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TMI Blog1968 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... to the agriculturist-principals after appropriating the agent's commission. It is averred that none of the agriculturistprincipals have a turnover exceeding Rs. 10,000 and consequently, under the sales tax law, the agent would not be liable in respect of the transactions entered into on behalf of such principals. Apart from the question as to whether the petitioners would be liable under section 5-A of the Act for additional sales tax on a turnover exceeding Rs. 3 lakhs, which question is concluded by a judgment of this court in W.P. Nos. 748 of 1967 and batch decided on 26th September, 1968*, it is contended Since reported as Addepalli Surya Ramachandra Rao Co. v. The State of Andhra Pradesh and Others [1969] 24 S.T.C. 133. that a Bench of this Court, consisting of one of us (the Chief Justice) and Krishna Rao, J., had held in Irri Veera Raju v. Commercial Tax Officer(1) that the reason why an agent is being assessed is that he is only a convenient representative for assessment, levy and collection of the tax whether he is the agent of a resident or a non-resident principal. That is, the agent's liability is a vicarious liability on behalf of the seller or purchaser as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) when the agriculturist who sells jaggery, which is an agricultural produce, is himself not liable to be taxed, his agent is sought to be made liable in respect of such transactions, virtually treating the goods as though the agent owns them and sells them. This is giving a go-by to the basic principle of representative character on which the agent's liability can be (1) [1967] 20 S.T.C. 501, 509. made to rest; (iii) if the amended section is so construed as to bring about a change in levying a tax in respect of the turnover of the agents, inconsistent with the vicarious basis, then the levy must be held to be illegal, because (a) section 11 of the Act by itself does not impose a tax on the turnover, and since it is only a machinery provision it cannot override the provisions of the charging section, which limits the liability for sales tax in respect of general goods on a turnover of Rs. 10,000 or more, and (b) it makes an inroad on the law of contracts, inasmuch as section 11(2), contrary to the provisions of sections 217 to 233 of the Contract Act, denies the agent the right to reimburse himself from out of the collections or to retain the amounts in his hands towards the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Whenever any person participates (1) [1967] 20 S.T.C. 501. in a transaction which results in a sale, the Legislature is competent to assess, levy and collect tax from such a person. If so, the agent can be made liable if the aggregate of the respective principals is Rs. 10,000 or more, irrespective of the fact that each of the principals may not have been liable on account of the turnover being below the taxable limit; as such section 11, which seeks to impose such a liability cannot be challenged. The contention that section 5, which is the charging section, remains unaffected and the Legislature cannot, by a machinery or collecting provision like section 11, enlarge the liability is countered on the ground that there is no impediment to the Legislature amending the Act in any manner it likes within the ambit of its power. The Legislature is therefore competent to enact, and has in fact enacted, section 11 to impose a tax liability on the agent in the manner specified by it (notwithstanding the charging section) and to that extent the Legislature is deemed to have modified the charging section. To put it simply, the charging section, viz., section 5, should be read with sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions, the Statement of Objects and Reasons with the amending Bill as originally stood and certain proceedings in the Assembly, which have been referred to by the learned Advocates for the petitioners, for a proper understanding of their submissions. The notes on clause 3 state: "The sale of jaggery is liable to multi-point tax at 3 paise per every rupee of turnover under section 5(1) of the Act, with effect from 1st August, 1963. Most of the sales of jaggery are effected by the growermanufacturers (principals) through commission agents. These commission agents are being assessed to tax in lieu of their principals as provided under section 11 of the Act. It has been held by the Andhra Pradesh High Court that the sales at the hands of the agents cannot be subjected to tax on the basis of agents' turnover and that the agents can be taxed on their transactions only where each of the principals concerned has the minimum turnover of Rs. 10,000 per year. As a result, the bulk of revenue by way of tax on the sales of jaggery is being lost. This clause read with clause 1(2) amends section 5 of the Act removing the turnover limit of Rs. 10,000 in respect of a dealer in jaggery with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and (ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern." Section 2(e): "'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes- (i) the Central Government, a State Government, local authority, a company, a Hindu undivided family or any society (including a cooperative society), club, firm or association which carries on such