CIVIL APPELLATE JURISDICTION : Civil Appeal No. 98 of 1971.
Appeal by special leave from the Judgment and Order dated the 26th February 1970 of the Mysore High Court in S.T.R.P. No. 18 of 1969.
D. V. Patel, Vineet Kumar and B. P. Singh for the Appellant.
V. P. Raman, Addl. Sol. General, N. Nettar and R. C. Kaushik for the Respondent.
The Judgment of the Court was delivered by
UNTWALIA, J. In this appeal by special leave the question for determination is whether the appellant company is a dealer within the meaning of section 2(b) of the Central Sales Tax Act, 1956-hereinafter referred to as the Central Act, liable to pay sales tax thereunder.
The appellant, Bagal Kot Cement Co. Ltd., is a manufacturer of cement. For the period 1st April, 1961 to 31st March 1962 it filed a Return before the Assessing Authority showing a total turn-over of Rs. 1,11,02,243/-. The entire sum was shown as taxable turn-over on which an amount of Rs. 2,25,317.55 had been collected and paid as tax. No claim was made on behalf of the appellant before the Assessing Authority that it was not liable to pay any sales tax. The Authority accopted the Return and assessed the tax as per the appellant’s figure. It appears the appellant was advised thereafter to file an appeal before the Deputy Commissioner of Commercial Taxes and take the stand that in respect of the transactions in question it was not a dealer and was not lable to pay any tax. The Deputy Commissioner dismissed the appeal. A second appeal filed by the appellant before the Mysore Sales Tax Appellate Tribunal also failed. The company took up the matter in revision to the High Court under section 23 of the Mysore Sales Tax Act, 1957hereinafter called the State Act, read with section 9(2) of the Central Act. The High Court dismissed the revision. Hence this appeal.
Under the Cement Control Orders, 1958 and 1961 the appellant was bound to sell the entire quantity of cement to the State Trading Corporation of India Ltd. By an agreement executed between the parties the Corporation appointed the Company as its selling agent for sale of cement to different customers on its behalf at the controlled price and in accordance with the instructions which may be given from time to time by the Corporation. Pursuant to the agreement the company made the inter-State sales and realized sales tax from the customers under the Central Act. Its contention is that being an agent of the State Trading Corporation and having effected all the sales under its direction it was not a dealer as defined in section 2(b) of the Central Act and hence was not liable to pay any sales tax thereunder. The liability was of the Corporation.
In our opinion there is no substance in the appellant’s argument. After having realized the sales tax from the various customers and voluntarily and ex-contractu paid it as per the Return submitted it was ill-advised to take an unsustainable stand of its not being liable to pay sales tax under the Central Act.
There cannot be any doubt that the sales of cement made during the period in question in the course of inter-State trade were exigible to sales tax under the Central Act. The question for consideration is who was liable to pay it ? The libility was of the dealer as defined in section 2(b). If the appellant company was the dealer which had made the sales as defined in section 2(g), then the liability to pay the tax under the charging section 6 was its. If it was not a dealer then obviously it was not liable to pay any tax.
To determine the point at issue as mentioned above it is necessary to advert to the primary facts and the course of conduct of the business of the appellant as per the terms of the agreement entered into with the State Trading Corporation. The High Court has pointed out that the Deputy Commissioner found:
(1) The Company was appointed by the State
Trading Corporation as its selling agent;
(2) It had sold cement at the price specified in
the Cement Control Order to the customers who
held permits from the governmental
authorities;
(3) The customers purchased the cement from the
company directly and they were not aware of
the identity of the principal namely the
State Trading Corporation. The High Court also refers to the fact that the appellant did not place the relevant papers pertaining to the transactions before the authorities below. But its learned counsel conceded that the invoices were issued by the company, that the company had possession and the custody in the goods and it was authorised to transfer the property of the goods to the purchasers. These facts were not disputed before us. Rather in the special leave petition it is admitted that the invoices were issued by the appellant company in its own name.
We may now refer to some relevant clauses of the agreement between the parties. They are as follows.
"1. The Corporation hereby appoints the agents to
take on its behalf delivery of the entire
cement produced at the works of Bagalkot
Cement Co. Ltd. and to arrange for the
distribution of such cement in accordance
with such directions as may be issued by the
Corporation from time to time.
2. The Agents may enter into contracts for sale
of cement on behalf of the Corporation and
shall, inter-alia, arrange for the despatch
of cement to the consignees, submit bills for
the sales, receive payments in connection
therewith and do all acts and things that may
be necessary to handle effectively, on behalf
of the Corporation, all contracts of sale of
cement entered into as aforesaid.
7(a) The Agents shall sell cement at such prices
as may be indicated by the Corporation from
time to time.
