1. The present application is directed against an order of the West Bengal Commercial Taxes Tribunal dated July 21, 1988, affirming in part, an appellate order passed by the Assistant Commissioner, Commercial Taxes dated May 17, 1986. The appeal was preferred by the applicant being aggrieved with an order of assessment of turnover tax for the period of 4 quarters ending 2036 K.B. under Section 11(1) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act").
The applicant-firm has been carrying on the business of selling goods owned by it as well as those owned by 24 principals as the commission agent of those principals.
The respondent No. 3 made an assessment under Section 6B of the said Act by aggregating the turnover of the applicant with the turnover arising out of sales made on behalf of the said 24 principals (vide annexure A). Being aggrieved, the applicant preferred an appeal before respondent No. 2, who having confirmed the assessment, the applicant moved the Commercial Taxes Tribunal in revision which too affirmed the appellate order in regard to the turnover tax (vide annexures B and C, respectively). The Tribunal held in substance that the turnover of each and every principal was liable to be clubbed together in the hands of the applicant which admittedly acted as commission agent for and on behalf of 24 disclosed principals, besides the business done by the applicant on his own account. The authorities below acted in clear violation of law and the principles enunciated by the Supreme Court and different High Courts. Hence, the orders are liable to be set aside.
3. The main contention of the applicant is that the assessing authority could not club together the turnover of the different principals and fix liability for the aggregate amount on the applicant. In the circumstances, the applicant has prayed for setting aside the impugned orders and for a direction upon respondent No. 3 for fresh assessment according to law and determine the liability under Section 6B on the basis of the turnover separately in respect of sales made on behalf of different principals instead of clubbing together the turnover of all the principals.
4. The respondents oppose the application. They have not, however, used any affidavit-in-opposition.
5. The dispute relates to the imposition of turnover tax under Section 6B. The gross turnover for the impugned period was shown as Rs. 1,58,38,724.54 which, according to the applicant, include sales on his own account as also sales on account of the principals for whom the applicant was merely acting as an agent. The contention of the applicant is that clubbing together of the turnover of the different disclosed principals is not permissible in law.
6. As against this, the argument advanced on behalf of the Revenue is that the applicant is in any event a "dealer" within the meaning of the BFST Act and, as such, he cannot escape the liability of paying the turnover tax as assessed.
7. In order to appreciate the respective contentions of the parties, it may be convenient to bear in mind the definition of the term "dealer".
The expression "dealer" has been defined in Section 2(c), material part of which is reproduced below : "(c) '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 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 documents 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." 8. The material part of the expression "turnover", as defined in Clause (i) of Section 2, is as follows : " '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, refunded by the dealer in respect of any goods returned by the purchaser within such period." The definition is followed by two provisos which are not relevant for our purpose and need not, therefore, be reproduced.
9. Section 6B imposed the liability to pay turnover tax on every dealer whose aggregate of the gross turnover during the year exceeds Rs. 25 lakhs. The rate of turnover tax payable is laid down in the different clauses of Sub-section (3) of Section 6B. The rate varies from 1 1/2 per cent to 1 1/2 per cent depending on the amount of turnover. The higher the turnover, the higher the rate.
10. Mr. Bose, appearing on behalf of the applicant, contends that the liability of the agent is co-extensive with the liability of the principal and that in no case he can be made liable for an amount larger than that of the principal. Precisely, his grievance is that by clubbing together the turnover of the different principals, he is being made liable for the payment of turnover tax in respect of a larger sum than he would otherwise have been liable. It is indeed true that just as an agent cannot claim a right larger than that of the principal, similarly his liability cannot be more than that of the principal. If there are more than one principal, the liability of the principals taken together cannot be fastened on to the agent. It will bear repetition that under the general law, either the right or the liability of the agent must be co-extensive with that of the principal or if there are more than one principal, with the principals individually.
11. As against this, the argument advanced on behalf of the respondents is that since the agent is also a "dealer", he would be liable for the aggregate turnover whether on his own account or on account of his principals. The argument, even though ex facie it seems catchy, cannot, however, stand scrutiny.
