1964 (1) TMI 37 - HC - VAT and Sales Tax

Railway Manager not liable for sales tax under Madras Act

S. Krishnamachari Versus The State of Madras

The High Court determined that the petitioner, a Manager at a railway station book stall, was not considered a 'dealer' under the Madras General Sales Tax ... - Issues:1. Whether the petitioner is a 'dealer' under the Madras General Sales Tax Act, 1959 based on his commission earned from vending at a railway station.Analysis:The case involves determining whether the petitioner, a Manager at a railway station book stall, qualifies as a 'dealer' under the Madras General Sales Tax Act, 1959 due to his commission earnings from vending food and beverages prepared by the Railway Administration. The petitioner's agreement with the Administration outlined strict terms, including using Administration's resources, fixed payment per item sold, employing specified servants subject to Administration's scrutiny, and following Administration's instructions. The Tribunal viewed the petitioner as an agent liable for sales tax on the turnover. However, the High Court disagreed, emphasizing the lack of evidence supporting a direct sale from the Administration to the petitioner and then to passengers, which is essential for a vendor-vendee relationship. The Court highlighted the significant control exerted by the Administration over the petitioner's vending activities, indicating a master-servant relationship rather than an independent vendor arrangement.The High Court criticized the Tribunal's reasoning, which relied on practical observations rather than the written contract terms. The Tribunal's attempt to establish a vendor-vendee relationship based on the practice of non-returnable unsold items and advance cash payments by the petitioner was deemed inappropriate. The Court stressed the importance of contractual terms in determining the nature of the transaction and disapproved of the Tribunal's departure from this principle. Additionally, the Court highlighted the Tribunal's error in considering the non-liability clause for injuries as evidence of a non-master-servant relationship, emphasizing that control and disciplinary powers are crucial factors in determining the nature of the relationship.Ultimately, the High Court concluded that the petitioner, due to the extensive control and lack of discretion in executing duties, was akin to a servant rather than a dealer. The Court ruled that the sales of food items were directly made by the Railway Administration through the petitioner as its servant, absolving the petitioner from sales tax assessment on the turnover. The assessment order was set aside, and the petitioner was awarded costs.