Agricultural produce exemption under sales tax law applies only when the dealer is the grower, not a mere selling agent.

The proviso to section 2(r) of the Madras General Sales Tax Act, 1959, exempts only the sale proceeds of agricultural or horticultural produce grown by the dealer claiming the benefit, so a co-operative society cannot claim exemption merely because it facilitates sale of members' produce. Where the society acts as a dealer or selling agent with authority to transfer property in the goods, the resulting turnover is its own turnover and not that of the member-growers. The earlier agency-based reasoning under the 1939 Act was inapplicable because that statute contained a special fiction absent from the 1959 Act. The Tribunal's broader view of the proviso was rejected.

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Issues: Whether the proviso to section 2(r) of the Madras General Sales Tax Act, 1959, exempted the turnover of a co-operative society acting in respect of agricultural produce brought by its members, and whether such turnover could claim the benefit of exemption where the society functioned as an agent or intermediary rather than as the grower of the produce.

Analysis: The exemption in the proviso to section 2(r) applies to the proceeds of sale by a person of agricultural or horticultural produce grown by that person or on land in which that person has an interest. The language of the proviso shows that the seller claiming exemption must himself be the grower, and the turnover must be his own turnover as a dealer. Where the society, on the statutory definition of dealer, effects a sale as agent with authority to transfer property in the goods, the turnover so arising is the society's own turnover and not that of the principal agriculturist. The earlier agency-based reasoning drawn from the special scheme of section 14-A of the Madras General Sales Tax Act, 1939, was held inapplicable because that provision created a special statutory fiction for non-resident principals which is absent in the 1959 Act. The real nature of the transaction, including the society's by-laws and the bargain between the parties, still had to be examined on remand to decide whether the society was an actual selling agent or merely an intermediary facilitating the auction.

Conclusion: The proviso to section 2(r) does not extend exemption to a society or agent merely because it facilitates sale of members' produce; the exemption is available only when the produce is grown by the dealer claiming it. The Tribunal's wider view of the proviso was set aside.

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