1962 (2) TMI 62 - SC - VAT and Sales Tax

Appellant firm's agent role triggers sales tax liability under Section 18

The Supreme Court dismissed the appeals, affirming that the appellant firm's role as an agent, in addition to being a financier, subjected them to the ... Whether the appellant firm can be regarded as dealer under section 18 of the Hyderabad General Sales Tax Act, 1950 (XIV of 1950) with respect to certain transactions of purchasing castor seed entered into by the Bombay Export Co. Ltd. in the former State of Hyderabad on the ground that the appellant was the agent of the company? Held that:- Appeal dismissed. There is no doubt whatsoever that the appellant firm was not merely a financier of the company but also its agent during the years in question. It, therefore, falls squarely within the ambit of section 18 of the Hyderabad General Sales Tax Act and the Sales Tax Authorities were justified in making the assessments against it. Issues:- Determination of whether the appellant firm can be considered a dealer under section 18 of the Hyderabad General Sales Tax Act, 1950, in relation to transactions involving the purchase of castor seed by another company.Analysis:The main issue in this case revolves around whether the appellant firm can be classified as a dealer under section 18 of the Hyderabad General Sales Tax Act, 1950, concerning transactions where they acted as an agent for a company purchasing castor seed. The appellant firm was assessed for sales tax by the Sales Tax Authorities in Hyderabad for the years 1953-54 and 1954-55 based on the argument that they were an agent of a non-resident, thus deemed to be a dealer under the Act. The appellant contested this assessment, claiming they were merely a financier and not an agent of the company. However, the tripartite agreement between the appellant, the company, and a guarantor clearly outlined the appellant's role as an agent employed by the company to take delivery of the castor seed and store it on the company's behalf, in addition to providing financial support.The definition of 'agent' as per the Indian Contract Act, 1872, was crucial in determining the appellant's role in this case. While the appellant argued that the Contract Act's definition should not be imported into the Sales Tax Act, the agreement's terms clearly established the appellant as the company's agent for specific actions, including taking delivery of goods and raising funds by hypothecating or pledging the goods. Despite also serving as a financier, the appellant's agency relationship with the company was evident from the agreement's provisions.The appellant relied on a decision under the U.P. Sales Tax Act, emphasizing the necessity for an agent to have authority to buy on behalf of the principal to be considered a dealer. However, the Hyderabad General Sales Tax Act did not contain a similar deeming provision, and section 18 did not require the agent to have buying authority. Another case under the Bengal Finance (Sales Tax) Act, 1941, was cited to highlight that an agent not empowered to make contracts for the purchase or supply of goods was not deemed a dealer. In this instance, the appellant firm was both a financier and an agent of the company, falling within the scope of section 18 and justifying the assessments made by the Sales Tax Authorities.Ultimately, the Supreme Court dismissed the appeals, affirming that the appellant firm's role as an agent, in addition to being a financier, subjected them to the provisions of section 18 of the Hyderabad General Sales Tax Act, leading to the assessments for sales tax being justified.