business; (ii) a society (including a co-operative society), club, firm, or association which buys goods from, or sells, supplies, or distributes goods to its members; (iii) a casual trader, as hereinbefore defined; (iv) a commission agent, a broker, a del credere agent, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have taken place- (1) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser, or (2) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid- (i) to have sold the goods at one rate and to have passed on the sale proceeds to his principal at another rate; or (ii) to have purchased the goods at one rate and to have passed them on to his principal at another rate; or (iii) not to have accounted to his principal for the entire collections or deductions made by him, in the sales or purchases effected by him on behalf of his principal; or (iv) to have acted for a fictitious or non-existent principal." Section 5(1): "Every dealer other than a casual trader and an agent of a non-resident dealer, whose total turnover for a year is not less than Rs. 10,000 and every agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year, at the rate of three naye paise on every rupee of his turnover. Every casual trader shall pay a tax at the rate of two naye paise on every rupee of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 'agent' shall have the meaning assigned to the expression 'dealer' in sub-clause (iv) of clause (e) of sub-section (1) of section 2." The history of the amendment as can be ascertained from what too' place in the Assembly before the amendment of section 11 actually became law, shows that originally it was intended to amend only the charging section 5, by adding a proviso making dealers in jaggery retrospectively liable to tax at the rate of 3 paise on every rupee of their turnover irrespective of the quantum of turnover. No exception could therefore have been taken to that amendment if it had been enacted, because it is always open to the Legislature to withdraw an exemption in respect of all or any of the dealers. But subsequently, however, this scheme was given up, and section 11 in the amended form has been enacted. Now, what is it that section 11 is intended to achieve? Sri Ramachandra Reddi contends that inasmuch as the Bench in Irri Veera Raju's case(1) had relied on the words in the definition of dealer in section 2(1)(e)(iv) with particular emphasis on the words "on behalf of any principal" for the conclusion that a commission agent who is transacting business on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent to withhold or reimburse himself has, to that extent, been taken away. What we intend to stress is that the liability of the agent nevertheless continues to be based on the principal of representation, because in the event of the turnover exceeding Rs. 10,000, either the principal or the agent would be liable even in respect of each of the principals; and there is, therefore, no impediment for the agent to reimburse himself or recover or withhold payments from those principals. It may be that legislation such as this might conflict with Article 14 or 19 of the Constitution. But that the Legislature has the competence to enact such a measure under entry 54 of List II is undoubted. We cannot accept the contention of the learned Advocates that there is no element of sale which the Legislature can deal with under entry 54 of List II of Schedule VII when an agent sells goods on behalf of the principal. Whether the impugned section 11 in effect attempts to impose a liability on mere agency business or contracts of agency, which is the subject-matter of entry 7 of the Concurrent List III of Schedule VII, is a question, which if necessary, will have to be considered later. Sri Anan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressly authorised by the owner of the goods to make the same, provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not the authority to sell. This section lays down the general principle that no man can sell goods and pass a good title to them unless he is the owner or someone having his authority or consent, namely, an agent. Notwithstanding this rule, the owner may be estopped from his conduct from setting up his title against the buyer in the circumstances set out in that section. There are five exceptions to this general rule; namely, sale by a mercantile agent under the proviso to section 27, sale by one of the joint owners under section 28, sale by a person in possession under a voidable contract under section 29, sale by one who has already sold the goods but continues in possession thereof under section 30(1) and sale by buyer obtaining possession before the property in the goods has vested in him, under section 30(2). These exceptions are designed to protect persons who deal bona fide with mercantile agents and others mentioned in the exceptions. It may be noted that a mercantile agent can only pass a good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Sales Tax Act and it is only to those dealers, who have the capacity to pass property in goods, that section 11 applies. In other words, according to him, in order to make an agent liable under section 11, he must, whatever be his designation, carry on the business of buying or selling on behalf of a principal or principals. Even this argument could not overlook the fact that the liability of the