12. In support of the case of the applicant, a reference was made to the case of Irri Veera Raju v. Commercial Tax Officer, reported in [1967] 20 STC 501. That was a decision of the Andhra Pradesh High Court in a matter arising out of the Andhra Pradesh General Sales Tax Act, 1957. There also the petitioners carried on business as commission agents on behalf of various ryots by selling jaggery on their behalf and collecting commission from them. The turnover of each of the principals did not exceed the taxable limit. Therefore, the petitioners claimed that no tax was payable by them. In that Act also, the agent is a "dealer" as defined in Section 2(1)(e)(iv) of the Andhra Pradesh General Sales Tax Act. The provisions of Section 11 of that Act read with Rule 17 indicate that the authority could realise the tax or penalty from the principal instead of from the agent. It was held that in such a situation the agent should be deemed to be as many dealers as there are principals for whom he works. That is the ratio of the decision. In the context of the provision that the authority could impose the tax or penalty on either the principal or the agent, the High Court posed the question that if the agent is held liable to be assessed and taxed on the sum total of the transactions of the several principals, then what is the tax that is recoverable from each of the principals The answer lies in the principle that it is a tax due from the agent on account of the principal.
13. It is true that there is no express provision like Section 11 of the Andhra Pradesh General Sales Tax Act in the Bengal Finance (Sales Tax) Act, 1941, but that does not, in our view, alter the position under the general law that an agent is an agent qua the particular principal and his liability arises only in respect of that principal.
14. The learned Tribunal below sought to distinguish this case on the lone consideration that under the Andhra Pradesh General Sales Tax Act, while defining a "dealer", the expression "on behalf of any principal", is used while that expression is wanting in our Act. We see no point in distinguishing that case on that consideration alone. In the BFST Act, 1941, the expression "dealer" includes a commission agent who has authority to sell goods belonging to "principals". The use of the expression "principals" instead of "any principal or principals", makes no difference whatsoever, as regards the status, rights and liabilities of the agent vis-avis the principal or principals, if there be more than one. Therefore, the reasoning given by the learned Tribunal is hardly tenable. The learned Tribunal, after distinguishing the case referred to above, went on to consider a question which was totally extraneous to the point at issue. He observed that since all deductions contemplated under Section 6B(2) were given, no interference with the order was called for. It seems that he failed to appreciate the real point at issue and decided the revisional application on irrelevant considerations.Sri Konathala Venkata Ramana and Budha Appa Rao v. State of Andhra Pradesh [1969] 24 STC 367. This also is a decision of the Andhra Pradesh High Court. After the decision rendered in Irri Veera Raju v. Commercial Tax Officer [1967] 20 STC 501 (AP), Section 11 of the Act was amended in 1968. The petitioners there were working as commission agents on behalf of ryots. Each of the principal's turnover did not exceed the limit. The petitioners, therefore, were not exigible to tax as interpreted in Irri Veera Raju v. Commercial Tax Officer [1967] 20 STC 501 (AP). Section 11 was amended to guard against possible evasion by agent-dealers who purport to act on behalf of fictitious principals and to make the agent liable in respect of the transactions of several principals irrespective of the liability of the principals. Petitioners challenged the validity of the amendment as unconstitutional.
16. It was held that an agent who sells goods on behalf of a principal is a dealer in respect of the same goods. Section 11, as amended, sought to apply the incidence of tax differently between the same class of persons in that where a principal employs an agent, the agent will be taxed irrespective of whether the principal is liable or not, but no tax liability attaches to the principal in respect of transactions entered into by him directly if the turnover is below the limit. This, it was held, amounted to a hostile discrimination. It was, however, held that Section 11 was valid in so far as the agent's liability, which was co-extensive with that of the principal, was concerned. It was further held that he was entitled to the same exemption to which each of his principals was entitled.
17. In spite of the fact that there is no provision in the BFST Act analogous to Section 11 of the Andhra Pradesh General Sales Tax Act, yet the basic and fundamental principle regulating the relationship between the principal and agent remains unaffected. This apart, we respectfully agree with the view expressed in the above decisions.
18. Mr. Chakraborty for the respondents, however, argued that the rights and obligations of an agent and principal under the general law, are determined by their contractual relationship as determined by the Contract Act and that the statutory liability of the agent as dealer has to be considered independently of the contractual relationship.
This argument appears to us to be of no substance. In the case of State of Madras v. Cement Allocation and Co-ordinating Organisation, reported in [1972] 29 STC 114, the Supreme Court observed that under the general law an agent merely represents his principal and acts for him. This rule must hold good even under the Madras General Sales Tax Act, unless otherwise provided therein. The fact that for the purpose of that Act the agent is considered to be a dealer does not alter the legal position in other respects. He merely steps into the shoes of the principal. He is entitled to the same exemptions as his principal would have got had he dealt with the concerned goods himself. The provision of the Act under which agents are considered as dealers does not convert an agent into a principal.
