TaxTMI 
TaxTMI 
1985 (9) TMI 326
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.... hereinafter referred to as the petitioner, carries on the business of cotton ginning and oil-seeds crushing and is a registered dealer under the Act, as also under the Central Sales Tax Act, 1956, hereinafter referred to as the Central Act; that the cotton and oil-seeds are both specified in Schedule C to the Act; that the petitioner on its own showing had been purchasing goods specified in Schedule C from registered dealers said to be commission agents after furnishing to them sales tax form XXII on payment of consideration comprising of price of goods and 1½ per cent of commission amount thereon; that right from the year 1961 onwards no assessment of the petitioner has been finalised; that for the assessment years 1973-74 and 1974-75 the petitioner took up the stand before the Assessing Authority that the acquisition of Schedule C goods by it from its commission agents, who are also registered dealers, did not amount to a purchase, as the same had to be treated as an acquisition under a contract of agency and not under a contract of sale; and that since the Assessing Authority had already made its intention clear to follow the procedure of getting the statements of commis....
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....he petitioner for the year 1977-78, the Assessing Authority adopted the aforesaid reasoning of the Sales Tax Tribunal and completed the assessment which order the petitioner had challenged in appeal. That in regard to the assessment year 1978-79 the Assessing Authority appeared to be determined to follow the same course as it did in the case of the assessment for the year 1977-78, as is evident from letter dated 17th September, 1984, annexure P.3, namely, relying upon verifications made by various Excise and Taxation Officers and Assistant Excise and Taxation Officers holding charge of the districts in Punjab regarding the nature of transactions between the petitioner and its commission agents and refusing to summon the commission agents either as witnesses of the department or as witnesses on behalf of the petitioner and thus declining to follow the procedure indicated by the Division Bench in Civil Writ Petition No. 4087 of 1977 decided on 12th January, 1978, the petitioner instead of waiting for the finalisation of the assessment by the Assessing Authority and taking recourse to the statutory remedy approached this Court on the writ side which the motion Bench admitted to Ful....
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.... The question as to whether acquisition of goods by a registered dealer from another registered dealer on payment of certain commission over and above the price of the goods paid in turn by such registered dealer (commission agent) to his selling dealer could or could not be treated as a purchase, or, in other words, whether the acquisition of such goods could be under a contract of agency and not necessarily a transaction of sale, was neither argued before the court nor their Lordships expressed any opinion whatsoever on that question. Hence, the learned counsel for the petitioner was not right in arguing that the question of law posed for consideration before the Full Bench stood covered by a binding decision of the apex Court rendered in Bhawani Cotton Mills Ltd.'s case [1967] 20 STC 290 at page 320 (SC). Page No: 118 Mr. Anand Swaroop then sought to adopt the reasons given by the aforesaid Division Bench of this Court for allowing the petition, as arguments on his behalf in support of the contention advanced by him. The relevant portion of the Division Bench judgment is in the following terms (Civil Writ No. 1591 of 1963 decided on 23rd November, 1965*): "The next po....
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....al. The transfer of the goods purchased by him is an act done in discharge of his duty as agent. The contract between the principal and the commission agent is not one of sale but of agency. Such transactions cannot, therefore, be assessed under the Sales Tax Act. The ratio of this decision is that the contract between the principal and the commission agent is not one of sale. In other words, when the goods pass to the principal from the commission agent, that cannot be regarded as a transaction of sale. In the cases which are being disposed of by us, it is purchase tax which is being levied and not sales tax and, therefore, it has to be decided on whom the incidence of such a tax should fall. In arguments what *[1967] 20 STC 290 at page 303. has been emphasised on behalf of the petitioners is the rule which flows from section 230 of the Indian Contract Act. According to it, there shall be a presumption that an agent can personally enforce contracts entered into by him on behalf of his principal and he is personally bound by them where the agent does not disclose the name of his principal. The presumption is rebuttable and where the contract is in writing the whole of the contract ....
