Somnath Iyer, J.
1. In this revision petition presented under section 23(1) of the Mysore Sales Tax Act, 1957, the Cement Marketing Company of India, Limited, which is the agent of the State Trading Corporation of India, Limited, for the sale of cement produced by the Associated Cement Companies, Limited, calls in question, the inclusion of a sum of Rs. 1,22,989.90 paise in the taxable turnover for the period between 20th February, 1961, and 31st March, 1961, relating to sales of cement within the State of Mysore. Its inclusion was opposed by the petitioner on the ground that rule 6(5)(f)(ii) of the Mysore Sales Tax Rules, 1957, provides for its exclusion.
2. The Associated Cement Companies, Limited, which will be referred to as 'the producer' produced the cement which was sold. The State Trading Corporation of India, Limited, which purchased that cement from the producer will be referred to as 'the Corporation'. The petitioner who sold the cement as the local agent of the Corporation will be referred to as 'the dealer'.
3. It is undisputed that under the Cement Control Order, 1958, promulgated by the Government of India, under the provisions of section 18(G) of the Industries Development and Regulation Act, 1951 (Act 65 of 1951), the producer was under a duty to sell the entire quantity of cement held in stock by it on the date of the commencement of the Order and also the entire quantity of cement which might be produced during a period of three years from the date of the commencement of that Order, only to the Corporation. The Cement Control Order contains provisions about the price at which the producer shall sell the cement to the Corporation. The Schedule to that Order enumerated those prices.
4. There was an amendment to this Order in the year 1961 intituled the Second Cement Control Amendment Order by which an elucidation was made in regard to the price which could be recovered by the producer for the packed cement and the price which could be recovered for the cement in its loose condition.
5. During the period with which we are concerned in this revision petition, the Cement Control Order as amended by the Second Amendment Order was operating and in consequence the price payable by the Corporation to the producer was the price stated in the amending Order.
6. It is to be gathered from the orders made by the Commercial Tax Officer and by the Deputy Commissioner and the Sales Tax Appellate Tribunal which confirmed the assessment order made by the Commercial Tax Officer that the turnover related to sales of cement purchased by the Corporation from the producer and sold to the consumers in the State of Mysore through the dealer who was the selling agent of the Corporation.
7. During the assessment proceedings, the dealer contended that a sum of Rs. 1,22,989.90 represented the packing charges incurred in respect of the cement sold in that way and the dealer asked for the exclusion of that amount from the turnover under rule 6(5)(f)(ii) of the Mysore Sales Tax Rules, 1957, which will be referred to as 'the Rules' and the relevant part of which reads :
'6. Determination of total and taxable turnovers. - (1) Save as provided in sub-rule (2) the total turnover of a dealer for the purposes of these rules shall be the total amount paid or payable to the dealer as the consideration for the sale, supply or distribution of any goods sold, supplied or distributed by him.
* * * (5) In determining the taxable turnover the amount specified in clauses (a) to (k) shall, subject to the condition specified therein, be deducted from the total taxable turnover of a dealer :-
* * * (f) all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold :
(ii) charges for packing and delivery and other such like services.'
8. It was asserted by the dealer that the sum of Rs. 1,22,989.90 represented the packing charges incurred for packing the cement in suitable containers before it was despatched by the producer from Shahabad. That these packing charges represented the charges for services rendered for the consumer by the dealer and had to be excluded from the taxable turnover was the contention maintained before the Commercial Tax Officer who repelled it on the ground that no such service was rendered by the dealer for the consumer. The view taken by the Commercial tax Officer was that since the producer did the packing and not the dealer and since the dealer sold the cement in packed containers the packing charges did not fall within rule 6(5)(f)(ii) of the Rules.
9. The Deputy Commissioner to whom the dealer appealed, concurred in that view and the Sales Tax Appellate Tribunal to whom there was a further appeal dismissed it. So this revision petition.
10. For the dealer it is contended by Mr. Ullal that the finding recorded by the Commercial Tax Officer and in the two appeals that no service was rendered by the dealer for the consumer, overlooks the provisions of the Cement Control Order and the amendment made to it in the year 1961. It is also urged that the fact that the producer attended to the packing operations for which the Corporation paid the producer did not justify the view that no service was rendered by the dealer who was the agent of the Corporation for the consumer.
