Full Judgment Text
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PETITIONER:
STATE OF WEST BENGAL
Vs.
RESPONDENT:
O.P. LODHA & ANR, M/S. CHOWRINGHEE SALES BUREAU PRIVATE LTD.
DATE OF JUDGMENT: 31/03/1997
BENCH:
SUHAS C. SEN, SUJATA V. MANOHAR
ACT:
HEADNOTE:
JUDGMENT:
With
CIVIL APPEAL NOS. 4414-14A OF 1990
J U D G M E N T
SEN, J
O. P. Lodha and others (hereinafter described as ‘the
firm’) carry on business under the trade name M/s prakash
Trading Corporation. Its place of business is at No. 161/1,
M.G. Road, Calcutta. The business of the firm is to sell
goods on its own behalf and also on behalf of 24 other
principals on commission agency basis. The Commercial Tax
officer, Colootola charge assessed the firms the Tax under
Section 6B of the Bengal Finance (Sales Tax) Act. 1941 on
total turnover of the firm comprising of sales made by the
firm on its own behalf as well as on behalf of 24 principals
for whom the firm acted as commission agent. The firm
preferred an appeal to the Assistant Commissioner of
Commercial Taxes who agreed with the Commercial Tax officer.
The West Bengal Commercial Taxes Tribunal on further appeal,
also took the same view.
On further appeal, the west Bengal Taxation Tribunal
came to the conclusion that the assessment of the firm by
including in its turnover sales made by it as commission
agent of 24 other principals was erroneous in law. It was of
the view that the liability of the firm and others for sales
tax was confined to the sales effected by it on its own
behalf. T he sales effected on behalf of 24 other disclosed
principals as commission agents had to be assessed
separately.
The contention made on behalf of the firm which found
favour with the Taxation Tribunal was that the definition of
‘dealer’ provided by the Bengal Finance (Sales Tax) Act,
1941 did not permit the Commercial Tax officer to tax a
dealer in respect of sales effected on behalf of the
principals. The attention of the Tribunal was drawn to the
definition of ‘turnover’ in sales tax laws of some other
states where goods sold by an agent on his own account as
well as on account of somebody else have been brought
within the mischief of the Act by specific words. Reference
was made to the case of Ramaswamy Gounder and Sons V. State
of Madras, 32 STC 350. There, in the definition of
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‘turnover’ provided by the Tamil Nadu General Sales Tax Act,
turnover included sales effected by a dealer directly or
through another ’on his on account or on account of others."
These words, according to the Tribunal were crucial for
determination of the liability of a dealer in cases where
sales were effected on behalf of a disclosed principal’. It
was contended that unless there were specific words to the
contrary, the liability of the dealer would be the same as
that of the principle . The agent could not be made liable
for any amount of tax for which the principal was not
liable. Aggregation of sales effected by a dealer on behalf
of as many as 24 principals led to imposition of a higher
rate of duty. If the principals were separately assessed,
they would have paid a much lower rate of duty . The
liability of agent was co-extensive with that of the
principal . if a dealer sells any goods on behalf of the
disclosed principal, the sales Tax Officer has an option to
tax the principal or levy tax on the dealer on behalf of the
principal. The liability of the dealer, however, will be the
same as that of the Principal. There is nothing in the Act
which permits the sales Tax officer to add together the
sales made on behalf of as many as 24 principals so that the
turnover becomes larger and the rate of tax becomes higher.
There was no way the dealer could recover this larger tax
from its principals.
We are unable to uphold this contention for a number of
reasons.
Agents of all types have been included in the
definition of ‘dealer’. the clear intention of the
legislature is to levy tax on an agent even when such agent
is selling goods on behalf of disclosed principals. There
has to be only one assessment on the agent in respect of his
total turnover. No exception or exemption has been provided
by the Bengal Finance (sales Tax) Act for sales made by a
dealer as an agent. Section 2(c) of the bengal Finance
(sales Tax) Act defines "dealer" as under:
"dealer" means any person who
carries on the business of selling
goods in west Bengal or of
purchasing goods in West bengal in
specified circumstances or any
person making a sale under Section
6D and includes-
the Central or a state Government,
a local authority, a statutory
body, a trust or other body
corporate which, or a liquidator or
receiver appointed by a Court in
respect of a person defined as a
dealer under this clause who,
whether or not in the course of
business sells, supplies or
distributes directly; or otherwise,
for cash or for deferred payment or
for commission, remuneration or
other valuable consideration.
