1969 (9) TMI 107 - HC - VAT and Sales Tax

Court rules cooperative sale of cotton taxable under Sales Tax Act; oil-engines not agricultural machinery

The court held that the sale of cotton by the cooperative society was taxable under the M.P. General Sales Tax Act as the society was deemed a 'dealer' ... - Issues:1. Whether the sale of cotton by auction under the cotton pool scheme is liable to tax under the M.P. General Sales Tax Act, 1958Rs.2. Are the oil-engines and centrifugal pumps sold by the society considered agricultural machineryRs.3. Are oil-engines and centrifugal pumps sold to agriculturists for agricultural purposes considered agricultural machinery under the M.P. General Sales Tax Act, 1958Rs.Analysis:Issue 1:The Madhya Pradesh State Co-operative Marketing Society, Jabalpur, was assessed for sales under the cotton pool scheme and sales of oil-engines and pumping sets. The society contended it acted as an auctioneer, not a dealer, for cotton sales. However, the Assistant Commissioner and Tribunal held the society was liable for tax as a dealer. The society's control over the sales process and transactions indicated it was more than an auctioneer, leading to the conclusion that the society was a 'dealer' as per the Act. The court found the society's involvement in the sales process went beyond that of a mere intermediary, distinguishing it from cases where auctioneers were not considered dealers. Therefore, the sales of cotton by the society were deemed taxable under the Act.Issue 2:Regarding the second issue, the Tribunal found that the oil-engines and pumping sets sold were not solely for agricultural purposes but also for other uses. Previous court decisions established that for machinery to be considered agricultural, its primary and principal use must be for agriculture. The society failed to prove that the oil-engines and pumps were commonly known as agricultural machinery in commercial circles. As a result, the court answered this question in the negative, indicating that the items sold were not classified as agricultural machinery.Issue 3:The final issue questioned whether the oil-engines and pumps sold to agriculturists for agricultural purposes were exempt under item 44 of Part II of Schedule II. The court clarified that the taxability of these items was based on their nature, not the buyer's purpose. Since the items were not classified as agricultural machinery, they were taxable under item 44, regardless of the buyer's intent. The question was deemed ill-conceived, and the court answered it in the negative.In conclusion, the court affirmed that the sale of cotton by the society was taxable, the oil-engines and pumps were not considered agricultural machinery, and their taxability was determined by their classification under item 44. The reference was disposed of accordingly, with costs awarded to the Commissioner of Sales Tax, M.P.