Sales manager not taxable as dealer; conditional tax collections cannot be treated as State revenue absent lawful liability.

A sales manager acting under an agreement for cement companies was not a dealer for sales tax purposes where he merely entered contracts, submitted bills and received payments on the principals' behalf. The transactions were treated as those of the principal companies, so a second levy on the same sales was impermissible and the assessments and notices were held without jurisdiction. Amounts collected conditionally from customers during the dispute could not be compelled to be remitted to the State, because section 11 was read as applying only to tax lawfully leviable under the Act. The impugned demands were therefore quashed.

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Issues: (i) whether the petitioners, acting under the agreement as sales managers for the cement companies, could be treated as dealers and subjected to sales tax on the transactions effected on behalf of the principal companies; (ii) whether amounts collected conditionally from customers pending the tax dispute could be compelled to be remitted to the State under the sales tax law.

Issue (i): whether the petitioners, acting under the agreement as sales managers for the cement companies, could be treated as dealers and subjected to sales tax on the transactions effected on behalf of the principal companies.

Analysis: The agreement showed that the petitioners were appointed only as sole and exclusive sales managers, authorised to enter into contracts, submit bills and receive payments on behalf of the companies. The department itself accepted that they were merely sales managers and not independent legal entities effecting purchases from the companies. On that footing, the transactions were those of the principal companies, and the petitioners could not be treated as dealers liable to a second levy on the same sales.

Conclusion: The assessment orders and notices levying sales tax on the petitioners as dealers were illegal and without jurisdiction.

Issue (ii): whether amounts collected conditionally from customers pending the tax dispute could be compelled to be remitted to the State under the sales tax law.

Analysis: The collection in question was made only conditionally, pending the outcome of the dispute, and was not a collection of tax lawfully leviable if the petitioners were not liable as dealers. Section 11 of the Hyderabad General Sales Tax Act was construed to cover only amounts collected by way of tax lawfully leviable under the Act. A collection made without legal authority could not be treated as State revenue merely because it was described as tax at the time of collection.

Conclusion: The State was not entitled to compel remittance of the conditionally collected amounts.

Final Conclusion: The challenge succeeded in full, the impugned sales tax demands were quashed, and the petitioners were protected from further dealer-based assessment in respect of sales made as sales managers.

Ratio Decidendi: A person acting only as a sales manager on behalf of a principal cannot be assessed as a dealer for the same transactions, and only tax lawfully leviable under the Act can be required to be paid over to the State.

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