Explanation 1.- A Co-operative
society or a club or any
association which sells goods to
its members is a dealer.
Explanation 2.- A factor, a broker,
a commission agent, a del credere
agent, an auctioneer, an agent for
handling or transporting of goods
or handling of document of title to
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goods or any other mercantile
agent, by whatever name called, and
whether of the same description as
hereinbefore mentioned or not, who
carries on the business of selling
goods and who has, in the customary
course of business, authority to
sell goods belonging to principals
is a dealer."
Section 2(h) defines ": sale-price"
as follows:
"sale-price means the amount
payable to a dealer as valuable
consideration for-
(i) the sale, other than that
referred to in section 6D of any
goods, less any sum allowed as cash
discount according to ordinary
trade practice, but including any
sum charged for anything done by
the dealer in respect of the goods
at the time of, or before, delivery
thereof , other than the cost of
freight or delivery or the cost of
installation or interest when such
cost or interest is separately
charged;"
Section 2(g) defines "sale" as
follows:
"sale" means any transfer of
property in goods for cash or
deferred payment or other valuable
consideration, and includes-
(i) any delivery of goods on hire-
purchase or any system of payment
by instalments.
(ii) any transfer of the right to
use any goods for any purpose
(whether or not for specified
period) for cash, deferred payment
or other valuable consideration,
(iii) any supply, by way of or as
part of any service or in any other
manner whatsoever, of goods, being
food or any other article for human
consumption or any drink (whether
or not intoxicating), where such
supply or service is for cash,
deferred payment or other valuable
consideration or
(iv) any supply of goods by any
unincorporated association or body
of persons to members thereof for
cash, deferred payment or other
valuable consideration,
and such delivery, transfer or
supply of any goods shall be deemed
to be a sale of the goods by the
person making the delivery,
transfer or supply and a purchase
of those goods by the person to
whom such delivery, transfer or
supply is made, but does not
include a mortgage, hypothecation,
charge or pledge."
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"Turnover" has been defined by
Section 2(i) as under:
"turnover" used in relation to any
period means the aggregate of the
sale-prices or parts of sale-prices
receivable, or if a dealer so
elects, actually received by the
dealer during such period after
deducting the amounts, if any,-
(i) refunded by the dealer in
respect of any goods returned by
the purchaser within such period or
(ii) separately charged as turnover
tax payable under section 6B during
such period;
Provided further that where before
or after the date of the coming
into force of clause (f) of section
2 of Bengal Finance (Sales Tax)
(West Bengal Amendment) Act, 1950,
the calculation of the turnover for
any period prior to such date was
or is made on the basis of the
sale-prices or parts of sale-prices
receivable during such period, the
calculation shall not be called in
question merely on the ground that
it was or is so made; and no return
furnished , no assessment made, no
proceedings (including in
particular proceedings for the
recovery of any tax or penalty )
taken, no order passed and no
notice issued whether before or
after such date shall be called in
question on the ground that it was
or is based on turnover so
calculated;"
Section 6B which is the charging
section read under:
"6B. Liability to payment of
turnover tax and rate thereof-(1)
Notwithstanding anything contained
elsewhere in this Act,-
(a) every dealer, whose aggregate
of the gross turnover under this
Act and the gross turnover under
the West Bengal Sales Tax Act, 1954
during the last year ending on or
before the 31st day of May, 1987,
exceeds rupees twenty-five lakhs,
shall in addition to the tax
payable by him under section 5 and
section 6D if any, be liable to pay
from the 1st day of June, of 1987,
a turnover tax at the rate
specified in sub-section (3) of
such part of his turnover as
specified in sub-section (2);
(b) every dealer, other than those
referred to in clause (a) , whose
aggregate of the gross turnover
under this Act and the gross
turnover under this Act and the
gross turnover under the West
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Bengal Sales Tax Act, 1954
calculated from the commencement of
any year ending on or after the
11th day of April., 1994, exceeds
twenty - five lakh rupees at any
time within such year shall, in
addition to the tax payable by him
under section 5 and section 6D, if
any, be liable to pay, with effect
from the date immediately following
the day on which such aggregate
first exceeds twenty-five lakh
rupees or from the 11th day of
April, 1994 , whichever is later ,
a turnover tax at the rate
specified in sub-section(3) of such
part of his turnover as specified
in sub-section (2) -
(c) x x x X X
It will appear from the wide definition of dealer that
a person who sells goods on behalf of disclosed or
undisclosed principals has been treated as ‘dealer’ the
extended definition given to a dealer which includes, inter
alia, a commission agent, del credre agent and auctioneer
goes to show that the agents who sell goods for and on
behalf of others for a commission will have to be treated as
dealers and are liable to be assessed as such under Section
6B of Bengal Finance(Sales Tax) Act. The charge of turnover
tax has been imposed upon "every dealer" whose gross
turnover is in excess of a specified amount specified in
Section 6B. "sale-price" has been defined as valuable
consideration for the sale of any goods including any sum
charged for anything done by the dealer in respect of the
goods at the time of or a before delivery thereof.
