State of
West Bengal Vs. O.P. Lodha & ANR, M/S. Chowringhee
Sales Bureau Private Ltd. [1997] INSC 364 (31 March 1997)
SUHAS
C. SEN, SUJATA V. MANOHAR
ACT:
HEADNOTE:
With
CIVIL APPEAL NOS. 4414-14A OF 1990
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 `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 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."
"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 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;
(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.
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 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 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.
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