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Rajasthan High Court · body

2003 DIGILAW 736 (RAJ)

Khushi Ram Agencies v. Commercial Tax Officer

2003-05-12

P.C.TATIA

body2003
Honble TATIA, J.–Heard the learned counsel for the petitioner. (2). The points raised by the learned counsel for the petitioner in these revision petitions are as under:- ``1. Whether the assessee, after submitting Form No. ; ST- 41, stands discharged from liability of payment of tax in view of sub-rule (2) of Rule 42-A? 2. Whether, in case when Form No. ST-41 is submitted, the Assessing Authority should proceed, in case the Assessing Authority decideds to hold any inquiry, first against the agent of the assessee treating the Form No. ST-41 as a proof of recovery and payment of tax by the agent of the Principal because of the reason that Form No. ST-41 is a proof of recovery of the tax amount by the agent of the Principal? 3. Whether, even if there is a joint and several liability of payment of tax of the Principal and the agent, still when Forms Nos. ST-40 and ST-41 are submitted then the Assessing Authority can proceed only against the agent and can recover the tax amount after exhausting the remedy of recovery of tax from the agent? In addition to above, the learned counsel for the petitioner also submitted that the Assessing Authority committed serious illegality in refusing the request of summoning of the record from his agent and in refusing the permission of cross-examination of the petitioners agent, who according to the petitioner, has collected the tax amount and admitted that he has deposited the tax amount by giving Form No. ST-41. (3). I have considered the arguments of the learned counsel for the petitioner and perused the orders passed by the Assessing Authority and the appellate authorities. The rules relevant for the purpose of deciding these revision petitions are the Rules 42-A and 42-B read with Section 9-B. (4). From the bare perusal of Rule 42-A, it is clear that the Principal is permitted to transfer goods to his commission agent for sale through him (commission agent) and for that purpose the Principal is required to issue a certificate of transfer in Form ST-40 in respect of such goods duly filled and signed by him (by the Principal) to his commission agent. Sub-rule (2) of the Rule 42-A provides that where any Principal claims that he is not liable to pay any tax under the Act in respect of any goods transferred for sale through his commission agent, the burden of proving that tax in respect of such goods has been paid by the commission agent shall be on the Principal and for this purpose he may produce before the Assessing Authority a certificate of sale proceeds thereof in Form ST-41 duly filled and signed by the commission agent. (5). Sub-rule (3) of Rule 42-A provides that if the Assessing Authority satisfied after such inquiry as he may deem necessary that the particulars contained in the certificates in Forms ST-40 and ST-41 are true, he shall accept the claim of the Principal or commission agent, as the case may be, and accordingly the Assessing Authority may held that he shall not be liable to pay tax in respect of the same transaction. (6). The provisions of Rule 42-B provides maintenance of accounts by the commission agent. (7). In addition to above, provisions of Section 9-B is also relevant which fasten the liability of tax on Principal and commission agent and the Section 9-B clearly provides that where a commission agent sells any taxable goods on behalf of the Principal, such commission agent and his Principal shall, both, be jointly and severally liable to pay tax on such sales. Sub- section (2) of Section 9-B further provides that in case the commission agent proves that he has paid the tax for the said goods, then the Principal shall not be liable to pay tax again in respect of the same transaction. (8). A bare reading of above Rules itself makes it clear that the liability of payment of tax amount in the cases of sale of goods through commission agent is the joint liability of the Principal as well as the commission agent. The sale by the commission agent of the goods is obviously on behalf of the Principal but the commission agent has been given permission to deposit the tax which appears to be because of the reason that the commission agent is required to recover the tax amount at the time of sale. The sale by the commission agent of the goods is obviously on behalf of the Principal but the commission agent has been given permission to deposit the tax which appears to be because of the reason that the commission agent is required to recover the tax amount at the time of sale. Since the commission agent is to collect the tax at the time of sale, therefore, he is made liable equally to the amount of tax under Section 9-B of the Act of 1994. He may discharge his obligation by depositing the tax amount and by this, the Principal is also stand discharged from the liability of payment of the tax as the tax can be recovered once for the sold goods. To give this transaction a regular way, the Forms Nos. ST-40 and ST-41 are prescribed. Form No. ST-40 is required to be issued by the Principal which should be