Illegal sales may still attract sales tax, but liability through sub-lessees needs findings on authority.

Sales tax liability can attach to sales carried on in an unauthorised or illegal manner because the statutory definition of dealer is wide enough to cover business activity undertaken directly or otherwise, and the legality of the underlying transaction does not defeat taxability. However, liability attributed to a petitioner for turnover generated by sub-lessees depends on a finding as to the nature and extent of their authority. As no such finding had been recorded, the assessment and revisional order could not stand and the matter was remitted for fresh determination on the sub-lessees' authority.

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Issues: (i) Whether turnover from sales made in an unauthorised or illegal manner can attract sales tax liability under the definition of dealer; (ii) whether the petitioner could be held liable for turnover arising from sales made by sub-lessees without a finding on the scope of their authority.

Issue (i): Whether turnover from sales made in an unauthorised or illegal manner can attract sales tax liability under the definition of dealer.

Analysis: The expression defining a dealer covered carrying on the business of buying, selling, supplying or distributing goods, directly or otherwise. That expression was wide enough to include transactions carried on even if they were not authorised by law. Sales tax liability depended on the carrying on of the taxable activity, not on the legality of the underlying business.

Conclusion: Yes. Illegal or unauthorised sales are not excluded from sales tax liability if the activity otherwise falls within the statutory definition.

Issue (ii): Whether the petitioner could be held liable for turnover arising from sales made by sub-lessees without a finding on the scope of their authority.

Analysis: Liability on the basis of acts done by another person depends on the nature and extent of the authority under which that person acted. The assessing authorities had not recorded any finding on whether the sub-lessees acted within the petitioner's authority or the limits of any agency arrangement. Without that finding, the assessment could not stand.

Conclusion: No. The impugned assessment and revisional order were unsustainable for want of findings on the scope of authority of the sub-lessees.

Final Conclusion: The turnover was not exempt merely because the sales were unauthorised, but the assessment was set aside and the matter was sent back for fresh decision after examining the sub-lessees' authority.

Ratio Decidendi: For sales tax purposes, the taxable character of a sale is not defeated by its illegality, but liability attributed through another person requires a finding on the nature and extent of that person's authority.

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