agent arises only when he acts on behalf of a principal or principals. At one time Sri Ramachandra Reddi seemed to contend that the power to pass property is different from the power to pass title; the former alone is capable of being effected by the agent, while the latter is by the principal. But on further consideration, he did not stress this aspect. We have no doubt that an agent has both the power to pass property as well as title. In fact property in goods means general property or ownership in the goods as distinguished from special property or interest, such as that of a bailee or pledgee. When it is said, therefore, that property in the goods has passed to the buyer, it means that the property ceased to be of the seller and becomes the property of the buyer. In some case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent so as to bring the case within the ambit of the aforesaid entry. Nor, in our view, has the Legislature in amending section 11 gone beyond its competence, because it has only sought to fix the liability on the agent who has the power to effect a sale on behalf of a principal. The principle of representation is, therefore, the corner-stone of the levy of tax on agents. We may point out that the word "agent" though not defined in section 2 has been defined as a dealer by referring to section 2(1)(e)(iv). The result of this discussion, in our view, is that the basis of the liability of the agent as a dealer was, and still is, his representative character; as such, the Legislature in amending section 11 has acted within the ambit of the powers conferred by entry 54 of List II. There, however, remain the other arguments, namely (1) that without amending the charging section 5, by amending section 11, which is a machinery section, tax liability cannot be effectively varied, (2) that purporting to act under entry 54 of List II of Schedule VII, the Legislature has in fact imposed a tax on agency contracts, which subject falls under entry 7 of List III, and (3) that the amendment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes, and direct an enquiry and a discrimination between those which apply and those which do not. The latter cannot aid the charge of super tax, since they do not apply to it." This decision is no authority for the proposition that tax liability cannot be varied by means of a machinery section. The Legislature has power to make amendments of whatever sections it likes and thereby either specifically or by necessary intendment modify the other sections, whether they are charging sections or otherwise. On the second question, we have already held that the exercise of legislative power has intimate connection with the taxing event, and that event is the sale by an agent in his representative capacity. The contention that section 11 imposes a tax on contracts of agency or agency business is not sustainable. No doubt what the Legislature intends by the amendment of section 11 is to withdraw the exemption granted under section 5 in respect of transactions entered into by an agent in his representative capacity on behalf of a principal who is given the benefit of that exemption in respect of the same transaction. It therefore raises a question of discrimination rather than compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transactions entered into by him directly if the turnover is less than Rs. 10,000, but the agent will be taxed irrespective of whether the principal is liable or not. Again if we take the case of a principal whose turnover exceeds Rs. 10,000, the turnover of the agent in respect of the goods sold or purchased on behalf of such a principal is liable and the State can assess either the principal or the agent in respect of that turnover. But when the turnover of the principal is less than Rs. 10,000 the State is authorised to aggregate the turnovers of the several principals and make the agent liable in respect of that turnover as if the agent is independently liable for the business. This contrast itself, ex facie, shows a hostile discrimination which is not reasonable, nor has it any nexus between the classification and the object sought to be achieved. The general principles upon which a classification can be sustained under Article 14 have been authoritatively laid down by their Lordships of the Supreme Court in several cases. In K.T. Moopil Nair v. State of Kerala A.I.R. 1961 S.C. 552., where different kinds of property were subjected to different rates of taxation, it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that provision results in inequality, and has, therefore, to be struck down. However, in so far as the agent's liability which is co-extensive with that of the principal is concerned, section 11 is valid. In view of this, it is unnecessary to consider the further questions either under Article 19(1)(g) of the Constitution or the conflict between the provisions of section 11(2) of the Act and the provisions of the Contract Act. The question raised under Article 176 of the Constitution may still require consideration. Mr. Choudary's contention is that under Article 176, the Governor should himself personally address the Assembly and if he has not done so or has addressed the Assembly through the Speaker, he has not discharged the functions imposed upon him by the Constitution, and consequently the subsequent proceedings of the Assembly are not valid. In support of this contention, he has cited the decisions in Saradhakar v. Orissa Legislative AssemblyA.I.R. 1952 Orissa 234. and Syed Abdul v. West Bengal Legislative AssemblyA.I.R. 1966 Cal. 363. and certain passages from Halsbury's Laws of England (Third Edition, Vol. 7, page 238), and Basu's Constitution of India (5th Edition, Vol. