Holding

An agent who is a dealer under Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941 is directly liable to pay turnover tax on his total turnover, which includes sales made on his own behalf as well as on behalf of disclosed principals, and no deduction is permitted.

Summary

The respondent firm, M/s Prakash Trading Corporation, sold goods both on its own account and as a commission agent for 24 disclosed principals. The Commercial Tax Officer assessed sales tax under Section 6‑B of the Bengal Finance (Sales Tax) Act, 1941 on the firm’s total turnover, including the commission sales. The West Bengal Taxation Tribunal held that the firm’s liability was limited to sales made on its own behalf and that sales on behalf of principals should be assessed separately. The Supreme Court reversed this view, holding that the definition of “dealer” in Section 2(c) expressly includes agents such as commission dealers, and that “turnover” under Section 2(i) encompasses all sales, whether on the dealer’s own account or on behalf of others. Consequently, an agent‑dealer is directly liable for turnover tax on the aggregate turnover without any deduction for sales made for principals. The Court set aside the Tribunal’s order and allowed the appeal.

Issues considered

The definition of ‘dealer’ under the Bengal Finance (Sales Tax) Act, 1941 – does it include commission agents?
Whether ‘turnover’ under the Act includes sales made by a dealer on behalf of disclosed principals.
Whether a dealer‑agent can claim a deduction for sales effected on behalf of principals when computing taxable turnover.

Legislation cited

Bengal Finance (Sales Tax) Act, 1941s. 2(c), s. 2(g), s. 2(h), s. 2(i), s. 4, s. 5(2), s. 6B
West Bengal Sales Tax Act, 1954

Subjects

sales taxturnover taxdealer definitioncommission agenttaxable turnoverBengal Finance (Sales Tax) ActSection 6Bagency liabilityassessment

Judgment

STATE OF WEST BENGAL A
v.
O.P. LODHA AND ANR.

MARCH 31, 1997

fSUHASC. SEN AND SUJATA V. MANOHAR, JJ.] B

Bengal Finance (Sales Tax) Act, 1941: Sections 2 (c) and 6 (B ).

Sales TaJ..~"Taxable tumovcr"-Scope of-Assessee sold goods 011 his
own behalf as well as 011 behalf of principals 011 commission agency C
basis-Assessee contended that his liability for sales tax on goods sold by him
as a9e11t was limited only to the extent of liability of principals-Held:
"Taxable twnover" covered goods sold by assessee on his own behalf as well
as on behalf of p1i11cipals--Non-111ention of this aspect in definition of
"tzunover'~.immaterial--Contention of assessee rejected.
D
Words and Phrases:

"Dealer''-Meaning of-In the context of S.2 (c}°ofthe Bengal Finance
(Sales Tax) Act, 1941;

The business of the respondent-firm was to sell goods on its own E
behalf and also on behalf of 24 other principals on commission agency
basis. The Commercial Tax Officer (CTO) assessed the said firm to sales
tax under Section 6-B 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 b.ehalf of 24 principals for whom the firm acted as commis- F
sion agent.

Before the West Bengal Taxation Tribunal, the respondent-firm
contended: (i) that the definition of 'dealer' under the Act did not permit
the CTO to tax a dealer in respect of sales effected on behalf of the
principals; (ii) that unlike the sales tax statues of other States, there were G
no specific words in the definition of 'turnover' in the Bengal Sales Tax
Act to include sales effected on behalf of the principals. The Taxation
Tribunal held that the liability of the respondent-firm was confined to the
sales effected by it on its own behalf. The Tribunal further held that the
sales effected on behalf of 24 other disclosed principals as commission H
439

0
440 SUPREME COURT REPORTS [1997] 3 S.C.R.

A agents had to be assessed separately. Hence this appeal.