The incidence of taxation under Section 4 of the Bengal
Finance (sales Tax) Act is on the gross turnover in excess
of the taxable quantum has to be fixed by a notification
issued in the official Gazette. Taxable quantum has been
defined in Sub-section (5) of section 4 to mean :
(a) in relation to a dealer who
imports for sale any goods into
West Bengal-Rs. 20,000/-,
(b) in relation to any dealer who
manufactures or produces any; goods
other than cooked foods, for sale-
Rs.50,000/-
(c) in relation to any dealer who
manufactures or produces cooked
foods for sale, Rs.1,00,000/-
(d) in relation to any other
dealer-Rs. 2,00,000/-
‘Taxable turnover’ has been defined by section 5(2) as
under:
"5(2). in this Act, the Expression
"taxable turnover" means in the
case of a dealer who is liable to
pay tax under section 4 or under
sub-section (3) of Section 8, that
part of his gross turnover during
any period which remains after
deducting therefrom-
(a) his turnover during that period
on-
(i) the sale of goods declared
tax-free under section 6;
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(ii) sales to a registered dealer
of goods other than iron and steel,
rice and wheat, referred to in
section 14 of the Central Sales Tax
Act, 1956(74 of 1956) specified in
the certificate of registration of
such dealer as being intended for
re-sale, other than that by way of
sale referred to in sub-clause(ii)
of clause (g) of section 2 or in
section 6D, by him in West Bengal,
and of containers and other
materials for the packing of such
specified goods;
(iii) Omitted.
(iv) Omitted.
(v) sale of goods which are shown
to the satisfaction of the
Commissioner naot to have taken
place in West Bengal, or to have
taken place in the course of inter-
state trade or commerce, within the
meaning of section 3 of the Central
Sales Tax Act, 1956 (74 of 1956),
or in the course of import of the
goods into, or export of the goods
out of, the territory of India,
within the meaning of section 5 of
that Act;
(va) sales of goods specified in
section 14 of the central Sales
Tax Act, 1956 (74 of 1956), on a
prior sale whereof in West Bengal
due tax is shown to the
satisfaction of the Commissioner to
have been paid;"
it is not necessary to enumerate various other
deductions which are permissible under sub-clauses (vb) to
(vd) and also sub-clause (vi) of section 5(2) of the Act.
It is of significance to note that an agent who is a
dealer is not entitled to any deduction on account of the
sales made by him for and on behalf of the principal. In
fact, there is no sense in treating the agent on the one
hand as a dealer for the purpose of levying sales tax on
its taxable turnover and exclude from his turnover the sales
made for and on behalf of others on the other hand . The
mere fact that the agent is being treated as a dealer for
imposition of sales tax precludes the argument that the real
liability to pay the tax is on the principal for and on
whose account the goods are sold by the agent. The Act has
made agent directly liable to pay sales tax on his taxable
turnover. There is no provision in the Act which permits the
Commercial Tax Officer to look beyond the sales effected by
the agent and find out for and on whose behalf the sales
have been effected. Section 6B merely provides for levy; of
an additional amount of tax on ’dealers’ whose aggregate of
the gross turnover under the Bengal Finance ( Sales Tax )
Act and the West Bengal Sales Tax Act taking together
exceed RS. 25 lakhs. If the dealer happens to be an agent,
he will have to pay this tax on his gross turnover because
the statute treats him as dealer in respect of the sales
effected by him. In fact, the argument that the liability of
the dealer must be determined by excluding the sales made
for or on account of somebody else will nullify the charging
section which levies tax on the agent himself.