duly filled and signed by the Principal and required to be sent to his commission agent. The commission agent, in turn, return the Form No. ST-41 duly filled and signed by him to the Principal so that the Principal may submit the same before the Assessing Authority in proof of sale proceeds through commission agent. The Forms Nos. ST-40 and ST-41 are the documents to be used by the Principal and the commission agent respectively. The Assessing Authority is and cannot be made bound to accept the contents of the Forms ST-40 and ST-41 as correct. The Assessing Authority has been given jurisdiction to inquire into the correctness of the particulars contained in the certificates in Forms Nos. ST-40 and ST-41 for the purpose of accepting the claim of the Principal or commission agent, as the case may be. There appears to be no reason to infer that mere production of Form No. ST-41 received from the commission agent by the Principal itself is a conclusive proof of the deposit of tax under the Act of 1994. Sub-rule (2) of Rule 42-A very specifically provides that ``burden of proving that the tax in respect of such goods has been paid by the commission agent shall be on the Principal . . . . . Sub-rule (2) of Rule 42-A very specifically provides that ``burden of proving that the tax in respect of such goods has been paid by the commission agent shall be on the Principal . . . . . The assessee is given permission to produce the certificate by the same sub-rule (2) of Rule 42-A in proof of the transaction, but at the same time, sub-rule (3) of Rule 42-A makes further clear that the Assessing Authority, after satisfying itself, can accept the claim of the Principal or commission agent regarding the particulars contained in the certificates in Forms Nos. ST-40 and ST-41. This sub-rule (3) of Rule 42-A leaves no doubt that the certificates of Forms Nos. ST-40 and ST-41 neither conclusive proofs nor they themselves are the proofs of the correctness of the particulars contained in the Forms Nos. ST-40 and ST-41. Therefore, the contention of the learned counsel for the petitioner that since the petitioner has submitted the Form No. ST-41 and, therefore, he is not liable for the tax, has no force. (9). It will be just and proper to mention here that the facts contained in the Forms ST-40 and ST-41 only record the admission of the Principal and agent respectively and these admissions, which are in favour of Principal and agent, can be used by the department against the Principal and agent. But, when the Principal and agent wants to use these admissions, which are the admissions in their own favour, normally cannot have evidenciary value in their own favour except by virtue of sub-rule (2) of Rule 42- A. These documents have been made admissible in evidence by sub- rule (2) of Rule 42-A. These documents contain the admissions in ones favour only, therefore, the other party i.e. the Assessing Authority has a right to examine the correctness of the contents in the Forms ST-40 and ST-41. Therefore, by sub-rule (3) of Rule 42-A, a specific authority has been given to the Assessing Authority to hold inquiry to find out the truth and correctness of the contents of Forms ST-40 and ST-41. In view of the above also and by reading of the above provisions, it is clear that these documents are permitted to be placed on record but can be acted upon, upon satisfaction of the Assessing Authority. (10). In view of the above also and by reading of the above provisions, it is clear that these documents are permitted to be placed on record but can be acted upon, upon satisfaction of the Assessing Authority. (10). The next contention of the learned counsel for the petitioner that the Assessing Authority should have proceeded against the commission agent of the petitioner alone because there is a prima facie proof of transfer of the goods by the Principal to the commission agent and further prima facie proof of sale of the goods by the commission agent and who is supposed to recover the tax amount at the time of sale. This contention of the learned counsel for the petitioner is also devoid of any force firstly because of the reason that the burden of proving that the tax in respect of such goods has been paid by the commission agent is on the Principal as provided under sub-rule (2) of Rule 42-A. The next part of the sub-rule (2) of Rule 42-A only provides that the Principal may produce the certificate of sale proceeds in Form No. ST-41 which he received duly filled and signed by his commission agent. But as held above, it itself is not a conclusive proof of contents of the certificate much less to the actual payment of the tax by the commission agent. Therefore, the contention of the learned counsel for the petitioner has no force and liable to be rejected. (11). The contention of the learned counsel for the petitioner is that the Assessing Authority should have first proceeded against the commission agent first to recover the tax amount which, according to the learned counsel for the petitioner, has been recovered by the petitioners commission agent. There appears to be no reason to accept such a plea resulting into only multiplicity of the proceedings, that too in