1958 (4) TMI 87 - SC - VAT and Sales Tax

Whether the High Court was in error in rejecting the appellant s case that in purchasing the teas in question at the public auction in Calcutta the appellant was acting merely as an agent for his principals in Bombay? Held that - It would thus be clear that unless the appellant had purchased the teas in question as a dealer he was not required to show these transactions in his return at all. The fact that those transactions were included in his return is consistent only with the theory that the appellant purchased the teas as a dealer within the meaning of the Act and is wholly inconsistent with his case that in these transactions he was concerned only as an agent. We are therefore satisfied that the correctness of the finding made by the High Court on the question of appropriation cannot be effectively challenged by the appellant on the materials on record. If the goods were appropriated to the contract by the appellant with the consent and to the knowledge of the Bombay merchant title to the goods clearly passed in favour of the Bombay party. Incidentally the goods sent by the appellant were not the same as the goods originally purchased by him. There has been blending according to the instruction of the Bombay party and that also indicates that the sale of the goods by the appellant to the Bombay party had preceded the blending of several teas which was done under the instructions of the Bombay party on the basis that the title in the goods had already passed to the Bombay party. In that view of the matter section 5(2)(a)(v) of the Act would be wholly inapplicable. Appeal dismissed.

Issues Involved:
1. Whether the appellant acted as an agent or a dealer in the transactions in question.
2. Eligibility for exemption under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of Article 286(1)(b) of the Constitution.
4. Procedural aspects regarding the exhaustion of alternative remedies under the Act.

Issue-wise Detailed Analysis:

1. Agency vs. Dealership:
The appellant argued that he acted as an agent for his principals in Bombay when purchasing teas at public auctions in Calcutta. The Supreme Court found no substance in this argument, noting that the appellant was a registered dealer under the Act and had submitted his tax return as a dealer. The Court observed, "judging the character of the appellant in respect of the transactions in question solely by reference to the return, there could be no doubt that the appellant purports to be a dealer in respect of them and not an agent." The inclusion of these transactions in his return was inconsistent with the claim of agency.

2. Exemption under Section 5(2)(a)(v):
The appellant claimed exemption for sales of goods despatched outside West Bengal. The Court held that this provision applies only to sales where the goods are despatched by or on behalf of the dealer to an address outside West Bengal. It was found that the property in the goods had passed to the Bombay merchants before the goods left West Bengal, making the despatch on behalf of the Bombay parties, not the appellant. The Court noted, "the despatch of the goods outside West Bengal was not on behalf of the appellant but was by and on behalf of the Bombay parties."

3. Applicability of Article 286(1)(b):
The appellant invoked Article 286(1)(b) of the Constitution, arguing that the transactions occurred in the course of export and thus were exempt from tax. The Court referred to its previous rulings in the Travancore cases and the recent State of Mysore case, concluding that the appellant's sales to the Bombay parties did not qualify for exemption under Article 286(1)(b). The Court stated, "what is taxed are the sales made by the appellant in favour of the Bombay party and not the sales made by the Bombay party in favour of outsiders."

4. Procedural Aspects:
The appellant had not fully exhausted the remedies available under the Act, as he did not file a revision application against the appellate order. The Court highlighted the observation by Chakravartti, C.J., that "if the competence of the application for a writ had been challenged in the original Court on this technical ground, speaking for himself, he would have been inclined to consider it more seriously." However, the Supreme Court did not express any opinion on this procedural point.

Separate Judgment:
Civil Appeal No. 665 of 1957, concerning the appellant's turnover for the subsequent year 1950-51, was dismissed on the same grounds as Civil Appeal No. 300 of 1956. The Court declined the appellant's request to send the appeal back to the appellate authority, stating, "If the appellant did not pursue his remedy available under the Act and failed to make an appeal in proper time, we see no reason why we should show him special indulgence."

Conclusion:
The Supreme Court dismissed both appeals, upholding the findings of the lower courts that the appellant acted as a dealer, not an agent, and was not entitled to exemptions under section 5(2)(a)(v) of the Act or Article 286(1)(b) of the Constitution. The procedural lapse of not exhausting alternative remedies under the Act was noted but not decided upon. Appeals were dismissed with costs.

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