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TMI Blog1982 (9) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ity estimated the sale value of the chemicals so distributed at Rs. 12,42,541.45 and by an order dated 20th August, 1974, this turnover was assessed at 3 per cent. The assessee disputed the assessment of Rs. 12,42,541.45 relating to the import of chemicals and contended before the Appellate Assistant Commissioner that the chemicals were imported by the assessee in its capacity as an agent pursuant to an agreement with the subsidiary concerns and that the transactions are not exigible to tax. The stand taken by the assessee was accepted by the Appellate Assistant Commissioner, who set aside the assessment on the turnover of Rs. 12,42,541.45. In the exercise of suo motu revisional powers under section 34 of the Tamil Nadu General Sales Tax Act, 1959, the Board of Revenue examined the order passed by the Appellate Assistant Commissioner and issued a notice to the assessee to the effect that the transactions of the assessee cannot. be stated to be that of an agent nor can it be said to represent sales in the course of import and that it was, therefore, proposed to set aside the order of the Appellate Assistant Commissioner and restore the order of the assessing authority. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had entered into such agreements. It is also not in dispute that such agreements had existed from 21st September, 1963, onwards and had been periodically renewed. The terms of the agreement dated 1st April, 1970, between the assessee and Nagappa Industrial Trading Corporation have been extracted in the order of the Appellate Assistant Commissioner. Amongst others, the agreement states that the assessee is appointed and retained to act as their agents to promote exports and also to import all kinds of chemicals from the foreign countries on the basis of their export in proportion to the allotment by the Import Control Authorities. The agreement empowers the assessee to enter into contracts in their own name, unless otherwise restricted by the principals. It is also further provided that in the import of goods from the foreign countries, the bills of lading may be taken in the name of the principals or in the name of the agents on behalf of the principals on the distinct understanding that the property in the goods had passed as soon as the shipping documents are negotiated. There is also a provision for the assessee making a claim from the principal in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter, as by the terms of the agreement referred to earlier, the assessee had also acted only in its capacity as the agent of the sister concerns even for the purpose of import entitlements. We have carefully looked into the records and we do not find any material to support the conclusions of the Board that the assessee did not act as the agent of the subsidiary concerns. Indeed, there is no consideration of the true import of the terms of the agreements between the assessee and the sister concerns set out earlier. As seen already, the sales of hides and skins manufactured by the sister concerns to the foreign buyers had been effected through the instrumentality of the assessee, and therefore, the Board was not quite correct in stating that there is no privity of contract between the subsidiary concerns and the foreign buyers. It may be that the agreements between the assessee and the subsidiary concerns was of a general nature, but the existence and the validity of the agreement and its terms cannot be disputed and the terms of the agreement would undoubtedly govern the relationship between the assessee and the sister concerns as agent and principals as well as the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of export, the entire turnover would be exempt. In considering the correctness of this order, the Bench pointed out the distinction between a sale to an agent who later exported and the sale through an agent and directed the Tribunal to analyse each transaction and conclude whether the export sale was by the assessee or by the agent in his own right. At page 264, the Bench observed as follows: " .....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." The aforesaid observations would mean that even a contract entered into by an agent on behalf of a principal, though not disclosed as such, would be deemed to be a sale by the assessees to the agent with the result that there would be no privity established between the assessee and the foreign buyer and in every such case it would also amount to a sale for export to a local agent. We do not see how the mere entering into a contract b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the foreign buyer, and therefore, the export transactions effected by the assessee through his as agent would be exempt from sales tax. This decision thus lays down that even though the agent does not disclose that he his acting on behalf of the principal but purports to act as an agent, there will be a privity of contract between the principal and the foreign purchaser. No doubt, to this extent, there is a departure from the observations referred to earlier in State of Tamil Nadu v. Shafeeq Ahmed Co. [1979] 44 STC 263 (App), but it has already been pointed out that those observations have been rather widely made and the decision in Akhtar Co. v. State of Tamil Nadu [1981] 47 STC 62 would, in our view, affirm that. In addition State of Tamil Nadu v. Rafeeq Ahmed Co. (Tax Case No. 500 of 1977 dated 16th July, 1981, since reported in [1983] 52 STC 281), after referring to Hajee Abdul Khalique Sahib Co. v. State of Tamil Nadu [1979] 44 STC 261, State of Tamil Nadu v. Shafeeq Ahmed Co. [1979] 44 STC 263 (App), and Akhtar Co. v. State of Tamil Nadu [1981] 47 STC 62 lays down the principle as under: "Where an assessee enters into an export sale through the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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." Considering the impact of the observations in State of Tamil Nadu v. A. Shafeeq Ahmed Co. [1979] 44 STC 263 at 264 (App), in the light of explanation (4)(a) to section 2(a) of the Tamil Nadu General Sales Tax Act, Balasubrahmanyan, J., pointed out that there was no fiction or other deeming provision with reference to the treatment of the assessee's transactions as independent sales transactions and that, therefore, the assessing authority or any other body has no power to create a fiction of its own and foist fiscal liabilities on the basis of such fictions. It has already been seen how the observation in State of Tamil Nadu v. A. Shafeeq Ahmed Co. [1979] 44 STC 263 at 264 (App) have been held to be rather widely and broadly stated and the observations extracted above would also supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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