Cement company appointed selling agent by State Trading Corporation challenged sales tax liability claiming it was not a 'dealer' under the Central Sales Tax Act. Supreme Court held it effected sales as principal vis-a-vis customers and was a dealer.
Appeal dismissed with costs.
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852
A
r
I 1
BAGAL KOT CEMENT CO.
v.
STATE OF MYSORE
November 27, 1975
B
[P. K. GOSWAMI AND N. L. UNTWAL!A, JJ.]
Cemral Sales 1'ax Act, 1956-S. 2(b)-"dealer" if includes a del credre agent c.nd a mercantile agelll.
By an agreement, the State Trading Corporation appointed the appellant as its selling agent for cement. A term o[ the agreement was that the agent shall collect State or inter-State sales tax on the sale of cement and pay the same in accordance with law. The appellant paid the sales tax on its annual turnc over to me Sales Tax Authorit.ies. Later, however, it filed an appeal stating ~ that it was ncit a dealer and, as such, was not liable to pay any tax, but that was dismissed. Its appeal to the Appellate Tribunal and later revision application before the High Court were dismissed.
•
Dismissing the appeal to this Court,
HELD : (I ) The contention that the appellant being an agent of the State D Trading Corporation, it was not a dealer as defined in s. 2(b) of the Central Sales Tax Act and hence was not liable to pay any sales-tax thereunder has no substance. Having realised the sales-tax from the various customers and voluntarily paid it as per the return submitted it was ill-advised to take an inconsistent stand of its not being liable to pay sales tax under the Central Sales Tax Act. [853F-G]
(2) From a reading of the 1-erms of the agreement it is abundantly clear that sale was made by the appellant-company as it effected transfer of property E in the goods to the customers and 1ea!ised the sale price from them by issuing invoices in its own name. The restricted definition of the term "dealer" in the Central Sales Tax Act is not wide enough to cover all kinds of agents such as a broker or a commission agent simp/iciler. The term "dealer" defined in the Central Act, would, however, include a de/ crcdre agent or a mercantile agent who carries on the busine5' of buying or selling goods not as an agent simpliciter on behalf of the disclos~d princinal hut '" a principal 1·is-a-vis its customers. f855F-H1
F
Ka11d11/a Radhakrisl111a Rao and others v. The Province of Madras represented by the Collector of Wesn Godavari, Eluru mid another, A.I.R. 1952 Madras 718, approved.
In the instant case it was the appellant company which carr :·c,l on the business of selling cement although it was acting as selling agent of the Corporation_ The Corporation was· not a Je<1ler which effccte,\ the 'ales but it wa' the company which did so.
G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 98 of 1971.
Appeal by special leave from the. Judgment. anct. Order dated the 26th February 1970 of the Mysore High Court m S. r.R.P. No. 18 of 1969.
H
D. V. Patel, Vineet Kumar and B. P. Singh for the Appellant.
v. P. Raman, Addi. Sol. General, N. Nettar and R. C. Kaushik for the Respondent.
BAGAL KOT CEMENT co. v. MYSORE (Untwalia, !.) 853
The Judgment of the Court was delivered by
A
UNTWALIA, J. In this appeal by special leave the question for determination is whetl}er the appellant company is a dealer within the meaning of section 2(b) of the Central Sales Tax Act, 1956-hereinafter referred to as the. Central Act, liable to pay sales tax thereunder.
The appellant, Bagal Kot Cement Co. Ltd., is a manufacturer of cement. For the period 1st April, 1961 to 31st March 1962 it filed a Return before the Assessing Authority showing a total turn-over of Rs. 1,11,02,243/-. The entire sum was shown as taxable turn-over on which an amount of Rs. 2,25,317.55 had been 'collected and paid • as tax. No claim was made on behalf of the appellant before the Assessing Authority that it was not liable to pay any sales tax. The Authority accepted the Return and assessed the tax as per the appellant's figure. It appears the appellant was advised there<(fter to file an appeal before the Deputy Commissioner of Commercial Taxes and take the stand that in respect of the transactions in question it was not a dealer and was not liable to pay any tax. The Deputy Commissioner dismissed the appeal. A second appeal filed by the appellant before the Mysore Sales Tax Appellate Tribunal also failed. The company took up the matter in revision to the High Court under 'sectfori 23 of the Mysore Sales Tax Act, 1957-hereinafter called the State Act, read with section 9(2) of the Central Act. The High Court dismissed the revision. Hence this appeal.
Under the Cement Control Orders, 1958 and 1961 the appellant was bound to sell the entire quantity of cement to the State Trading Corporation of India Ltd. By an agreement executed between the parties the Corporation .appointed the Company as its selling agent for sale of cement to different customers on its behalf at the controlled price and in accordance with the instructions which may ·be given from time to time by the Corporation. Pursuant to the agreement the company made the inter-State sales and realized sales tax from the customers under the Central Act. Its contention is that being an agent of the State Trading Corporation and having effected all the sales under its direction it was not.. a dealer as defined in section 2 (b) of the Central Act and hence was not liable to pay any sales tax thereunder. The liability was of the Corporation.
In our opinion there is no substance in the appellant's argument. After having realized the sales tax from the various customers and voluntarily and ex-contractu paid it as per the Return submitted it was ill-advised to take an unsustainable stand of its riot being liable to pay.sales tax under the Central Act.
