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PETITIONER: BAGAL KOT CEMENT CO.

       Vs.

RESPONDENT: STATE OF MYSORE

DATE OF JUDGMENT27/11/1975

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. GOSWAMI, P.K.

CITATION:  1976 AIR  357            1976 SCR  (2) 852  1976 SCC  (1) 336

ACT:      Central  Sales   Tax  Act,   1956-S.  2(b)-"dealer"  if includes a del credre agent and a mercantile agent.

HEADNOTE:      By  an   agreement,  the   State  Trading   Corporation appointed the  appellant as  its selling agent for cement. A term of the agreement was that the agent shall collect State or inter-State  sales tax  on the sale of cement and pay the same in  accordance with  law. The  appellant paid the sales tax on  its annual  turnover to  the Sales  Tax Authorities. Later, however, it filed an appeal stating that it was not a dealer and, as such, was not liable to pay any tax, but that was dismissed.  Its appeal  to the  Appellate  Tribunal  and later  revision  application  before  the  High  Court  were dismissed.      Dismissing the appeal to this Court. ^      HELD :  (1) The  contention that the appellant being an agent of  the State Trading Corporation, it was not a dealer as defined in s. 2(b) of the Central Sales Tax Act and hence was not  liable to  pay  any  sales-tax  thereunder  has  no substance. Having  realised the  sales-tax from  the various customers  and   voluntarily  paid  it  as  per  the  return submitted it  was ill-advised  to take an inconsistent stand of its  not being  liable to pay sales tax under the Central Sales Tax Act. [853F-G]      (2) From  a reading of the terms of the agreement 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  realised the  sale price from them by issuing invoices in  its own  name. The restricted definition of the term "dealer"  defined in  the Central  Sales Tax Act is not wide enough to cover all kinds of agents such as a broker or a commission agent simpliciter. The term "dealer" defined in the Central  Act, would, however, include a del credre agent or a  mercantile agent who earries on the business of buying or selling  goods not  as an  agent simpliciter on behalf of the disclosed  principal but  as a  principal vis-a-vis  its customers. [855F-H]      Kandula Radhakrishna  Rao and others v. The Province of Madras represented  by the Collector of West Godavari, Eluru

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and another, A.I.R. 1952 Madras 718, approved.      In the  instant case it was the appellant company which carried on  the business  of selling  cement aithough it was acting as  selling agent of the Corporation. The Corporation was not  a dealer  which effectedl  the sales but it was the company which did so.

JUDGMENT:      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. 853      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,  1957- hereinafter 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

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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. 854      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

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              devolving upon  them  as  dealers  under  the                various sales tax Acts and Rules; 855           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. 856      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

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    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 857 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.

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P.B.R.                                     Appeal dismissed. 858