TATA FISON INDUSTRIES LTD Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) THIS rule is directed against an order passed by the CTO in a proceeding u/s 12 of the Rajasthan ST Act. The petitioner company entered into an agreement with Rallis India Limited to act as petitioner company's sole distributors for selling and marketing insecticides and pesticides in Rajasthan and other places. It appears, this agreement was entered into on 12-11-1964 which was to remain in force for five years from 1-9-1963 to be extended by mutual consent for a further period of five years from 1-9-1968. It appears that the petitioner was to pay commission to M/s Rallis India Limited and this was confirmed by the Board of Directors of Rallis India Limited. The Rallis India Limited was assessed to tax for the insecticides and pesticides sold by them as a Distributor of the Principal Tata Fison Ltd. The assessment, however, is pending in appeal. The assessed tax was paid by Rallis India Ltd. It is further stated that inspite of the fact that Rallis India Limited has now been taxed, the respondent is proceeding with the notice u/s 12 of the Rajasthan ST Act. It is further stated that Rallis India Limited is acting as agent to the petitioner company and the products of the petitioner company have been marketed by Ganganagar branch of Rallis India Limited. On 18-3-1970, the Asstt. CTO, Ward No. 2. Circle 'b', Jaipur, directed the petitioner's authorised representative to produce the account books pertaining to purchase and sale of the petitioner's Alwar Branch. It is stated also that the said officer intimated the petitioner company that M/s Rallis India Limited did not act as an agent for the petitioner and the petitioner company has concealed the turnover relating to Alwar Branch and filed incorrect returns which is an offence u/s 16 (1) (e) of the Raj. ST Act The company was given an opportunity of being heard on 2-4-1970 in respect of the aforesaid matter and thereafter it was held on the preliminary issue that Rallis India Limited was a buyer and not an agent of the petitioner company. In the mean time, it may be stated, that Rallis India Limited, who filed the return without mentioning therein the sales made as a distributing agent of Tata Fison Company, revised their return and included the sales which were made by Rallis India Limited to others. It appears further that assessment has been made against Tata Fison in respect of the alleged purchase made by Rallis India Limited from Tata Fison Limited. An application appears to have been made by Tata Fison through their Chartered Accountant to the CTO on 28-9-1972 stating therein, inter alia, that the petitioners are the principal and Rallis India Limited is an agent of the petitioner and they are not buyer and seller in the sense of the terms. When this order was made, the petitioner moved this court and obtained the present rule and an interim order.

(2.) FROM the agreement which is annexed as Annexure P/2 to the writ petition, it appears to me that it is difficult to hold that the petitioners and Rallis India Limited are related between themselves as seller and buyer from the terms of the agreement.

(3.) FROM s. 9b, it is quite clear that either the principal or the agent is liable to pay the tax though they are severally and jointly liable but in the facts of the present case it appears from the papers on record that Rallis India Ltd. in fact is to be assessed for the goods which were sold by them as commission agent. In such cases, therefore, if Rallis India Ltd. has already been assessed to tax and it is pending appeal, it is no answer to say that if the assessment is set aside in appeal, the taxing authorities will not be entitled to tax the principal itself. It is not for me to answer this question at this stage as the appeal is pending and that will be subject to the result of the same. Mr. Mehta, on the other hand, very fairly conceded that if Rallis India Ltd. does not pay the tax, Tata Fison will certainly pay the tax on behalf of its agent. As is well known, in any agency agreement, if an agent does not pay the liability of the principal, in fact the principal is as much liable to pay the tax. Mr. Mehta also makes it clear that such tax can be levied on the principal, but that stage has not yet come. It is clear that Tata Fison is the principal and Rallis India Limited is an agent in respect of the sale of goods of Tata Fison. Number of cases have been cited by Mr. Mehta on this point, namely Hafiz Din Mohammad Haji Abdulla vs. State of Maharashtra (3) and State of Tamil Nadu vs. Rafeeq Ahmed & Co. (4) and also other cases of different High Courts. It is not necessary for me to refer to these decisions. In my opinion, the agreement is between the principal and the agent and. therefore, if the agent has also been assessed, proceedings u/s 12 of the Rajasthan ST Act against the principal cannot continue and, therefore, must be set aside.