Allowing the appeal, this Court

HELD : 1.1. Agents of all types have been included in the definition
of'dealer' in Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941. The
B 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 Act for sales made by a dealer as an
agent. The charge of turnover tax has been imposed upon "every dealer"
C whose gross turnover is in excess of a specified amount specified in Section
6-B of the Act. The incidence of taxation under Section 4 of the Act is on
the gross turnover in excess of the taxable quantum of all sales effected by
a dealer in a given period of time. [446-H, 447-A-B]

1.2. An agent who is a dealer is not entitled to any deduction on
D 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
E principal for and on whose account the goods are sold by the agent. The Act
has made the 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. In fact, the argument that the liability
of the dealer must be determined by excluding the sales made for or on
F account of somebody else will nullify the charging section which levies tax
on the agent himself. [448-E-H]

1.3. It is true that unlike some other State Acts, the Act has not
defined 'turnover' specifically to include sales made by a dealer whether on
G his own account or on account of somebody else. That, however, does not
make any difference. Whether a person sells goods on his own behalf or on
behalf of somebody else is quite Immaterial for the purpose of liability to
tax. [449-B]

Ramaswamy Gounder & Sons. v. State of Madras, 32 STC 350 (Mad.),
H referred to.

0
STATE 1·. O.P. LODHA 441

2.1. The scheme of the Act leaves no room for doubt that an agent A
who sells goods on behalf of somebody else cannot escape 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
6-B of the Act has been imposed directly upon him by the broad definition
of 'dealer'. [449-D]
B
2.2. The liability of the agent to pay sales tax on the sales made by
him has to he found out from the Sales Tax Act itself and not on any
general principle of agency. The agent 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 C
been levied directly on the agent on his turnover. It is not possible to
uphold the argument that the 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 bas to he found out what exactly is the liability of each of his
lJrincipals. [449-H, 450-A-B]
D
Cardamom Planters Association v. CST, Board of Revenue (Taxes),
[1989] 3 SCR 719, relied on.

H. Veerabhadrappa v. Commissioner of Commercial Taxes, 24 STC
919 and Gudathur Bhemappa v. CTO, 47 STC 121, overruled.
E
3.1. The liability to pay tax imposed by Section 6-B of the Act 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 he found
out. [452-C]

3.2. The Taxation Tribunal has, therefore, clearly fell into error in
F
holding that the aggregate of the turnover of the principals cannot he
computed for assessing the agent for turnover tax under Section 6-B of the
Act. [452-F]

CIVIL APPELLATE .IURISDILIION : Civil Appeal No. 1374 of G
1990.

From the Judgment and Order dated 20.9.89 of lhe West Bengal
Taxation Tribunal at Calcutta in R.C. No. RN-334 of 1989.

With H
442 SUPREME COURT REPORTS [1997] 3 S.C.R.

A Civil Appeal Nos. 4414-14A/90.

Santosh N. Hegde, Dilip Sinha, J.R. Das, Rathin Das, Badar Durrez
Ahmed, K.V. Mohan, Ajay Kr. Yadav for P.R. Seetharaman for the ap-
pearing parties.

B The Judgment of the Court was delivered by

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. Tht: business of
the firm is to sell goods on its own behalf and also on behalf of 24 other
C principals on commission agency basis. The Commercial Tax Officer,
Colootola Charge assessed the firm to sales tax under Section 6-B of the
Bengal Finance (Sales Tax) Act. 1941 on total turnover of the firm com-
prising 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
D preferred an appeal to the Assistant Commissioner of Commercial Taxes
who agreed with the Commercial Tax Officer. The West Bengal Commer-
cial Taxes Tribunal on further appeal, also took the same view.

On further appeal, the West Bengal Taxation Tribunal came to the
conclusion that tb.e assessment of the firm by including in its turnover sales
E made by it as commission agent of 24 other principals was erroneous in
Jaw. 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. The sales effected
on behalf of 24 other disclosed principals as commission agents had to be
assessed separately.

p 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
G 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
H or through another "on his own account or on account of others." These
STATE v. O.P. LODHA [SEN,J.) 443

words, according to the Tribunal were crucial for determination of the A
- 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
principal. 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 B
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 the 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, C
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 high er. There was no way the dealer could recover
this larger tax from its principals.
D
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 E
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 F
goods in West Bengal or of purchasing goods in West Bengal in
specified circumstances or any person making a sale under Section
60 and includes -

The Central or a State Government, a local authority, a
statutory body, a trust or other body corporate which, or a G
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. H
444 SUPREME COURT REPORTS [1997] 3 S.C.R.

A Explanation 1. - A co-operative society or a club or any as-
sociation which sells goods to its members is a dealer.

