Licence-based sales tax exemption applies only to post-licence transactions; commission agent treated as dealer on substantive trading facts.

A licence-based sales tax exemption applied only to transactions carried out in accordance with the licence after it came into force, so pre-licence turnover remained taxable. The maintained accounts could support treating the assessee as a pakka arhatia, because the transactions were recorded as purchases from sellers and sales to buyers on the assessee's own account. On that basis, a commission agent in substance could be treated as a dealer liable to sales tax on taxable turnover, while the licence fee regime did not convert earlier taxable transactions into exempt ones or justify any additional licence fee absent deficiency.

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Issues: (i) whether there was evidence to support the finding that the assessee acted as a pakka arhatia and not as a kachcha arhatia; (ii) whether obtaining a licence during the assessment year exempted the assessee from sales tax for the entire year or only for transactions after the licence took effect; (iii) whether the assessee, though a commission agent, was liable to sales tax on its turnover and not merely to pay licence fee.

Issue (i): whether there was evidence to support the finding that the assessee acted as a pakka arhatia and not as a kachcha arhatia.

Analysis: The maintained accounts showed that the assessee treated commission-agency transactions as purchases from sellers followed by sales to buyers, with payment to sellers and receipt from buyers at different times. Those features could legally support the inference that it bought and sold goods on its own account rather than merely bringing parties together. The existence of some material supporting the opposite inference did not destroy the validity of the finding so long as evidence existed to sustain the conclusion reached.

Conclusion: Yes, there was evidence supporting the finding that the assessee was a pakka arhatia.

Issue (ii): whether obtaining a licence during the assessment year exempted the assessee from sales tax for the entire year or only for transactions after the licence took effect.

Analysis: Exemption under section 6 operated only in respect of transactions carried out in accordance with the terms and conditions of the licence. A transaction completed before the licence was granted could not be said to have been carried out in accordance with a licence that did not then exist. The scheme of the licence provisions and the fee rules showed that the fee related to the year's net turnover, while exemption attached only from the effective date of the licence to qualifying transactions thereafter. Section 21 was concerned with recovery of escaped or under-assessed licence fee, not with converting pre-licence taxable turnover into exempt turnover.

Conclusion: No, the assessee was exempt only for transactions carried out after the licence took effect and not for the whole assessment year.

Issue (iii): whether the assessee, though a commission agent, was liable to sales tax on its turnover and not merely to pay licence fee.

Analysis: Once the assessee was found to be a dealer and not merely an intermediary, its turnover before the licence date remained taxable under section 3. The licence fee already paid on the basis of the year's net turnover did not eliminate liability to tax on earlier transactions that were outside the licence exemption. There was no basis for invoking section 21 to levy any additional licence fee, because no deficiency in the fee paid was shown.

Conclusion: The assessee was liable to pay sales tax on the taxable turnover prior to the licence date, and no further licence fee was payable.

Final Conclusion: The reference was answered against the assessee and in favour of the revenue authorities, with the pre-licence turnover remaining taxable and the licence exemption confined to qualifying post-licence transactions.

Ratio Decidendi: A licence-based tax exemption applies only to transactions actually carried out in accordance with the licence after it comes into force, and a commission agent who in substance buys and sells goods on its own account can be treated as a dealer liable to sales tax on taxable turnover.

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