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting Parliament, except in the case of the demise of the Crown." But it is contended that under Article 176(1) of the Constitution of India, the Governor is not permitted to address the Assembly through a representative, as in England. This is sought to be supported by a passage in Basu's Commentary on the Constitution of India (5th Edn., Vol.2) on Article 87 relating to the duty of the President to address both the Houses of Parliament, which is in identical terms with Article 176(1) relating to the duty of the Governor to address the Houses of the Legislature. The author poses this question at page 524 (Vol. 2, 5th Edition): "Since in England it is not obligatory for the Sovereign to read the opening speech in person, a question has been raised in India as to whether the President or a Governor can authorise another person to read his opening speech. The answer should be in the negative." After stating that though the opening speech may embody the policy of the Government the functions conferred by Article 87(1) or 176(1) of our Constitution appear to vest the functions in the President or the Governor (as the case may be) personally and that Article 87(1) is mandatory as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or officer of the State, and therefore that clause must have a limited content, proceeds upon an obvious fallacy. These powers cannot be delegated under Article 258(1) because they are not the powers of the Union, and not because of their special character." This case however does not deal with the question whether the President should address the House personally or that the word "address" has the meaning given to it by the Oxford English Dictionary as "to send any written message to the Assembly", i.e., to write the address, expressly that it may reach and be read by someone. Syed Abdul v. West Bengal Legislative AssemblyA.I.R. 1966 Cal. 363. is no doubt a case in which the Governor was personally present to deliver the speech informing the Legislature of the cause of its summons. But as there was a disturbance created by some members of the Legislature and the Governor was unable to obtain the desired silence, she (the Governor) left the House without completing her address and the same was laid on the table of the House. It may be mentioned that rule 16 of the Rules of Procedure and Conduct of Business (W.B. Legislative Assembly) requires that the Governor should deliver the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attempt to perform that duty but fails to do so, in the prescribed manner, although does so in substance (in the instant case the written text of address being laid on the table of the Assembly) the procedural failure should not be over-emphasised and the duty should not be treated as wholly unperformed with consequences of non-performance following it....The consequence of non-delivery of the whole of the address, by word of the mouth, was not such as rendered the subsequent proceedings inside the Legislative Chamber illegal but merely resulted in procedural irregularity. Such an irregularity cannot be called in question under clause (2) of Article 212....." None the less, it was held that Article 176 is mandatory, and unless the provisions are complied with, that is to say, unless the Governor delivers a speech informing the Legislature of the causes of the summons, the Legislature cannot meet to transact legislative business. It was further stated that if the Legislature meets and transacts legislative business, without the preliminary of an address by the Governor, when required under Article 176, its proceedings are illegal and invalid and may be questioned in a court of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been delivered." In this case as well as in the Calcutta case cited above there was an attempt by the Governor to deliver the address personally, but he was prevented. In those circumstances, it was held that nothing more could have been done, and that at any rate, Article 212(1) of the Constitution came in the way and the proceedings could not be challenged. In State of Punjab v. Satya Pal Dang and OthersCivil Appeal No. 1427 of 1968 dated 30-7-1968, since reported at A.I.R. 1969 S.C. 903., their Lordships of the Supreme Court had recourse to Article 212(1). Hidayatullah, C.J., observed: "This clause [i.e. clause (1) of Article 212] was invoked in respect of a Money Bill in Patna Zilla Truck Owners Association and Others v. State of Bihar and OthersA.I.R. 1963 Pat. 16. following a case of this Court in M/s. Mangalore Ganesh Beedi Works v. The State of Mysore and Another[1963] Supp. (1) S.C.R. 275; 14 S.T.C. 198. We are entitled to rely upon this provision. Our conclusion gets strength from another fact. There is no suggestion even that the Appropriation Bills were not Money Bills or included any matter other than that provided in Article 199 or were not passed by the Assembly. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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