G. Gilda Textile Agency v. State of Andhra Pradesh

HIDAYATULLAH, J.-These two appeals with H idayc,tullah J special leave have been filed hy Messrs. G. Gilda Textile Agency, Vijayawada, against the State of Andhra Pradesh. 'l'hey are directed against a common order of the High Court of Andhra Pradesh in two revisions filed under s. 12-B(l l of the Madras General Sales Tax Act, 1939 (9 of 19:39).

The matter relates to the levy of sales tax from the appellant on its turn-over for the years, 1954-55; and 1955-56. The appel-lant was an agent of several non-resident prin· cipals, on whose behalf it booked orders and dealt with the indents. There were agreements between the non-rtisident principals and the appel-lant, and three such agreements contained in letters have been produced as instances, and are marked Exs. A-3, A-3(a) and A-3(b). Under these agree-menta, the appellant was appointed as indenting agent in Andhra Pradesh for cloth merchants, who, admittedly, resided and carried on business outside Andhra Pradesh. It was required to book orders and to forward them to the principals, receiving commission on sale of goods despatched to Andhra Pradesh. In some cases, this commission was only availabfo on the orders booked by the appellant, and in others, on all the sales effected by the princi-pals in this territory. The appellant did business in three aifferent ways, which have been described aa three separate categories in the case. In the first

2&0 SUPREME OOUR'I' BBPoRTB [1963]

1HJ category, the appellant took delivery of the goods

from the railway, stocked them in it.a own godowne, G,GaM Tutit. fonnd buyers and delivered the goods to the

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v. buyers. Thie category of eales was held to be within si.11 •f fnl'fMri the ,1Jadras General Sa.Jes Tax Act and the appel-

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lant, liable to the tax. The appellant does not qulllltion this part of the decision. The seoond category was in which it merely booked orders and forwarded theII\ to Bombay and the principals sent the goods with the railway receipts through the bank to the purohasers in Andhra Pradesh. The connection of the appellant was not considered Auffioient to constitute it the "dealer", as defined in the Madras General Salee Tax Aot, and suoh sales were omitted from the turnover. No dispute, therefore, arises about this category. The third category related to goods sold by the outside dea-lers to buyers in the St&te. The appellant in these transactions, besides booking orders, received the railway receipts from the outside principal, handed them over to the buyers and sometimes oolleoted and tr&DSmitted the amounts to the out.side princi-pal. The period involved is oovered by the Sales Tr.x Validation Act, 1956 (7 of 1956), and no ques· tion under the Constitution arises. The only ques-tion is whether the appellant comes within s. 14-A of the Madras General Sales Tax Act, and it liable to t&x Act, a.a a dealer.

It may be pointed out that the appellant did I !>«>* produce any correspondence between it and the JICD.lreBident principals Qr the covering letters whioh mmt have been sent along with the railway receipts. The Tribunal under the Madras General Sales Tax Aot, therefore, oame to the conclusion that the railway receipts whioh had been sent, must have been endorsed by the sellers either in favour of the appellant or in blank, to enable the appellant to claim the goods from the railway or to negotiate them. The Tribunal, before, held that the appellant must be deemed to be a "dealer" under s.14-A and 1912 thus liable to tax under that section. IJ. GiJU Talilt Ag111q •• Section 14-A of the Act reads as follows :

Stol<o/A- "In the case of any person carryinl? on Prod.A - the business of buying and sellinl? goods in H i4q)!alallall J the State but residing outside it (hereiuafter in this section referred to as a 'non-resident'), the provisions of this Act shall apply subject to the following modifications and additions, namely:.

(i) In respect of the' business of the non·

resident. his a.gent. residing in the State shall be deemed to be the dealer.

(ii) The agent of anon-resident shall be

assessed to tax or taxes under this Act at the rate or rates leviable thereunder in respect of the busineBS of such non-resident in which the agent is concerned, irrespective of the amount of the turn.Over of such business being less than the mini· mum specified in Section 3, sub-sec· tion (3).

(iii) Without prejudice to his other rights, any agent of a non-resident who is aaseB11ed . under this Act in respect of the busine&11 of such non-resident may retain out of any moneys · payable to the non-resident by the a.gent, a sum equal to the amount of the tax or taxes 888essed on or paid by the agent.

