By G. G. Goyal
Janak Vaghani Chartered Accountants
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VAT- Agency – Supply of Goods to Agent – Thereafter by Agent to Buyer or Authorised Dealer of Principal For Commission – No Two Independent Sales-Supply of Goods to Agent – Not a Sale-Not Taxable, Section 2(4), Explanation (c ), of The Madhya Pradesh Value Added Tax Act, 2002.
FACTS
The Petitioner Company entered into an agreement with M/s. Rahul Pharma and appointed him as carry forward agent to supply the goods to the authorised distributors or dealers appointed by the Company. While assessing the petitioner company the assessing authority relying on Explanation (c ) to section 2(4) of the Act, treated supply of goods by the petitioner to its agent as first sale liable to VAT and thereafter when the selling agent further sold or transfers the goods to buyers, then also it was treated as sales taxable under the Act. The petitioner company objected to it as it amounted to double taxation. The petitioner company filed writ petition before the Madhya Pradesh High Court against the aforesaid action of the assessing officer.
HELD
Under clause ( c) of Explanation to section 2(4) of the MP VAT Act, for the purpose of Act, two independent sales or purchases are deemed to have taken place when the goods are transferred from principal to his selling agent and from the selling agent to the purchaser or when the goods are transferred from the seller to buying agent and from the buying agent to his principal. This, clause (c) applied only when there is transfer of property in goods. M/s. Rahul Pharma was an agent of the petitioner, company which was evident from the agreement. It only supplied the goods to the authorised dealer of the petitioner company for a commission not as his own property but as the property of the principal, who continued to be the owner of the goods. The supply of goods by the petitioner company to the agent was not a sale as per the interpretation of clause (c) of Explanation to section 2(4) of the Act therefore not liable to tax. When the agent supplied goods to the buyer of the petitioner company or to its authorised distributor on behalf of the petitioner, the petitioner company was liable to pay the tax. Consequently, the petition was disposed by the court with the direction that the delivery of goods to the agent of the petitioner for delivery of goods to the buyer or to the authorised distributer shall not be taxed under the provisions of VAT Act by treating it as an independent sale.
