Commercial parlance test governs agricultural machinery classification; sales through a controlled scheme can still make a society a dealer.

A society controlling sales under a cotton pool scheme was treated as carrying on the business of selling cotton, because it supervised the scheme, acted through sub-agents, issued sale bills in its own name, received proceeds, and accounted for the transactions; it was therefore a dealer liable to tax. Oil-engines and centrifugal pumps were not agricultural machinery, since classification depends on how the goods are understood in commercial parlance and not on possible agricultural use. Sales of those goods to agriculturists for bona fide agricultural purposes did not attract the agricultural machinery exception to item 44, because the goods themselves were not shown to be agricultural machinery.

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Issues: (i) Whether the sale of cotton under the cotton pool scheme was a sale effected by the society so as to render it liable to tax as a dealer under the M.P. General Sales Tax Act, 1958. (ii) Whether the oil-engines and centrifugal pumps sold by the society were agricultural machinery. (iii) Whether oil-engines and centrifugal pumps sold to agriculturists for bona fide agricultural purposes fell within the agricultural machinery exception to item 44 of Part II of Schedule II appended to the M.P. General Sales Tax Act, 1958.

Issue (i): Whether the sale of cotton under the cotton pool scheme was a sale effected by the society so as to render it liable to tax as a dealer under the M.P. General Sales Tax Act, 1958.

Analysis: The scheme and rules showed that the marketing society was the central organisation controlling the cotton pool business, the agricultural associations functioned only as its sub-agents, and sale decisions were subject to the society's approval. The society made the sale bills in its own name, received the sale proceeds, and accounted for the transactions in its books. Even if ownership of the cotton did not vest in the society, it carried on the business of selling cotton and therefore answered the statutory description of a dealer.

Conclusion: The cotton sales were effected by the society and were taxable. The finding was against the assessee.

Issue (ii): Whether the oil-engines and centrifugal pumps sold by the society were agricultural machinery.

Analysis: The character of the goods in commercial parlance was the governing test. Machinery is not agricultural machinery merely because it can be used in agriculture; the assessee had to show that such goods were ordinarily understood in the market as agricultural machinery. On the record, the society failed to establish that oil-engines and centrifugal pumps were known in the commercial world as agricultural machinery, and the finding of the Tribunal was unsupported.

Conclusion: Oil-engines and centrifugal pumps were not agricultural machinery. The finding was against the assessee.

Issue (iii): Whether oil-engines and centrifugal pumps sold to agriculturists for bona fide agricultural purposes fell within the agricultural machinery exception to item 44 of Part II of Schedule II appended to the M.P. General Sales Tax Act, 1958.

Analysis: Taxability depended on the character of the goods and not on the status or intended use of the purchaser. Since the goods were not agricultural machinery, sales to agriculturists did not take them out of item 44. The exception could apply only if the goods themselves were agricultural machinery, which was not established.

Conclusion: Sales to agriculturists for agricultural use did not exempt the goods from item 44. The finding was against the assessee.

Final Conclusion: The reference was answered by upholding taxability of the cotton sales and rejecting the claim that the oil-engines and centrifugal pumps were exempt agricultural machinery, with costs awarded against the assessee.

Ratio Decidendi: A person carrying on and controlling the business of sale under a statutory scheme may be a dealer even if acting through agents, and machinery is excluded from a tax entry as agricultural machinery only when it is so understood in commercial parlance, not merely because it may be used for agriculture or purchased by agriculturists.

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