Explanation 2. - A factor, a broker, a commission agent, a de!
credere agent, an auctioneer, an agent for handling or transporting
of goods or handling of document of title to goods or any other
B 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."
c Section 2(h) defines "sale-price" as follows :

"sale-price means the amount payable to a dealer as valuable
consideration for~

D (i) the sale, other than that referred to in section 60 of any
goods, less any sum allowed as cash discount according to
ordinary trade pr'!ctice, 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
E 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 in-
F cludes-

(i) any delivery of goods on hire purchase or any system of
payment by installments,

(ii) any transfer of the right to use any goods for any purpose
G
(whether or not for a 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
H article for human consumption or any drink (whether or not
STATEv. 0.P.LODHA[SEN,J.) 445

introxicating), where such' supply or service is for cash, A
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 othe~ valuable ciinsideration,
B
and such' delivery, transfer or supply or' any goods shall be deemed
to be a sale' ot the goods by the person making the delivery, transfer
or supply and a purchase of'thcise goods by 'the person to whom
such delivery,· transfer or supply is made, but does not include a
mortgage; hypothecation, charge or pledge."
c
. "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 I)
.deducting the amounts, if any c

(i) refunded by thf! dealer in respect of any goods returned
by the purchaser with,in such period or

(ii) sep~ately charged 'as turnover tax payable under section E
6B during such period; ..

Provided that ari eledioh as aforesaid once made shall not be
altered except with the perrnissioh of the Commissioner ~nd. on
such terms and conditions as he may think fit to impose :
F
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 dat~ was or is made
on the basis of the sale-{lrices or parts of sale-prices receivable G.
during such petiod; the ealcufation shall not be called ill question
merely 'on the ground that it w~s or is' so made; and no return
furnished; no assessmentm'ade, no proceedings (including in par-
ticular proceedings for the recovery' of any tax or penalty) taken;
no order p~ssed and no notice iss~ed whether befo~e or after such
date shall be called in question on the .ground that it was or is ·H
446 SUPREME COURT REPORTS (1997) 3 S.C.R.

A based on turnover so calculated;"

Section 6B which is the charging section read as under:

"6B .. Liability to payment of turnover tax and rate thereof-(!)
Notwithstanding anything contained elsewhere in this Act,-
B
(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
c pay from the 1st day of. June, 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
D aggregate of 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
E
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-sec-
tion (2);
F
(c) xxxx xxxx xxxx"

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 in-
G eludes, inter alia, a commission agent, del credre agent and auctioneer goes
to show that the agents who sell goods for and on behalf of other 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
H . is in excess of a specified amount specified in· Section 68. "Sale-price" has
STATE v. O.P. LODHA [SEN, J.) 447

been defined as valuable consideration for the sale of any goods including A
any sum charged for anything done by the dealer in respect of the goods
at the time of or 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
of all sales effected by a dealer in a given period of time. The period of B
time and 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 C
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 D
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 :
E
"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- F

(i) the sale of goods declared tax-free under section 6;

(ii) sale 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 G
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 60, by him in West
Bengal, and of containers and other materials for the packing
of such specified goods; H·
448 SUPREME COURT REPORTS [1997] 3 S.C.R.

A (iii) Omitted.

(iv) Omitted.

(v) sale of goods which are shown t'o the satisfaction of the
Commissioner not to have taken place in West Bengal, or to
B have taken' place in the course of' inter-State trade or·
com-
merce, within the meaning of section 3,of the Cential Sales
Tax Act, 1956 (74 of 1956), or· in the coutse of import of die
goods into, or export of the goods out of; the territory -Of
India, within the meaning of section 5 of that Act;
. ' ' !

C·
(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 Commis-
sioner to have been paid;''

D It is not ne'cessary to enumerate various other deduction which are
permissible under sub-clauses (vb) to (vd) and also sub:cfause (vi) of
Section 5(2) of the Act,

It is of significance .to note t_hat an agent who is .a dealer, is not
entitled to any deduction on account of the sales ma,de by him for and on
E behalf of the principal. In fact, there is no sense in treating the agent on
the one ha!ld as a deab for the purpose of lerymg salei tax ~n its taxable
turnover and exclude from his turnover the ,sales made for Md 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
F liability to pay the tax is on the principi!l for· and on whose account the
goods are sold by the agent. The Act has made the 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 mi whose behalf the sales have l:ieen effected.
Station 6B merely provides· for a levy of an'additional amount of tax on
G 'dealers' whose aggregate of the gross turnover under the Bengal Finance
(Sales Tai<) Act and the West Bengal Sales Tax Acttaking-together exceed
Rs. 25 lakhs.' If the dealer happens to Be an agent, lie 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. 'ln fact, the argument that the liability of the
H dealer must be determined by excluding the saleS"Inade for dr on account
STATEv. O.P.LODHA[SEN,J.] 449

