First dealer status under sales tax law depends on a seller's presence in the State and execution of contracts.

Liability to the additional rate of sales tax on silk cloth turned on whether the seller was the first dealer in the State under rule 7 read with section 4(2) of the Hyderabad General Sales Tax Act, 1950. The scheme of the Act treated physical presence in the State as necessary for a person to be regarded as a dealer for this purpose, so a non-resident seller who had not entered the State to carry on the relevant business could not be treated as a dealer merely because goods were bought from him. A contrary Madras decision was distinguished on the basis that the seller there had entered the State and executed the contracts.

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Issues: Whether the appellant, purchasing silk cloth from merchants outside the State, was the first dealer in the State and liable to pay tax at the additional rate on the turnover of silk cloth.

Analysis: Liability under rule 7 read with section 4(2) of the Hyderabad General Sales Tax Act, 1950 depended on whether the seller was the first dealer in the State. The text of the Act distinguished a dealer from a non-resident dealer, and the scheme of the Act showed that physical presence in the State was necessary for treating a person as a dealer for its purposes. A non-resident seller who had not entered the State for carrying on the relevant business could not be treated as a dealer merely because goods were purchased from him. The reliance on the Madras decision was held inapplicable because there the non-resident seller had come into the State and executed the contracts of sale.

Conclusion: The appellant was the first dealer in the State in respect of the silk cloth turnover and was liable to the additional rate of tax.

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