Commission-agent sales and missing declarations did not defeat exemption or shift purchase tax liability under sales tax law

A beneficial departmental circular binding on subordinate authorities extended exemption under section 4-A of the U.P. Sales Tax Act, 1948 to sales routed through a commission agent for a manufacturer holding an eligibility certificate; the exemption therefore applied and the revenue objection failed. Under section 3-D, where the statutory scheme treated the transaction as taxable in the seller's hands, the purchaser of khandsari sugar could not be fastened with purchase tax merely because the prescribed declarations were not furnished; the absence of declarations did not shift the levy to the purchaser.

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Issues: (i) whether the benefit of exemption under section 4-A of the U.P. Sales Tax Act, 1948 extended to sales made through a commission agent on behalf of a manufacturer holding an eligibility certificate; (ii) whether the purchaser of khandsari sugar was liable to purchase tax under section 3-D of the U.P. Sales Tax Act, 1948 when the relevant declarations were not furnished.

Issue (i): whether the benefit of exemption under section 4-A of the U.P. Sales Tax Act, 1948 extended to sales made through a commission agent on behalf of a manufacturer holding an eligibility certificate.

Analysis: The eligibility certificate held by the manufacturer exempted the sale of the sugar manufactured by him from tax. A departmental circular stated that the exemption was available even where sales were effected through a commission agent. That circular, being beneficial to the taxpayer, was binding on subordinate authorities. The fact that the sale was routed through a commission agent did not take the transaction outside the exemption.

Conclusion: The exemption under section 4-A was available to the sales made through the commission agent, and the revenue's objection failed.

Issue (ii): whether the purchaser of khandsari sugar was liable to purchase tax under section 3-D of the U.P. Sales Tax Act, 1948 when the relevant declarations were not furnished.

Analysis: Section 3-D creates a levy on first purchase, but also contains a statutory scheme under which, in specified cases, the tax is treated as a tax on sale in the hands of the seller. The purchasing dealer did not furnish the prescribed declaration to the selling dealers. In consequence, the sales were liable to be treated as sales in the hands of the selling dealers rather than as purchase turnover in the hands of the respondent. The absence of the declaration did not justify shifting the levy to the purchaser on these facts.

Conclusion: No purchase tax was leviable on the respondent on the disputed purchases.

Final Conclusion: The revisional challenge failed because both the exemption claim for commission-agent sales and the objection to purchase-tax liability were rejected.

Ratio Decidendi: A beneficial departmental circular binding on subordinate authorities can extend statutory exemption to sales effected through a commission agent, and where the statutory scheme treats the transaction as taxable in the seller's hands, the purchaser cannot be fastened with purchase tax merely for want of the prescribed declaration.

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