Pucca adatiya transactions and sales tax: despatches outside the Province were not proved to be taxable sales.

Despatches of oilseeds to a pucca adatiya outside the Province were not shown to be taxable sales under the Sales Tax Act. Applying Explanation (II) to section 2(g) of the Sales Tax Act, 1947, the court held that the documents did not establish whether the transaction was a sale to the adatiya at Jabalpur or a sale to an undisclosed principal outside the State. In a pucca adati arrangement, a sale to the adatiya arises only on appropriation for himself; if he merely procures a customer, there is only one sale to the outside buyer. On the proved facts, no sale was shown to have occurred while the goods were still within the Province, so the reference was answered in favour of the assessee.

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Issues: Whether the despatches of oilseeds to a pucca adatiya outside the Province constituted sales taxable under the Sales Tax Act.

Analysis: The assessment period preceded the commencement of the Constitution and the question turned on the application of Explanation (II) to section 2(g) of the Sales Tax Act, 1947. On the facts proved, the documents did not establish whether the transaction was a sale to the pucca adatiya at Jabalpur or a sale to an undisclosed principal outside the State. In the pucca adati system, a sale to the adatiya comes into existence only when he appropriates the transaction for himself, and where he merely procures a customer there is only one sale to the outside buyer. The record did not justify an inference that the goods were sold while still within the Province, and if the sale was to the adatiya at all, it would be treated as taking place when the bijak was submitted, by which time the goods had already reached Khadakpore outside the State.

Conclusion: The despatches did not constitute sales taxable under the Sales Tax Act and the answer to the reference was given in favour of the assessee.

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