Purchase tax liability for buying agent turns on substance over form under the Bihar Sales Tax Act.

A person purchasing chillies from local cultivators for outside-State principals was held liable for purchase tax because the substance of the transaction showed that it acted as a purchasing agent for the principals. The broad definition of "dealer" under section 2(f) of the Bihar Sales Tax Act, 1959 covered a person buying goods for commission, remuneration or otherwise, and the assessee could not avoid liability by characterising the arrangement as agency for both sides. The facts also showed that the purchases were arranged for despatch through a common carrier and the tax recovered from principals was accounted for in the books. The reference was answered in favour of tax liability.

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Issues: Whether the assessee, while acting in the transaction as an agent for purchasers, was liable to purchase tax on the chillies purchased through cultivators under the Bihar Sales Tax Act, 1959.

Analysis: The facts found by the assessing authority and the Tribunal showed that the assessee purchased chillies from local cultivators for outside-State principals, arranged despatch through common carrier, and accounted for the purchase tax recovered from principals in its books. Section 2(f) of the Bihar Sales Tax Act, 1959 defines a dealer broadly to include a person who buys goods for commission, remuneration or otherwise. On those findings, the assessee could not escape liability by describing the transaction as agency for both sides; the substance of the transaction was that the assessee acted as purchasing agent for the out-of-State principals.

Conclusion: The assessee was liable to pay purchase tax on the transactions in question and the reference was answered in the affirmative.

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