1959 (11) TMI 51 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Rule 4-A(iv)(b) in relation to Section 5 of the Madras General Sales Tax Act.
2. Liability of the assessee as an agent under Section 14-A of the Madras General Sales Tax Act.
3. Applicability of Article 286(2) of the Constitution concerning inter-State trade.

Detailed Analysis:

1. Validity of Rule 4-A(iv)(b) in relation to Section 5 of the Madras General Sales Tax Act:
The assessee argued that Rule 4-A(iv)(b) is inconsistent with Section 5 of the Madras General Sales Tax Act, which provides for exemption and reduction of tax. The court noted that Section 5(ii) specifies that the sale of cotton shall be liable to tax at a single point in the series of sales by successive dealers. Rule 4-A(iv)(b) advances the cause of Section 5(2) by fixing the single point at which the tax shall be collected. The rule specifies that the tax shall be levied from the last dealer not exempt from taxation who is a buyer in the State. The court held that there is nothing in this rule that militates against Section 5 or any other provision of the Act. The rule ensures precision in carrying out the purpose of Section 5, and the plea that Rule 4-A(iv)(b) is inconsistent with the provisions of Section 5 or goes beyond the powers of the delegated authority is untenable.

2. Liability of the assessee as an agent under Section 14-A of the Madras General Sales Tax Act:
The assessee contended that it is not liable to any tax under Section 14-A as it is not an agent within the meaning of that provision. Section 14-A applies to a person who carries on business of buying or selling goods in Andhra State though residing outside it, and deems the agent concerned with this business residing in the State as a dealer. The court observed that the petitioner firm is an agent of the non-resident principal who carries on business of buying and selling goods in the State. The agent handled the goods on behalf of Bombay buyers for testing, pressing, weighing, and keeping custody until despatched by railway wagons. The agent charged commission and other incidental charges, including sales tax, and paid the sellers in the State. The court found that the assessee is not exempt under G.O. 319 dated 10th July, 1951, and thus, this plea also fails.

3. Applicability of Article 286(2) of the Constitution concerning inter-State trade:
The assessee argued that the sale being of an inter-State character, Article 286(2) of the Constitution would operate as a ban on the imposition of tax by the State Legislature. Article 286(2) prohibits a State from imposing a tax on the sale or purchase of goods in the course of inter-State trade or commerce. The court examined whether the sale was completed within the State or had inter-State elements. It was determined that the sale or purchase was completed within the State as the agreement to sell, transfer of ownership, payment of price, and delivery of goods were all completed within the State. The court held that the transactions were intra-State sales, and the movement of goods was not a direct result of the sale transaction. Therefore, the sale is not in the course of inter-State trade within the meaning of Article 286(2), and the plea of the petitioner is without substance.

Conclusion:
The petition was dismissed with costs, and the Advocate's fee was set at Rs. 200. The court upheld the validity of Rule 4-A(iv)(b) in relation to Section 5, confirmed the assessee's liability as an agent under Section 14-A, and ruled that Article 286(2) does not apply to the transactions in question.