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TMI Blog1981 (7) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal ultimately held, agreeing with the assessee's contention, that the turnover in question constituted sales in the course of export and hence not liable for sales tax. The matter was then taken up by the State Government in revision before this Court. There, a Bench of this Court, after some consideration, remanded the case to the Tribunal for a fuller investigation into the facts, with particular reference to the question whether Abdul Shukoor and Company really acted as the agent of the assessee in the transactions of sale to the foreign buyers or whether the transactions were export sales of the assessee's own concern. After remand, the Tribunal went into the question in greater detail. They have since rendered their findings. On the basis of those findings, the Tribunal have come to the conclusion that the turnover in question represented sales, not of Abdul Shukoor and Company, but only of the assessee and those sales were in the course of export to various foreign buyers. In this view, they have held once again that the transactions were not liable to be brought in for sales tax. Undeterred by the findings of the Tribunal for the second time, the State Government have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by the assessee to Abdul Shukoor and Company. The statements of account also showed expenses such as labour charges, packing charges, harbour dues, shipping and carriage expenses, etc., all of which were debited by Abdul Shukoor and Company to the assessee's account. It was further found that even liabilities arising on account of exchange differences, port trust penalties and the like were borne by the assessee. A perusal of the account books of the assessee showed that actual financial entries in regard to these sales were passed in the assessee's accounts only on receipt of the statements of account furnished from time to time by Abdul Shukoor and Company. When the transactions were so recorded, they reflected the sales to the foreign buyers not as sales of Abdul Shukoor and Company, but as the assessee's own sales. The commission paid to Abdul Shukoor and Company alone figures in the accounts in addition to the direct transactions with the foreign buyers. The account books of Abdul Shukoor and Company were also examined by the Tribunal and they showed appropriate contra entries in their books in regard to these transactions, which clearly showed that they were carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bdul Shukoor and Company must be regarded as transactions effected by them as agents for an undisclosed principal. The Tribunal accordingly held that notwithstanding the form in which those transactions were put through by Abdul Shukoor and Company they were really the transactions belonging to the assessee and must be adjudged as such. The learned Government Pleader urged before us that the Tribunal's conclusion is not in accordance with the law. He submitted that when the documents relating to the actual sales in which the foreign buyers were involved were scrutinised, it was seen that the assessee was nowhere in the picture. This, according to the Government Pleader, showed that the transactions must be regarded as (i) sales to Abdul Sukhoor and Company for resale by them as export sales, and (ii) export sales by Abdul Shukoor and Company, after they had acquired the goods, by purchase, from the assessee. The next step in the argument of the learned Government Pleader was to urge that if the sales in the course of export were really those of Abdul Shukoor and Company, then the turnover in question must be brought to tax as representing the sales turnover of the assessee in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into by the agent on his behalf. So far as the other contracting party is concerned, the section enacts that he would have as against the principal the same rights that he would have against the agent, if the agent had been dealing on his own. In other words, the nondisclosure of the principal does not have any effect whatever in the real nature of the contract between the agent and the other contracting party. Section 232 of the Contract Act further provides that where an agent contracts with another party without disclosing his own principal's name, the principal can obtain performance of the contract by the other party only through the agent and subject to the rights and obligation which subsisted between the agent and the other party to the contract. This provision is meant to save the mutual rights and obligations that might be entered into by the agent of the undisclosed principal and the other party to the contract without, at the same time, any detriment to the principal's rights. These being the attributes of the contractual relationship between two parties, one of whom is represented by an agent, who does not disclose his principal's name to the other party there can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment Pleader relied on the following passage in the judgment of V. Ramaswami, J., in the first of the three cases, namely. State of Tamil Nadu v. Shafeeq Ahmed and Co. [1979] 44 STC 263 (Appendix): "If the contention of the assessees is that they were the exporters in fact and any other person was acting only as their agent, the privity of contract between the assessees and the foreign exporter would be established and the assessees themselves could become an exporter. But if the facts were to be that the contract was entered into by the agent on his own right and not as an agent of the assessees, there shall be deemed to be a sale by the assessees to the agent and there would be no privity of contract between the assessees and the foreign buyer and it would amount to a case of sale for export to a local agent." Having regard to the findings of the Tribunal to which we have made reference earlier in this judgment, we think the present case must be brought within the first part of the dictum of Ramaswami, J., namely, that even in cases where there is interposition of an agent for export between the assessee and the foreign buyer, the transactions must be regarded as export sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agency can be rejected by the assessing authorities as unreal. Does it automatically follow therefrom that the assessee must be held to have effected an out and out sale to the person who figures in the accounts as agent? What is more, can we extend the inference farther and hold that the agent, in turn, had effected sales of the same goods in the course of export to the foreign buyers? We think not. At any rate, not in every case. If the role of the agent in the transaction is discredited, that may not, in our judgment, necessarily lead to a legitimate inference in all cases that the agent is an independent individual and the relation between him and the assessee is that of principal, to principal or that of buyer and seller. Denial of agency and ruling it out does not rule out other inferences. It is, for instance, equally possible to draw quite a different inference to the effect that the so-called agent is a mere stooge or a dummy of the assessee, and he has been interposed just to camouflage a direct sale by the assessee to the foreign buyers under the garb of an agency transaction. The impelling motive behind the interposition of an intermediary, such as a commission age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4). Clause (a) deals with a situation where goods are transferred from a principal through his selling agent to the purchaser. In such a case, according to explanation (4), two independent sales or purchases shall be deemed to have taken place. It is, however, clear from this explanation that for adopting the statutory fiction of two independent sales for the purposes of the Act, there must be a transfer of goods from a principal to his selling agent, and again, another transfer from the selling agent to the purchaser. The Supreme Court had had occasion to deal with the implications of this statutory fiction in Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer [1968] 21 STC 312 (SC), the Supreme Court held that the real effect of the third explanation was to impose the tax only where there is a transfer of title to the goods and not where there is a mere contract of agency. The Supreme Court explained that two successive transactions of sale of the same goods can be envisaged under the explanation only if there is, in reality, a transfer of property by the principal to the agent, followed close upon its heels by another transfer of property by the agent, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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