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....o pay tax on its purchase price and that the dealers from whom the assessee purchased cotton seeds could claim exemption under section 5(2)(a)(vi) of the principal Act to avoid double taxation was apparently erroneous. It is necessary for the Assessing Authority to determine in each case who is liable to pay purchase tax without being entitled to claim any exemption and once the liability is determined or tax has been paid by that assessee the goods cannot be subjected to the levy of tax in the hands of any subsequent dealer........" A perusal of the aforesaid observations of the Division Bench would show that it was highlighted on behalf of the petitioner that the presumption flowing from section 230 of the Indian Contract Act that an agent can personally enforce contracts entered into by him on behalf of his principal and he was personally bound by them where the agent did not disclose the name of his principal, was rebuttable, and where the contract was in writing, the whole of the contract was for that purpose to be examined. Reference was also made to a decision of the Bombay High Court in Chhogmal v. Jainarayan (1913) 20 IC 882, in which Macleod, J. (as he then was)....
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....urpose of this clause, 'Government' will include the Central Government or the Government of any other State. * * * (ff) 'purchase' with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C or of goods on the purchase whereof tax is payable under any provision of this Act for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge; * * * (h) 'sale' means any transfer of property in goods other than goods specified in Schedule C for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge; Explanation.-(1) A transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale. * * * Their Lordships in Commissioner of Sales Tax, U.P. v. Bishamber Singh Layaq Ram [1981] 47 STC 80 (SC), while dealing with the scope of the definition "dealer" as given in section 2(c) of the U.P. Sales Tax Act (15 of 1948), hereinafter referred to as the U.P. Act, in order to see as....
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....ha arhtia has to be held to be a "dealer" and the parties who have entered into a transaction can be said to be the dealers. If such a dealer purchases the goods from another dealer in his own name on payment of price of the goods, he acquires title to such goods and if thereafter transfers such goods to another dealer for cash or deferred payment or other valuable consideration but not through mortgage, hypothecation, charge or pledge, then such transfer of goods on his part would amount to a sale qua him and the acquisition of such goods qua the acquiring dealer would amount to a purchase. The amount of consideration received or agreed to be received is totally irrelevant to a determination as to whether the given transaction between the two dealers (that is, between the one who transferred the goods and the other who acquired such goods) is or is not a transaction of "sale" and "purchase", that is, it would make no difference that the price charged by the selling dealer from the purchasing dealer was the same, as he had paid to his own selling dealer, or it was less or it was more and if it was more than the price at which dealer-agent had purchased, then the amount by which the....
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.... is clearly erroneous and is not in consonance with the dicta of the Supreme Court in Bhawani Cotton Mills' case [1967] 20 STC 290 at page 320 (SC). In view of this, the appeal of the assessee would have to be allowed........" We also further hold that if the Division Bench judgment in Bhawani Cotton Mills Ltd. v. State of Punjab (Civil Writ No. 1591 of 1963) [1967] 20 STC 290 at page 292 decided on 23rd November, 1965, on the given point is considered to be still holding the field despite it being set aside by the Supreme Court on an appeal in Bhawani Cotton Mills Ltd.'s case [1967] 20 STC 290 at page 320 (SC), then, with respect, it does not lay down the correct law and is overruled. We also record our respectful dissent from Panna Lal Babu Lal's case [1956] 7 STC 722 (All.), as, in our opinion, it does not lay down the correct law. Here too, the learned judges, who constituted the Division Bench, have based their conclusion that the transfer of goods by the assessee-agent to his constituent did not constitute sale so as to attract sales tax on the sale price of the goods so transferred on the turnover of the assessee-agent, on the customary relationship of agent and pri....
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.... had paid to his selling dealer plus 1½ per cent above that amount (a fact established from the books of account of the petitioner), but had also delivered to the dealer-agent declaration in sales tax form XXII. As observed above, the petitioner had not only acquired the goods from its alleged dealer-agent on payment of consideration, but had also furnished to the said dealer a declaration in sales tax form XXII in order to enable the alleged selling agent to claim deduction from his turnover of the amount represented by the given transaction and consequently escape from the payment of the purchase tax on such amounts. By virtue of the definition of the expression "purchase" acquisition of goods by a dealer, if the same is not by way of mortgage, hypothecation, charge or pledge, amounts to purchase so far as the purchasing dealer is concerned and "sale" so far as the selling dealer is concerned. In view of this, there is no escape from the conclusion that the transaction entered into between the petitioner and its so-called dealer-agent, whether a pucca arhtia or kutcha arhtia, or called by any other name, as a result whereof the goods are transferred to the petitioner....