1964 (6) TMI 51 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of Section 2(n) of the Andhra Pradesh General Sales Tax Act.
2. Applicability of Explanation III to Section 2(n).
3. Determination of the point of sale for tax purposes.
4. Responsibility for sales tax payment between principals and agents.
5. Validity and scope of collections made by commission agents.

Detailed Analysis:

1. Interpretation of Section 2(n) of the Andhra Pradesh General Sales Tax Act:
The core issue revolves around the proper interpretation of "sale" as defined in Section 2(n) of the Act. The definition includes every transfer of property in goods by one person to another in the course of trade or business, for cash, deferred payment, or any other valuable consideration. The judgment emphasizes that the essence of a sale is the transference of property in the goods, and it is difficult to contemplate a sale without the dominion vesting in the transferee.

2. Applicability of Explanation III to Section 2(n):
Explanation III to Section 2(n) deems two independent sales or purchases to have taken place under specific conditions. The respondents argued that a sale should be deemed to have occurred when the principals delivered their goods to the agents. However, the court held that the expression "goods are transferred" in Explanation III bears the same connotation as "transfer of the property in goods" in the main definition. The explanation aims to prevent misuse of the principal-agent relationship to evade sales tax, ensuring that transactions involving the transfer of ownership are taxed.

3. Determination of the Point of Sale for Tax Purposes:
Under Section 5(3)(a) of the Act, tax is leviable at a single point and at the stage of the first sale on goods listed in Schedule II, including jaggery. The court concluded that the first sale occurred when the respondents, acting as commission agents, sold the jaggery, as there was no prior sale. Thus, the respondents were liable to pay sales tax on these transactions.

4. Responsibility for Sales Tax Payment Between Principals and Agents:
The respondents contended that the responsibility for paying sales tax lay with the principals. However, the court found that the commission agents had collected sales tax from the purchasers with the intention of paying it to the government. Since the agents accounted for the price of the goods to the principals and collected the tax for government remittance, the court held the agents responsible for the sales tax payment.

5. Validity and Scope of Collections Made by Commission Agents:
The court addressed the respondents' argument that various collections (dharmam, kolagaram, valtar, sales tax, etc.) made by the commission agents should be accounted for to the principals. The court found that these collections, unrelated to the price of the goods, were made by the agents in their own right and not on behalf of the principals. The sales tax collected was specifically for government remittance, and other collections like dharmam and cesses were utilized for charitable purposes or passed on to associations. Therefore, the agents were not required to account for these collections to the principals.

Conclusion:
The court disagreed with the Sales Tax Appellate Tribunal's view and upheld the order of the assessing authority, affirming the Assistant Commissioner's decision. The court concluded that the respondents, as commission agents, were liable to pay the sales tax collected from the purchasers. The Tax Revision Cases were allowed with costs, and the request for remand was denied.

Petitions Allowed.

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