9911796707
TMI Blog1960 (8) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 nP.; and so far as the assessment year 1957-58 is concerned, Rs. 4,17,151-33 nP. has been requested to be excluded for the same reason. The written agreement, which the petitioner asserts to be of agent, is dated 1st June, 1952, but mentions the document to be kerosene sales agreement. It is not disputed that the petitioner's licence under section 9 of the General Sales Tax Act, No. XI of 1125, had been renewed for all the three assessment years, and which section, omitting the unnecessary proviso, reads thus: "Government may, on application and on payment of such fee as may be prescribed in that behalf, license any person under this section who for an agreed commission or brokerage buys or sells on behalf of known principals specified in his accounts in respect of each transaction and may exempt from the tax or the taxes payable under section 3 such of his transactions as are carried out in accordance with the terms and conditions of his licence." "Provided also that the burden of proving that a transaction is exempt, by virtue of this section, from the tax or taxes payable under section 3, shall be on the licensee." The assessing authority had disallowed all the claims for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from levying and collecting sales tax on the disputed turnover on account of the fact that a licence under section 9 of the Sales Tax Act was granted to the petitioner?" "(3) Is the order of the Sales Tax Appellate Tribunal, Kerala, Trivandrum, in the above matter, sustainable in view of the failure of the Tribunal to decide the question of law?" It is clear that, should we answer the first question in the petitioner's favour, a finding would be necessary on whether he has observed the terms of his licence under section 9; for, it is not disputed that to obtain the benefit under the section, a dealer must not only show his being an agent, but also having observed the terms of the licence. In these circumstances, the cases have to be remanded; and adjudications of the other questions become unneccessary. Nor it should be disputed that, should the petitioner be really a purchaser, any erroneous view earlier entertained by the taxing department when renewing the licences would not preclude the State from cancelling them, after it had been correctly apprised of the correct position. The decisive issue in these revision petitions, therefore, is whether the agreement, on a fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on termination of the agreement, must be settled. Such are the positions of the parties during the agreement; and after the termination, their rights and liabilities are as follows: Under clause 31 the company is given the option to use the premises used by the petitioner; by clause 34 not only the properties of the company are to be surrendered, but the stock of the kerosene already purchased should also be given up and the price, if paid, to be repaid. Finally, clause 36 directs the petitioner, during the continuance of the agreement, to furnish security for the due performance of the obligations he had undertaken under the agreement. It is clear that to hold this agreement to be one of sale only, would be to pay inadequate attention to certain provisions of the agreement. Taking some of such clauses seriatim, the company is, by clause 2, given the right to notity in writing the minimum quantity of kerosene which the petitioner must order each month, and further the right to require his maintaining at all such times such minimum stock of kerosene as the company may notify. The ordinary rule of contract being formed on the acceptance of the offer being communicated is, by cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e oil is to be sold to the public within the area; and by clause 19 the company can not only insure all its property or equipment stored with, loaned to, or rented by the petitioner, but can also insure all kerosene sold to the petitioner against loss by fire, and that, not only during the transit, but even when in the petitioner's possession, provided the kerosene be in the warehouses, that are put up by the company. We do not see how the company can have insurable interest in the property sold to another and undertake to bear insurance expenses, unless it be that the company really is the principal. We find clauses 25 and 26 requiring accounts to be kept of daily sales, not only cash, but of credit; and these accounts are to be made available for inspection by the authorised representatives of the company. Finally, clause 34 requires the petitioner to deliver, on termination of the agreement, not only what are the company's property, but kerosene as well; and what has been paid for, shall be treated as repurchased by the company at the original price, less the discount and deductions. Having weighed these with the other provisions in the agreement, it is clear that the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase from the owner at a discount, and which he could not sell below retail price, or a dealer under taking to order, for a customer, goods which he does not have in stock, is a mere agent." The case relied in support of the first of the two propositions lastly stated, is Willcox Gibbs Sewing Machine Co. v. Ewing35 Law Ed. p. 782, at p. 815. There, the plaintiff was, by contract, appointed exclusive vendor of defendant's machines, which he was to purchase from defendant at a large discount, and could not sell below the regular retail prices. In such circumstances he was held to be mere agent of the defendant to sell the machines, and the principal to have a right to determine or revoke the authority at his own mere pleasure, when not otherwise agreed between them. The learned judge observes as follows: "It is true that the machines he undertook to sell were to be purchased by him from the company at a large discount. But he could not sell them by retail below the regular retail prices. This arrangement was the mode adopted to protect the company's interests, and to secure to the plaintiff such compensation for his services as would induce him to devote his time, attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be exempt from sales tax in respect of such of his transactions as are carried out in accordance with the terms of section 8 and the licence issued thereunder." In Radhakrishna Rao v. The Province of Madras[1952] 3 S.T.C. 121. , the Full Bench has described who is a commission agent, and has shown him to be a person, who has control over or possession of the goods, and to have the authority from the owner of the goods to pass the property in and title to the goods. In these circumstances, it was held that 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, and such a business can properly be described as a business of selling goods. The learned Judges further held that similar position would arise even in the case of a commission agent buying for an undisclosed principal, and such a person would be liable to sales tax under section 3, but would be exempted under section 8. Coming to Singarajanahalli Krista Reddi v. State of Madras[1953] 4 S.T.C. 379., it was found that under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held the transaction under the following circumstances to be of sale. A dealer in bidies, appointed an agent in U.P., who had to sell the goods at prices fixed under the agreement. The agent was entitled to a commission, but had to submit account of stock received and sold and the balance on hand at the end of every month. There was further no responsibility for any shortage in transit or liability to receive any unsold stock, if the agreement be terminated. In these circumstances, the real effect of the transactions was held to be sales within the meaning of section 2(g), Explanation II of the State Act. We would respectfully disagree, should the learned Judges be considered as having taken the view in the case that a person is not an agent, because at certain points in dealings with his principal, he becomes vested with the ownership. We think that where vesting of ownership in the agent is to sell the goods of the principal, the earlier transfer would be incidental to the main purpose of making the person an agent, and would not convert the transaction into one of sale. The learned Government Pleader next relied on Rohtas Industries Ltd. v. State of Bihar[1958] 9 S.T.C. 248 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the sales of the kerosene effected by the petitioner. Then the area, in which the petitioner has to operate, is fixed by the company; the storing is with the facilities afforded by the company; and on termination of the agreement what remains must be given up. On these grounds we hold that the true position of the petitioner is not that of a purchaser but of an agent, which is further emphasised by the requirement of keeping and rendering accounts. It is true that the assessee is not to put himself as an agent, but such secret direction by the principal would not affect the rights of a stranger. We, therefore, feel that the Appellate Tribunal has wrongly interpreted the agreement to be of sale. The position of the petitioner, being an agent, is further strengthened by his having taken licence under section 9 of the Sales Tax Act, and the assessing authorities as well as the Appellate Tribunal have erred in not deciding what are the terms of the licence. Indeed, we have not been able to find what the licence in 1952 contains though it is clear that the subsequent years extended what was then granted. It follows that the petitioner would become entitled to exemption on his sales o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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