. of somebody else will nullify the charging section which levies tax on the A
agent himselL

It is trne that unlike some' other State Acts, the Bengal Finance (Sales
.Tax) Ad. has not defined 'turnover' specifically 'to include sales made by a
.dealer whether on his. c:iwn account or qn account of somebody else, That,
iµ. my judgment, does not make any difference. If a person sells goods on B
his own· account,_ he js liable not as an agent but as a seller.· But when he
.sells on .behalf, of somebody else or on account of somebody else, then he
. sells the. goods as ail agent of the principal. Such agents have been made
liable to pay tax by the enlarged defin~tion of the Word 'dealer' in the Act.
.If the .sales effected by the dealer .exceeds "taxable- quantum" or the total C
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 thto Act leaves no room for doubt that D
.. an agent who sells goods Off behalf of somebody else cannot escape 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'. E
·, \

On behalf of the respondents; reliance was placed ·on H. Veerab-
=> '. 1zadrappa v. Coinmissioner of Commercial Taxes, 24 STC 919 and Gudathur
' Bhemappa v. Cdmmcrcial Taxes 47 .STC · 121 ·which were noted in the
judgment of the Trib~nal. These decisions of the High Courts were based
ori'the principle that the liabilily of the commission agent in respect of F
business carried on by him on behalf of the principal was only in his
character as agent and the turnover brought to ta'< in such a case was the
turnover of th~ principal and not the turnover of the agent himself. If the
- turnovcJO of the principal did not exceed the taxable limit, the Commercial
Tax Officer could _not aggregate the transactions of the several known G
principals and then m.ake 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 principal of agency.
The agent has been made liable to pay turnover tax by the provisions of H
450 SUPREME COURT REPORTS (1997) 3 S.C.R.

A 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
B 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),
C Board of Revenue (Taxe.~) Emakulam, (1989] 3 SCR 719. That was a case
of a 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
D mi.xing 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
E the surcharge under the Kerala Generai 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
F 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 principle of
agency, an agent would be liable to surcharge only to the same extent as
G 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 respect of the
sales effected by it on behalf of the principals whose sales to the Society
did not exceed the limit~ set out in Section 3 (1) of the Surcharge. Act. The
H principals could not be made liable to surcharge if they were assessed
STATEv. O.P.LODHA(SEN,J.) 451

individually. The sales made by the Society on behalf of the disclosed A
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 B
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 assessee that separate assessment must be made on the C
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 D
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 exceed-
ing those limits. In this state of affairs, it will be absolutely impracticable, E
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 of data, in the
assessment of every commission agent, regarding the entire sales turnover
of each of his constituents who may or may not b~ assessed by the officer p
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
of parts each containing the determination of turnover, tax and surcharge
qua each of the constituents. These deter~inati'ons require exercises which
cannot be practically undertaken by an offi.cer assessing a commission
agent but can easily be undertaken by the different officers assessing the G
principals. That is why the statute evolved a very simple procedu~e 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 the turnover so included and taxed in the hands of the agent
should be excluded from the turnover of the principal, where he is H
452 SUPREME COURT REPORTS [1997) 3 S.C.R'. ""

A . 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
·B · and make separate assessment on· the dealer. It is the total turnover of the
dealer which has been brought to tax .under the Act. In 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
C · 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 turn-
over of the dealer has to be found out. .

The Taxation Tribunal has attached great significance to the defini-
tion of "turnover" given in the Bengal Finance (Sales Tax) Act, and pointed
D · 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 niake any
difference in 'the case of a dealer who is an agent. The agent has been made
E liable to pay sal~s 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
•F- in holding that the aggregate of the turnover of the principals cannot be
computed for assessing the agent for turnover taic 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.

G C.A. Nos. 4414-14A of 1990.

In view of our decision in CA. No. 1374 of 1990, the jud~ent and
order dated 4.1.1990 of the West Bengal Taxation Tribunal is also set aside
aild the above appeals are allowed with no .order as to costs.

V.S.S. Appeals allowed.