the matter of tax liability created under the statute. Permitting the parties to take such type of defences before the Assessing Authority to settle the inter se dispute between the Principal and agent will result into prolonging the tax assessment and recoveries. Permitting the parties to take such type of defences before the Assessing Authority to settle the inter se dispute between the Principal and agent will result into prolonging the tax assessment and recoveries. When the liability of tax under sub-section (1) of Section 9-B is joint and several against the Principal and commission agent, then the Assessing Authority, after giving opportunity of hearing, can certainly recover the due tax amount from the Principal or the commission agent, as the case may be. Restricting the Assessing Authority from recovering tax from either Principal or commission agent or fixing priorities in any case, will be contrary to the Principle of Joint and Several Liability. Therefore also, the plea raised by the learned counsel for the petitioner is contrary to the law. The Taxing Authorities are required to see whether the tax has been paid to the Taxing Authorities or not and if not, it is required to be recovered. (12). The sub-section (2) of Section 9-B further specifically provides that the commission agent himself may satisfy the Assessing Authority that he has paid the tax and satisfaction is recorded by the Assessing Authority, same can be used by the Principal in support of his plea of tax paid for the sold goods. When the Principal is served with a notice or asked to prove the truth and correctness contained in the certificate in Forms ST-40 and ST-41, it is his duty to prove the truth and correctness of the certificate by producing sufficient evidence in support of the payment of tax, by calling his agent as witness and cannot say that simply because the commission agent is also registered by the Taxation Department, therefore, the Taxation Department should have called the commission agent as their witness. The reason for this is that the Taxation Authorities are not supposed to call an assessee or his witness who are the rival parties to the department. It is absolutely improper to call the rival party as a witness by the Department. It is also observed that summoning a rival party to give statement or evidence cannot be appreciated. (13). Learned counsel for the petitioner submitted that the petitioner requested for summoning of the record of the agent and sought permission to cross-examine the agent but that was wrongly refused by the Assessing Authority. It is also observed that summoning a rival party to give statement or evidence cannot be appreciated. (13). Learned counsel for the petitioner submitted that the petitioner requested for summoning of the record of the agent and sought permission to cross-examine the agent but that was wrongly refused by the Assessing Authority. It appears from the order of the Assessing Authority that the petitioner Principal did not produce the agent as his witness nor he made his own efforts for getting record from the agent. No facts available on record to show that the Principal was not having control over his agent and was not in position to produce him as witness for the purpose of transaction which he undertook on behalf of the Principal. The reason for making request for summoning of record of Principals own agent by the Principal himself is not available on record. Apart from it, it appears that the petitioner has not submitted even reply to the notice much less to any evidence, despite the fact that on 13.12.1994 it was ordered that in case the assessee petitioner will submit the reply and any evidence that will be taken on record but neither any reply was filed nor any evidence was produced. Therefore, in these circumstances, the Assessing Authority, in absence of any reply, did not summon the record, the Assessing Authority has not committed any wrong and rightly held that the Principal is liable to make payment of the tax amount which he failed to prove that the tax amount has been paid either by himself or his agent. (14). However, the Principle of Agency clearly provides that in case the agent causes some loss to the Principal then the Principal can recover the said amount, in the circumstances, from the agent as provided in the provisions of Principal of Agency which makes the agent liable in accordance with law and up to the extent for which he can be held liable. Therefore, the inter se dispute between the Principal and its agent cannot be a ground for deferring the tax recovery proceedings because of the additional reason that the Taxing Authorities are not supposed to determine the dispute between the Principal and agent and bona fide of disputes. (15). Therefore, the inter se dispute between the Principal and its agent cannot be a ground for deferring the tax recovery proceedings because of the additional reason that the Taxing Authorities are not supposed to determine the dispute between the Principal and agent and bona fide of disputes. (15). Thus, in view of the above, I do not find any question of law involved in these revision petitions and the same are hereby dismissed.