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It is true that unlike some other state Acts, the
Bengal Finance (Sales Tax) Act has not defined ‘turnover’
specifically to include sales made by a dealer whether on
his own account or on account of somebody else. That, in my
judgment, does nota made any difference. if a person sells
goods on his own account, he is liable not as an agent but
as seller. But when he sells on behalf of somebody else or
on account of somebody else, then he sells the goods as an
agent of the principal. Such agents have been made liable to
pay tax by the enlarged definition of the word ‘dealer’ in
the Act. If the sales effected by the dealer exceeds
"taxable quantum" or the total sales exceeds the taxable
turnover, he will be liable to pay tax under Section 4 or
Section 6B of the Bengal Finance (Sales Tax) Act. Whether
such persons sell goods on his own behalf or on behalf of
somebody else is quite immaterial for this purpose.
In my judgment, the scheme of the Act leaves no room
for doubt that an agent who sells goods on behalf of
somebody else cannot excape the liability to pay sales tax
on the sales made by him for and on behalf of others merely
because, he was selling goods on behalf of others. The
charge under Section 6B has been imposed directly upon him
by the broad definition of ‘dealer’.
On behalf of the respondents, reliance was placed on
H.Veerabhadrappa v. Commissioner of Commercial Taxes, 24 STC
919 and Gudathur Bhemappa V. Commercial Taxes 47 STC 121
which were noted in the judgment of the Tribunal. These
decisions of the High Courts were based on the principle
that the liability of the commission agent in respect of
business carried on by him on behalf of the principal was
only in his character as agent and the turnover brought to
tax in such a case was the turnover of the principal and
not the turnover of the agent himself. If the turnover of
the principal did not exceed the taxable limit, the
Commercial Tax officer could not aggregate the transactions
of the several known principals and then made the agent
liable for payment of the additional tax.
We are of the view that this approach is erroneous .
The liability of the agent to pay sales tax on the sales
made by him has to be found out from the Sales Tax Act
itself and not on any general principle of agency. The agent
has been made liable to pay turnover tax by the provisions
of section 6B read with Section 2(c) of Bengal Finance
(sales Tax) Act. This liability to pay tax is his own. so
far as the Act is concerned the agent is the assessee. He
may have his claims against the principals arising out of
the agency agreement. But it is something between him and
his principals. So far as the sales Tax Act is concerned,
tax has been levied directly on the agent on his turnover.
it is not possible to uphold the argument that agent’s
liability is limited only to the extent that his principal
was liable and that in order to find out the liability of
the agent, it has to be found out what exactly is the
liability of each of his principals. This argument has been
specifically negatived by this Court in the case of Cardamom
Planters Association, Bodinayakanur v. Deputy Commissioner
of Sales Tax(law), Board of Revenue(Taxes) Ernakulam 1989
(3) SCR 719. That was a case of society of which the members
were cardamom growers in the state of Kerala. The Society
carried on the business as an auctioneer under a licence
issued to it under the Cardamom Act read with the Cardamom
(Licensing and marketing) Rules, 1977. The mode of selling
cardamom was that the planters left their produce with the
society and the Society after mixing the produce of all the
planters put the same to auction. The Society used to
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collect one per cent as commission out of the sale proceeds
from each of the planters. Besides cardamom, the society
also sold goods on their own.
The question in that case was how far was the Society
liable to pay the surcharge under the kerala General Sales
Tax Act, 1963. The Kerala Act imposed sales tax on every
dealer whose total turnover in a year exceeded a specified
sum which varied from year to year. In 1957, the Kerala
Legislature introduced a surcharge on sales tax payable by a
dealer whose turnover exceeded Rs. 30,000/- a year. An
important feature of this surcharge was that unlike sales
tax, the seller could not pass on the burden of this
surcharge to the consumers and had to bear it himself.
