The State of Tamil Nadu vs Perambalur Co-operative Marketing Society

R. Sudhakar, J.—These revisions are filed by the Department under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai, dated 12.5.1993 passed in (i) M.T.A. No.185 of 1992 for the assessment year 1987-1988; (ii) M.T.A. No.183 of 1992 for the assessment year 1986-1987; (iii) M.T.A. No.184 of 1992 for the assessment year 1987-1988; (iv) M.T.A. No.191 of 1992 for the assessment year 1989-1990; (v) M.T.A. No.182 of 1992 for the assessment year 1986-1987; (vi) M.T.A. No.186 of 1992 for the assessment year 1988-1989; and (vii) M.T.A. No.187 of 1992 for the assessment year 1987-1988 respectively.

T.C. (R) No. 1946 of 2006 was admitted on the following question of law:

Whether the Tribunal is legally right in setting aside the turnover relating to auction sale of agricultural produce by the assessee who had acted as agents of agriculturists with complete dominion over the goods?

T.C. (R) No. 1949 of 2006 was admitted on the following question of law:

Whether the finding of the Tribunal that the assessee did not have any authority to sell the agricultural produce of the agriculturists independently and did not have any dominion over the goods which are sold in the auction effected by the assessee and as such not exigible to tax, is correct?

T.C. (R) Nos. 1988 and 1990 of 2006 were admitted on the following questions of law:

(i) Whether the Tribunal is legally correct in holding that the auction sales effected by the assessee is not taxable in their hands since they only acted as intermediary and, therefore, not falling with the definition of ''dealer'' and ''sale''?

(ii)Whether the order of the Tribunal is right in affirming the deletion of consequential penalty levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959?

T.C. (R) No. 2091 of 2006 was admitted on the following question of law:

Whether in the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that the respondent Society is only an intermediary and not a dealer under the provisions of the TNGST Act?

T.C. (R) No. 2282 of 2008 was admitted on the following question of law:

Whether the Tribunal is correct in coming to the conclusion that the respondent society would not come within the purview of the dealer as defined in Section 2(g) of the TNGST Act?

T.C. (R) No. 54 of 2009 has not been admitted till date.

The primal issue that arises for consideration in all these revisions is whether the respondent/society, which is a co-operative marketing society, is a dealer falling within the definition of Section 2(g) of the TNGST Act and liable to pay tax under the provisions of the TNGST Act.

The Original Authority held that the respondent is a dealer in terms of Section 2(g) of the TNGST Act and demanded tax and imposed penalty. The matter was taken up on appeal before the Appellate Assistant Commissioner, who dismissed the appeals. The respondent preferred further appeals before the Tribunal. The Tribunal placing reliance on a decision of this Court in The Tiruchengode Co-Operative Marketing Society Limited Vs. The State of Tamil Nadu, , came to the conclusion that the respondent is not a dealer in terms of Section 2(g) of the TNGST Act.

Challenging the said order passed by the Tribunal, the present revisions are filed on the questions of law referred supra.

We have heard the learned Special Government Pleader (Taxes) appearing for the petitioner and the learned counsel for the respondent/society and perused the orders passed by the Tribunal and the authorities below.

In The Tiruchengode Co-operative Marketing Society Limited case, referred supra, the main contention raised by the society was that in respect of the sales covering the turnovers in dispute, the society merely acted as an intermediary, bringing together the agriculturist-principals and the respective purchasers is auction held in the presence of the members and that the society did not actually do any business of purchasing or selling to make itself liable to assessment under the TNGST Act. The Tribunal negatived the said contention and held in favour of the department. On appeal by the society, the Division Bench decided the question in terms of Section 2(g) of the TNGST Act in the following manner:

"The short question that arises for consideration is, whether the assessee is a dealer within the meaning of section 2(g) of the Tamil Nadu General Sales Tax Act, 1959. The definition of ''dealer'', so far as is material, runs as follows :

''dealer'' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes.......

(iii) a commissioner agent, a broker or a del credere agent, or an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal;

.......

Explanation (1).- A society (including a cooperative society), club or firm or an association which, whether or not in the course of business, buys, sells, supplies or distributes goods from or to its members for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act.",

and held on facts that it is not a case of sale of produce by the society and, therefore, they are not liable to sales tax. The operative portion of the said decision reads as under:

"The above note will clearly show that the assessee had no authority to sell the produce of a particular agriculturist without his consent. Consequently, the documents make clear the following two facts:

(1) The assessee had no authority to sell the goods without the consent of the member concerned; and

(2) actually at the auction the goods are sold only when the agriculturist-member accepts the price offered.

These two facts about which there is no controversy clearly establish that the assessee cannot be said to have authority to transfer the property in the goods. Even if the assessee could be said to have dominion over the goods, if it did not have authority to transfer the property in such goods, certainly as per the law laid down by the Bench, referred to already, the assessee in the present case cannot be said to have effected a sale and, therefore, cannot be said to have acquired a turnover liable to sales tax."

The ratio laid down in The Tiruchengode Co-operative Marketing Society Limited case, referred supra, was followed by a Division Bench of this Court in The State of Tamil Nadu v. P. Muttulal Lalah & Sons. [T.C. (R) Nos. 394 of 2011 and batch cases, dated 27.11.2013], however it was held that the facts of the case decided by it are different from the facts of the case in The Tiruchengode Co-operative Marketing Society Limited case, referred supra.

In the case on hand, we find that the respondent/society acted as an intermediary, bringing together the agriculturists-principals and the buyer, and they have no authority to sell the goods and, therefore, the respondent/ society is not a ''dealer'' as defined under Section 2(g) of the TNGST Act. As the respondent/society has not effected any sale, they have not acquired any turnover liable to sales tax. The said view is fortified by the earlier decisions of this Court, referred supra.

For the foregoing reasons, these revisions are dismissed answering the questions of law against the Department and in favour of the assessee. No costs.