who dismissed the appeals and confirmed the view of the Sales Tax Officer. The appellant society is not satisfied with these orders and that is why it has filed these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Government and at the same time could not supply or sell the seeds to anyone else than those permitted by the Government. In other words, the appellant society was not free to charge its own price or to supply the goods to anyone else. There being no volition on the part of the appellant society, the society cannot be termed as a dealer. In support of his contention that the society is not a dealer, the learned Advocate pressed in service a decision of this Tribunal in the case of Messrs Vijapur Taluka Reti Kankro Udyog Kamdar Sahakari Mandali Ltd. vs. The State of Gujarat(1). The facts of this case are that the appellant was Co-operative Society of labourers engaged in the business of collecting Reti, Kankri, and Muram from the river-bed. The object of forming this society was to provide them with labour and pay them adequately for their labour and obviate their exploitation by contractors. For this the society was having Ijara or lease for excavating the land or river-bed. For this right of excavations the society was required to pay certain amount by way of royalty to the District Panchayat. The sales price of Reti, Kankro and Muram as well as the amount of royalty were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out attention to Bye-law No. 2(9) he said that this bye-law provides for obtaining loan to fulfil the purpose of the society of production, transformation and sale. He also invited our attention to the Annual Report and Accounts for the years 1970-71 and 1971-72 wherein not only purchases and sales are shown but also differential amount is shown as commission and net profit is worked out. He invited our attention to the entries made in respect of the closing stock which have been shown in the accounts. Distinguishing the case of Vijapur Taluka Reti Kankro Udyog Kamdar Sahakari Mandli(1) cited by the learned Advocate for the appellant, the learned Government Agent said that in that case the main object of the society was only to provide labour. The society intervened between the member-labourers and the customers in order to see that the member-labourers are paid adequately for labour. Whatever amount of labour was received was credited and paid over to the member-labourers without retaining anything therefrom. Nothing was recovered from the labourer-members either by way of commission or in any other form. In support of his contention that the appellant society has been rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, held a public auction in which the highest bid was accepted by a resolution of the managing committee. The purchaser paid the entire consideration to the society. The society, after deducting one paise for market yard charges and five paise as commission per maund, credited the realisation to the individual member's account. The society thus recovered the loans and outstandings from the sale proceeds. Upon these facts the High Court of Gujarat held that the definition of the term 'dealer' in s. 2(11) of the Bombay Sales Tax Act,1959, covers a person, who for a commission or remuneration carries on the business of buying or selling goods in the State and s.16 makes such a commission agent liable with the principal for sales tax; and that even though the goods sold by the society belonged to the members of the society and ultimately the sale proceeds after deducting the loans for financing the crop of groundnuts were returned to the members by the society, and the society was merely a commission agent, the society would be liable as a dealer under the wide definition of s.2(11) proded the society carried on the business of selling goods. Their Lordships further held as stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bye-law, Bye-laws No. 2(2) makes the provisions for arranging for godown as well as centres for the purchase and sale of the goods. Bye-law No. 2(5) which was subsequently added, states that the society may produce, transform an sell Shanker-4 quality of cotton-seeds for its members as well as non-members. Bye-law No. 2(9) provides for obtaining a loan for producing, transforming and selling of seeds to fulfil the purpose of the society. The learned Advocate for the appellant has explained in detail in a note, furnished at the time of hearing as to how Shanker-4 quality of cotton-seeds are obtained from the Government how they are distributed, how and when they go for ginning and how the entries in respect of these seeds are taken to the account of the appellant firm. It is pertinent to note that where the seeds are purchased from the Government at Rs. 25 per kilogram, an amount of Rs. 5 per kilogram ad hoc is collected from the agriculturist-members towards the transportation and other expenses, regardless of the fact whether the expenses incurred are more or less. Similarly an amount at the flat rate Rs. 1 per kilogram is deducted from the sale proceeds of the seeds belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealisation to the individual member's account. Similarly in the instant case the appellant society after deducing Rs. 4.90 towards the other expenses and Re. 1 towards the administrative expenses, credited the balance to the individual member account. This Re. 1 received by way of administrative expenses can safely be termed as commissions received by the appellant society and the appellant society has actually treated this amount as of commission. Even agreeing with the learned Advocate for the appellant that the members of the appellant society are illiterate and instead of relying on the nature of the entries passed in the account book, the substance of the transaction should be looked into, we are of the view that the entries have been properly made and even otherwise if we look to the substance of the transaction itself it shows that the appellant society purchased Shanker-4 quality of cotton-seeds from the Government at controlled price and while supplying the same to its members, received by way of commission Rs. 5% per kilogram. Similarly while selling its members' seeds the society received by way of commission Re. 1% from its members by deducing this amount from the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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