19. These observations of the Supreme Court are sufficient to meet the point urged by Mr. Chakraborty.
20. Mr. Bose also referred to several other decisions in supporting the applicant's case. The cases of Veerabhadrappa v. Commissioner of Commercial Taxes [1963] 14 STC 919 (Mys) and Guduthur Bheemappa v.Commercial Tax Officer [1981] 47 STC 121 (Kar) also lay down that the liability of a commission agent in respect of the business carried on by him on behalf of the principal is only in his character as an agent and the turnover brought to tax in such a case is the turnover of the principal and not the turnover of the agent himself. If the turnover of the principal does not exceed the limit, the Commercial Tax Officer cannot aggregate the transactions of the several known principals and then make the agent liable for payment of additional tax.
21. As against all these decisions, Mr. Chakraborty referred to a single decision of the Madras High Court in support of his contention that the agent-dealer may be held liable for the aggregate amount even though the principal may or may not have a turnover of his own.
(Ramaswamy Gounder and Sons v. State of Madras [1973] 32 STC 350). This is a case under the Tamil Nadu General Sales Tax Act, 1959. The decision in that case is based upon the definition of the expression "turnover" as in Section 2(r) of the Act. According to the definition, "turnover" means the aggregate amount for which goods are bought or sold, or supplied or distributed, by a dealer, either directly or through another, on his own account or on account of others. The definition, it was held, made the position clear that all the transactions effected by the agent either on his own account or on account of others should be aggregated for finding out the turnover of the agent as a dealer.
22. In the case before us, reliance cannot, however, be placed on this decision, for the simple reason that in the expression "turnover" as defined in the BFST Act, the words "or on account of others" are wanting. Therefore, the reasoning upon which the decision rested is not applicable to the facts of the case before us.
23. Mr. Chakraborty also drew our attention to explanation 3 as it was there in the definition of dealer which has since been omitted. The substance of explanation 3, as it then stood, was to include within the meaning of "dealer" a manager or an agent in West Bengal for a non-resident dealer engaged in the business of selling goods in West Bengal. We do not see how, if the explanation still existed, it would have altered the position in this case. That apart, we need not draw any inspiration from the possible interpretation or effect of an explanation which has been deleted as far back as in 1954.
24. Mr. Chakraborty also argued that factually the agent would not stand to lose anything even if the sum total of the turnover of the different principals is taken together and assessed upon the agent-dealer because, the agent may be entitled to reimbursement from the principals. This argument also does not appear to be sound. The question may be raised as to the amount for which the principal or principals may be required to reimburse the agent. It is quite likely that the individual principal's turnover may not exceed the limit so that individually he may not be liable for tax. But because the aggregate of the turnover of the different principals is computed for assessing the agent, he may be called upon to pay tax at the highest rate as in this case, while he may not be entitled to ask for reimbursement from the individual principal at all. Even if the individual principal would not be liable to pay at the highest rate, by reason of aggregating the turnover of all the principals the agent may be liable for a bigger sum, being tax levied at the highest rate. This can never be the intention of law.
25. Hence, upon a consideration of the pros and cons of the matter, we are of the view that the aggregate of the turnover of the principals cannot be computed for assessing the agent for turnover tax under Section 6B. But that is the method which has been adopted from the stage of assessment to the stage of revision before the Commercial Taxes Tribunal. The impugned orders are accordingly liable to be set aside. Respondent No. 3 is directed to make a fresh assessment for determination of liability under Section 6B on the basis of the turnover separately in respect of the transactions of the different principals without aggregating or clubbing together the turnover of all the different disclosed principals for the purpose of Section 6B.26. The case, therefore, succeeds and is hereby allowed. The impugned orders are set aside and the matter is remitted back to the assessing authority for making fresh assessment according to law and in the light of the observations made above. There shall be no order for costs.
27. Before parting with the case we would, however, like to make it clear that the question whether one is acting as an agent or not for and on behalf of a principal, is a question of fact to be determined by the assessing authority at the appropriate stage in each case. A mere assertion in that behalf, without more, may not be sufficient to establish that one is an agent-dealer. It has to be seen whether there is a contract of agency and also whether the principal claimed is a fictitious person or not. In the present case, however, this question would not arise because the claim that the applicant is an agent of several disclosed principals, has not been controverted at any stage.
Therefore, this question cannot be reopened in this case. But we make the observations as above in a general way for the guidance of the authorities concerned in appropriate cases.