(b) The Agents shall collect State or inter-State
sales tax and other local and State
Government taxes as may be leviable, and pay
the same in accordance with the law. They
shall also discharge all liabilities
devolving upon them as dealers under the
various sales tax Acts and Rules;
13. The Agents shall credit to the Corporation at
the end of every month the sale proceeds of
the cement sold by them at a price referred
to in clause 7 above, as reduced by:
(a) the amount paid to producers according
to the provisions of clause 9 above;
(e) the Agents remuneration referred to in
clause 8 above."
It would thus be seen from the course of conduct of the appellant’s business and the terms of agreement that the Company was not a mere commission agent or broker selling the goods on behalf of its principal-the Corporation. There was no privity of contract between the various customers of cement and the Corporation. No property in the goods sold was passed by the Corporation to them. After taking the symbolical delivery of the entire cement produced at the works of the company as per clause (1) of the agreement the company was in possession and custody of the goods. It was entering into contracts for sale of cement and selling it. The property in the goods was passed on to the buyers by the company. Under clause (7) it was authorised to collect sales tax both on intra-State and inter-State sales, and to discharge its liability devolving upon it as dealer under the various Sales Tax Acts and Rules. As per clause 13 of the agreement only the difference of price after deducting the company’s remuneration was to be credited to the Corporation’s account.
Section 2(b) of the Central Act reads as follows :
" "dealer" means any person who carries on the
business of buying or selling goods, and includes a
Government which carries on such business;" "sale" within the meaning of clause (g) means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration. "sale price" under clause (h) means the amount payable to a dealer as consideration for the sale of any goods. On the facts stated above it is abundantly clear that sale was made by the appellant company as it effected transfer of property in the goods to the customers and realized sale price from them by issuing invoices in its own name. The restricted definition of the term ’dealer’ in the Central Act is not wide enough to cover all kinds of agents such as brokers or a commission agent simplicter as many of the State Acts include them within their definitions. As for example the term ’dealer’ defined in section 2(k) of the Mysore State Act includes "a commission agent, a broker or 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;" The term ’dealer’ as defined in the Central Act would, however, include a del credere agent or a mercantile agent who carries on the business of buying or selling goods not as an agent simplicter on behalf of the disclosed principal but as a principal visa-vis its customers.
In Halsbury’s Laws of England, Fourth Edition, Volume 1, para 712 it is stated:
"A mercantile agent is one having, in the
customary course of his business as such agent,
authority either to sell goods, or to consign goods for
the purpose of sale, or to buy goods, or to raise money
on the security of goods. An agent may be a mercantile
agent although he has no general occupation as an
agent, or has only one customer, or although his
general occupation is that of an independent dealer in
the commodity entrusted to him, provided that he acts
in the transaction in his capacity as mercantile agent;
but he must not be a mere servant or shopman." In para 713 is stated:
"A del credere agent is one who, usually for extra
remuneration, undertakes to indemnify his employer
against loss arising from the failure of persons with
whom he contracts to carry out their contracts."
In the judgment under appeal the High Court repelled the stand of the appellant relying upon the decision of a full Bench of the Madras High Court in Kandula Radhakrishna Rao and others v. The Province of Madras represented by the Collector of West Godavari, Eluru and and another(1). Referring to the identical definition of the ’dealer’ in the Madras Act Rajamannar, C.J. delivering the judgment on behalf of the Bench has stated at page 723 column 2:
"In the case of a commission agent, the accepted
mercantile practice is that he has control over or
possession of the goods and he has the authority from
the owner of the goods to pass the property in and
title to the goods. If this is so, undoubtedly when a
commission agent sells goods belonging to his principal
with his authority and consent and without disclosing
to the buyer the name of the owner, there is certainly
a transfer of property in the goods from the commission
agent to the buyer. A business which consists in such
transactions can properly be described as a business of
selling goods. A similar position would arise even in
the case of a commission agent buying for an
undisclosed principal. A commission agent doing this
kind of business would in my opinion, fall within the
definition of dealer in the Sales Tax Act. Neither the
definition of dealer nor of sale contemplates as a
necessary condition, that the goods sold should belong
to the person selling or buying. Theere can be a sale
or purchase on behalf of another." We agree with the above view of the learned Chief Justice.
Mr. D. V. Patel, learned counsel for the appellant heavily relied on the definition of the expression "place of business" given in clause (dd) of section 2 of the Central Act which includes "(i) in any case where a dealer carries on business through an agent (by whatever name called), the place of business of such agent;" Counsel submitted that the above inclusive definition would show that it was the Corporation which was carrying on the business through the appellant company as its agent and for the purpose of the Central Act the place where the business was carried on by the company as the Corporation’s agent would be the place of the business of the Corporation. On the other hand, learned Additional Solicitor General II pointed out that if the appellant was the dealer within the meaning of section 2(b) then it was not the Corporation which was carrying on the business through it as an agent to attract the definition given in clause (dd). In our judgment it was the appellant company which carried on the business of selling cement although it was acting as selling agents of the Corporation. The Corporation was not the dealer which effected the sales but it was the company which did so.
For the reasons stated above, we find no substance in this appeal. It is accordingly dismissed with costs. P.B.R. Appeal dismissed.