The Society’s contention was that it sold goods in its
capacity as commission agent for various principals and on
the general principal of agency, an agent would be liable to
surcharge only to the same extent as the principal whom he
represented. Therefore, his liability could not be more than
the liability of his principal. It was, therefore, contended
that the Society could not be made liable for any surcharge
in respected of the sales effected by it on behalf of the
principals whose sales to the Society did not exceed the
limits set out in Section 3(1) of the Surcharge Act. The
principals could not be made liable to surcharge if they
were assessed individually. The sales made by the Society on
behalf of the disclosed principals could not be clubbed
together and subjected to one assessment.
This argument was rejected by this Court on two
grounds. The first was that the commission agent fell within
the ambit of the definition of "dealer" in the Kerala Act
and made its turnover liable to tax. The Act did not
contemplate any dissection of this turnover into
transactions on behalf of various principals by reference to
their individual liabilities to pay such taxes.
The other ground was that the statutory interpretation
apart, if the contention of the asessee that separate
assessment must be made on the sales effected on behalf of
each of the principals, is accepted, it will make the Act
unworkable. A commission agent will be dealing on behalf of
hundreds of Constituents and each of his constituents may be
dealing not only through him but also through several other
agents. The transactions may not be confined to the
territories of one State and may be spread over the entire
Indian sub-continent. The sales through different agents may
be of different goods attracting liability to tax at
different rates. it may be that a principal whose sales
through one commission agent may not come upto the limits of
turnover for levy of tax or surcharge may have been dealing
through other agents and, if assessed directly, may have a
turnover exceeding those limits. In this state of affairs,
it will be absolutely; impracticable, if not impossible, for
a Sales Tax officer having jurisdiction over one particular
commission agent to make his sales tax assessment on the
basis suggested by the assessee. That would require the
collection data, in the assessment of every commission
agent, regarding the entire sales turnover of each of his
constituents who may or may nota be assessed by the officer
assessing the particular commission agent. The assessment
order on the commission agent would then have to be split
up, as it were, into a number parts each containing the
determination require exercises which cannot be practically
undertaken by an officer assessing a commission agent but
can easily be undertaken by the different officers assessing
the principals. That is why the statute evolved a very
simple procedure to meet the situation. It brought the
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commission agent within the definition of a dealer and made
his aggregate turnover liable to tax. But it provided at
the same time that turnover so included and taxed in the
hands of the agent should be excluded from the turnover of
the principal, where he is separately assessed.
We are of the view that basically, the West Bengal Act
is on similar lines as the Kerala Act. An agent as a dealer
has been made directly liable to pay sales tax for good
reasons. The Act has not provided for splitting of the sales
made by the dealer for and on behalf of different principals
and make separate assessment on the dealer . It is the total
turnover of the dealer. It is the total turnover of the
dealer which has been brought to tax under the Act. In the
making the assessment of the dealer, the Commercial Tax
officer does not have to find out what was the exact
quantum of sales effected on behalf of each principal and
what was the liability, if any, of that principal. The
liability to pay tax imposed by Section 6B is on the dealer
himself and not on the principal through the dealer. For
computing his liability, the taxable turnover of the dealer
has to be found out.
The Taxation Tribunal has attached great significance
to the definition of "turnover" given in the Bengal Finance
(Sales Tax) Act, and pointed out that unlike the Tamil Nadu
General Sales Tax Act, 1959, the Bengal Act did not define
‘turnover’ to mean the aggregate amount for which the goods
were bought and sold by a dealer on his own account or on
account of others, In our judgment, the absence of these
words does not made any difference in the case of a dealer
who is an agent. The agent has been made liable to pay sales
tax. The agent may sell goods on account of others. But that
will not absolve the agent from the liability to pay tax on
such sales. Otherwise, the imposition of tax by Section 6B
on an agent who is a dealer will become meaningless.
We are of the view that the Taxation Tribunal clearly
fell into error in holding that the aggregate of the
turnover of the principals cannot be computed for assessing
the agent fora turnover tax under Section 6B. The judgment
and order dated 20.9.1989 of the Tribunal is set aside. the
appeal is allowed with no order as to costs.
C.A Nos. 4414-14A of 1990
In view of our decision in C.A. No. 1374 of 1990, the
judgment and order dated 4.1.1990 of the West Bengal
Taxation Tribunal is also set aside and the above appeals
are allowed with no order as to costs.