There cannot be any do11bt that the sales of cement made· during the period in question in the course of inter-State trade were exigible to sales tax under the Central Act. The question for consideration is who was liable to pay it ? The liability was of the dealer as defined in section 2(b). If the appellant company was the dealer which had made the sales as defined in section 2 (g), then the liability to pay the tax under the charging section 6 was its. If it was not a dealer then obviously it was not liable to pay any tax. 13-159SCI/76
B
c
D
E
F
G
H
[1976] 2 S.C.R.
854
SUPREME COURT REPORTS
A To determine the point at issue as mentioned above it is necessary to advert to the primary facts and the course of conduct of the business of the appellant as per the terms of the agreement entered into with the State Trading Corporation. Thy High Court has pointed out that the Deputy Commissioner found :
B
c
The High Court also refers to the fact that the appellant did not place the relevant papers pertaining to the transactions before the authorities below. But its learned counsel conceded that the invoices were issued by the company, that the company had possession and the custody in D the goods and it was authorised to transfer the property of the goods to the purchasers. These facts were not disputed before us. Rather in the special leave petition it is admitted that the invoices were issued by the appellant company in its own name.
We may now refer to some relevant clauses of the agreement between the parties. They are as follows.
E
G
H
BAGAL KOT CEMENT co. v. MYSORE ( Untwalia, J.) 855
A
( e) the Agents remuneration referred to in clause 8 above."
lt would thus be seen from the course of conduct of the appel• fant's business and the terms of agreement that the Company was not a mere commission agent or broker selling the goods on behalf of its principal-the Corporation. There was no privity. of contract betwe~n the various customers of cement and the Corporation. No property m the goods sold was passed by the Corporation to them. After taking the symbolical delivery of the entire. cement produced at the works of the company as per clause ( 1) of the agreement the company was in possession and custody of the goods. It was entering into contracts for sale of cement and selling it. The property in the goods was passed on to the buyers by the company. Under clause (7) it was authorised to collect sales tax both on intra-State and inter-State sales, and to discharge its liability devolving upon it as dealer under the various Sales Tax Acts and Rules. As per clause 13 of the agreement only the difference of price after deducting the company's remuneration was to be credited to the Corporation's account. '
B
C
D
Section 2 (b) of the Central Act reads as follows :
E
" "dealer" means any person who carries on the business of buying or selling goods, and includes a Government which carries on such business;"
"sale" within the meaning of clause (g) means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration. "sale price" under clause (h) means the amount payable to a dealer as consideration for the sale of any goods. On the facts stated above it is abundantly clear that sale was made by the appellant company as it effected tnmsfer of property in the goods to the customers and realized sale price from them by issuing invoices in its own name. The restricted definition of the term 'dealer' in the Ce,ntral Act is not wide enough to cover all kinds of agents such as brokers or a commission agent simplicter as many of the State Acts include them within their definitions. As for example the term 'dealer' defined in section 2(k) of the Mysore State Act includes "a commission agent, a broker or del credere agent or an auctioneer or any other mercantile agent by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal;" The term 'dealer' as defined in the Central Act would, however, include a del credere agent or a mercantile agent who carries on the business of buying or selling goods not as an agent simplicter on behalf of the disclosed principal but as a principal visa-vis its customers.
F
G
H
[1976] 2 S.C.R.
SUPREME COURT REPORTS
856
i j I
A In Halsbury's Laws of England, Fourth Edition, Volume 1, para 712 it is stated :
"A mercantile agent is one having, in the customary course of his business as such agent, authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods. An B agent may be a mercantile agent although he has no general occupation as an agent, or has only one customer, or although his general occupation is that of an independent dealer in the commodity entrusted to him, provided that he acts in the transaction in his capacity as mercantile agent; but he must not be a mere servant or shopman."
In para 713 is stated :
c "A del credere agent is one who, usually for extra remuneration, undertakes to indemnify his employer against loss arising from the failure of persons with whom he contracts to carry out their contracts."
In the judgment under appeal the High Court repelled the stand of D the appellant relying upon the decision of a full Bench of the Madras High Court in Kandula Radhakrishna Rao and others v. The Province of Madras represented by the Collector of West Godavari, Eluru and and another(l). Referring to the identical definition of the 'dealer' in • the Madras Act Rajamannar, C.J. delivering the judgment on behalf of the Bench has stated at page 723 column 2 :
We agree with the above view of the learned Chief Justice.
(1) A.!.R. 1952 Madras, 718.
BAGAL KOT CEMENT co. v. MYSORE ( Untwalia, !. )
85 7
dealer carries on business through an agent (by whatever name called), the place of business of such agent;" Counsel submitted that the above inclusive definition would show that it was the Corporation which was carrying on the business through the appellant company as its agent and for the purpose of the Central Act the place where the business was carried on by the company as the Corporation's agent would be the place of the business of the Corporation. 011 the other hand, learned Additional Solicitor General II pointed out that if the appellant was the dealer within the meaning of section 2 (b) then it was not the Corporation which was carrying on the business through it as an agent to attract the definition given in clause ( dd) . In our judgment it was the appellant company which carried on the business of selling cement although it was acting as selling agents of the Corporation. The Corporation was not the dealer which effected the sales but it was the company which did so.
A
B
c
For the reasons st,ated above, we find no substance in this appeal. It is accordingly dismissed with costs.
P.B.R.
Appeal dismissed.
1 issue framed by the court
Whether a selling agent that transfers property in goods to customers and invoices them in its own name is a 'dealer' under section 2(b) of the Central Sales Tax Act, 1956 liable to pay sales tax.
Colour shows how this judgement treated each authority
4 provisions across 2 enactments
Bagal Kot Cement Co. Ltd.
State of Mysore
P. K. Goswami
N. L. Untwalia
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
