TaxTMI 
TaxTMI 
1980 (8) TMI 167
X X X X Extracts X X X X
X X X X Extracts X X X X
....imated purchase turnover of Rs. 3,80,000 as a dealer so as to be liable to purchase tax." The Commissioner of Sales Tax submitted that the first question should be answered in the negative and the second in the affirmative. The High Court decided in favour of the assessee and against the Commissioner, holding that the submission of the assessee was right and answered both the questions to the contrary. From this decision the appellant, the Commissioner of Sales Tax, has appealed. The reference arose out of assessment for the assessment year 1967-68 of Messrs. Bishamber Singh Layaq Ram which carries on business in jaggery, amchur, khandsari, etc., on its own account and as kutcha arhatiya in jaggery, foodgrains, etc., at Shahpur in the district of Muzaffarnagar, and is registered as a dealer under section 8-A of the Act (hereinafter referred to as "the assessee"). The material facts may be stated as follows: During the assessment year in question, the Sales Tax Officer, Muzaffarnagar, by his order dated December 27, 1968, rejected the account books of the assessee on the basis of some discrepancies found during the four surveys carried out at his shop and made a best judgme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed" appearing therein. With regard to the applicability of section 7(3), it is urged that the question was not referred. The finding arrived at by the High Court that the assessee as a kutcha arhatiya merely brought together the seller and the buyer charging an additional sum by way of commission and, therefore, could not be regarded as a dealer, i.e., a person engaged in the business of buying and selling goods, is contrary to the admitted facts of the case. The facts stated in the agreed statement of the case clearly show that the assessee is not a kutcha arhatiya, in the usual sense of the term, but his business brings into existence the relation of vendor and purchaser. The nature of the business carried on by the assessee is described thus: "Cultivators bring their produce to the assessee for sale. The goods are weighed at his shop and then supplied to the pucca arhatiyas or to other persons. Price of the commodity in full or part is paid by the assessee to the cultivators directly. The price from the purchasers is realised afterwards. In any case it is not the responsibility of the cultivators to realise the price from the purchasers. On the contrary, it is the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the buyer and the seller" charging his commission, who has no dominion or control over the goods, unlike a Pucca arhatiya who deals as a principal in relation to both his constituent and to the third party. The crucial test is whether the agent has any personal interest of his own when he enters into the transaction or whether that interest is limited to his commission agency charges and certain out of pocket expenses, and in the event of any loss his right to be indemnified by the principal. This principle was applied in the case of pakki arhat by Sir Lawrence Jenkins, C.J., in Bhagwandas Narotamdas v. Kanji Deoji [1906] I.L.R. 30 Bom. 205., and approved of by the Judicial Committee in Bhagwandas Parasram v. Burjorji Ruttonji Bomanji [1917-18] L.R. 45 I.A. 29., and by this Court in Shivnarayan Kabra v. State of Madras [1967] 1 S.C.R. 138. As to the incidents of pakki arhat, Sir Lawrence Jenkins, C.J., in the Bhagwandas Narotamdas's case [1906] I.L.R. 30 Bom. 205., succinctly states the legal position, in his own terse language: "A pakka adatia is not, in the proper sense of the word, an agent or even a del credere agent. The relation between him and his up-country constitue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the market for sale, to find buyers, assist them in weighment and secure to them payment of price, but the assessee here certainly does not answer that description. That apart, the explanation clearly brings within the definition of "dealer" in section 2(c) a kutcha arhatiya. It was not suggested at any time that the explanation was ultra vires the State Legislature being beyond the ambit of entry 54 of List II of the Seventh Schedule. The constitutional validity of a similar explanation to section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, which brought an auctioneer within the purview of the definition of "dealer" in that section, was upheld by this Court in Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax, West Bengal [1973] 31 S.T.C. 254 (S.C.); 87 I.T.R. 542 (S.C.); [1973] 2 S.C.R. 618. The whole object is to tax a transaction of sale in the hands of a person who carries on the business of selling goods and who has the legal or customary authority to sell goods belonging to the principal. It is evident from the statement of the case that the business carried on by the assessee was more or less similar to that of a pucca arhatiya and it is a misnomer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cember 13, 1967, it was discovered that there was a loose Parcha containing several entries. One of the entries of Rs. 371.17 in the name of Sakh Chand Udit Mohan alone was entered in the account books. That too on December 13, 1967, after inspection while the payment was actually made on December 11, 1967, i.e., it was not contemporaneous with the transaction. The High Court observes that "it has not been found that any other entry contained in the loose Parcha had not been entered in the account books". With regard to the third survey carried out on January 7, 1968, when twelve bags of wheat were found in stock, the stock register was not shown to the surveying officer. The High Court has again accepted the explanation of the assessee saying that "there was no duty cast on the assessee to produce the stock register and it was not shown since there was no demand for it". It observes that "there is nothing in section 13 or in any other provisions of the Act or the Rules framed thereunder which requires a dealer to produce his books of account and other documents before the surveying officer". As regards the last survey held on March 8, 1968, the mondhi bahi was found to be posted u....