(iv) Where no tax would have been· pay.

able by the non-resident in respeot of this business in the Stat.e ·by rea· llOll of ib.e turnover tboroof'beinf I• 1962 than the minimum specified in Section 3, sub-section (3 ), he shall be entitled Gilda Ttxlilt to have the amount of the tax or

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v. taxes paid by his agent refunded to St•t1 rj Andhra him or application made to the

Pr•dtsh assessing authority concerned, or i<ltJ,atuUch J. where more than one suoh authority is concerned, to such one of the authorities a8 may be authorised in this behalf by the State Government by general or special order.

(v) Suoh a.pplioation shall be made with-in twelve months from the end of the year in which payment was made by or on behalf of the non-resident of the tax or taxes or any part there-of."

Tho section makes the agent liable fictionally as a dealer in the circumstances laid down in the section, viz., that he is acting on bt"half of a non· •-!' residont person doing business of buying or selling I goods in the State. Tho agent is assessed to tax under tho Act in rcspent of tho business of such non-resident in whi<'h the agent is concerned, irrespective of whether the turnover uf such business is more or lcAs than the minimum prescribed in the Act. It is contended that tho first thing to deoide is whether the non-resident could be said to be ...... ....... carrying on the business of selling in And.bra. v Pradesh in the circumstances of this case, and reliance is placed upon a decision of this Court reported in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta (1). In that case, this Court was called upon to consider the Benge.I Fina.nee (Sllles Tax) Act, 1941 (6 of 1941). There also, the agent waa sought to be made liable in respect of tho sSle of goods belonging to a. pop-residept principal under a section which may be 1962 taken to be in pari materia with the section, G. Gilda •• T i!Xliit we are considering. This Court held that the 81411 of Andhta Kanpur Mille, whose agent the. appellant in the case Prade•h was, were not carrying on any busineBB of selling goods in West Bengal and were selling goods in Ridayalullol, J. Kanpur and despatching them to West Bengal for consumption. This part of the judgment is called in aid to show that the first condition of the Iiabi.

lity of the agent, in the present case under the Madras General Sales 'Pax Act is not fulfilled. Un-fortunately for the appellant, in this case there is & clear finding by the High Court that the non-resi-dent principals were carrying on the busineBB of selling in Andhra Pradesh. The High Court has observed that if the non-resident principals took out railway receipts in their own names, thereby manifesting their intention to remain the owners and to retain the control over the goods, the sales must be taken to have been completed or to have taken place in the State of Andhra Pradesh. From this, the High Court came to the conclusion that the non-resident principals were doing business of selling in Andhra Pradesh. The High Court pointed out that inasmuch as the appellant after securing the orders received the railway receipts from the sellers and handed them over to the buyers and sometimes collected the consideration and trans· mitted the same to the sellers, the sales thus resulting must be held to have taken place in the State either on behalf of the appellant or on behalf of the non resident principals, and whichever view Ire correct, the appellant as. agent was liable as a dealer within the Act. Either it was a dealer itself, or it became a dealer. by the fiction created by s. 14-A, ~ince the non-resident principals had done business in each case in the State of Andhra .._, Pradesh. The case of this Court on which reliance

ha.s been placed, turned on its own facts. and a

254 SUPREME OOURT REPORTS [1983]

196t finding there cannot be used in the present case, <Jill• r lldil• because no finding on the facts of one case can be Ag.liq applied to the facts of another.

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Sid• Prwm of An/Mo Sub-section (2) of s. 14-A was said to be connected with the opening part, and it id4J•tullah J. was i;.rgued that the tax was leviable on the

turnover relating to the business of a non-resident, which was carried on by the non-resident in the taxable territory. In our opinion, once the finding is given that the non-resident principal carried on the business of selling in Andhre. Pradesh and the appellant was the admitted a.gent through whom this business was carried on, the rest follows without any difficulty. .The High Court, in our opinion, was, therefore, right i~ upholding the leV"! of the tax from the e.ppelle.nt, m view of our de01-sion that the appellant ·~me within the four cor-ners of s. 14-A in relation to the transactions disclosed in the last category.

The appeals fa.ii, and a.re dismissed with coat.a, ·one hearing fee.

-- Appeal.s dismissed.