11. It is undisputed that before the cement left the factory of the producer and when it was despatched on its sale by the producer to the Corporation, certain quantities of cement were put into containers and packed and for the service rendered by the producer in that way the Corporation incurred an expenditure of Rs. 1,22,989.90. The Commercial Tax Officer did not doubt that that expenditure was incurred nor did any one else doubt it.
12. It was asserted by the dealer that the producer put the cement into the containers which were packed at the request and on behalf of the Corporation and that the services rendered in that behalf by the producer were rendered on behalf of the Corporation for the consumer. No finding was recorded by any of the three tribunals which dealt with this matter that that was not how the packing was done. The only finding recorded by them was that the producer was not an agent of the Corporation under the provisions of the Cement Control Order. What was also stated by them was that since the Corporation purchased cement which had been packed in that way and the services which had to be rendered in regard to the packing had been rendered by the producer for the Corporation, no service remained to be rendered in that regard by the Corporation or the dealer who was its agent for the consumer.
13. The Commercial Tax Officer found it possible to say in the course of his assessment order that the producer did not pack the cement on behalf of the Corporation. The Deputy Commissioner and the Sales Tax Appellate Tribunal said nothing on that matter. All that they stated was that the producer was not the agent of the Corporation. All the three tribunals found it possible to say that the Corporation purchased packed cement from the producer and that fact made it impossible for the dealer to contend that the packing charges were incurred or expended for the purpose of rendering a service for the consumer.
14. The Commercial Tax Officer did not, however, state in the course of his order the materials on which he founded his conclusion that the producer did not do the packing on behalf of the Corporation. It appears to us that when all the three tribunals addressed themselves to the question whether the producer was the agent of the Corporation, they misdirected themselves into thinking that in order to earn the deduction for which rule 6(5)(f)(ii) provides, it was necessary for the dealer to establish an agency in that way between the Corporation and the producer. The crucial and the cardinal question which had to be decided by the three tribunals was not whether the producer was the agent of the Corporation, but whether the packing which was made by the producer before the cement was despatched by the producer, was done for the purpose of rendering any service to the consumer such as the service to which rule 6(5)(f)(ii) alludes.
15. We should now discuss the meaning of rule 6(5)(f)(ii) of the Rules. Sub-rule (1) of that rule says that in a case to which sub-rule (2) does not apply, the total taxable turnover of a dealer is the consideration for the sale and the goods supplied or distributed. To this provision, there is an exception which emerges from sub-rule (5)(f). That clause says that in computing the taxable turnover, the freight and the charges for packing and delivering and other such like services shall be excluded where such freight and charges are specified and charged for by the dealer separately without including them in the price of the goods sold. What is perfectly manifest is that the freight and the charges to which the sub-clause of that clause refers can be excluded from the taxable turnover only when the two conditions specified in that clause exist. The first is that the amounts, to be deducted, should not be described as part of the price of the goods sold. They should be specified and charged independently to demonstrate that they do not form part of the price. Although the clause does not say so in express language, what is clear is that the freight and the charges can be excluded only when the freight is paid and the charges for packing and delivery and like services are incurred in the context of a sale which has relevance to the computation of the turnover. In other words, the principle which the clause incorporates is that the turnover is the value of the goods and not the value of the services.
16. We are concerned in this case with the question whether the packing charges of which the deduction was claimed by the dealer, represented charges for services rendered to the consumer in the context of the sale of the cement made by the dealer to the consumer. It we could say that they represent the charges for such service, the dealer is obviously entitled to the benefit of the deduction for which rule 6(5)(f)(ii) provides, otherwise not.
17. To understand the course of business which was carried on by the dealer, it would be necessary to advert to the relevant provisions of the Cement Control Order, 1958. Clause 2 of that Order which contains the definitions says that the Corporation means the State Trading Corporation of India Private Limited. Sub-clause (c) of that clause says that the word 'producer' means any person who manufactures cement. It the Schedule to the Order the Associated Cement Companies Ltd., to whom we have referred as the producer in the course of this order, is one of the producers defined by clause 2(c) of the Order.
18. Clause 3 directs that every producer shall sell the cement held in stock or produced during a period of three years from the date of the commencement of the Order, only to the Corporation, and, it further provides that the cement so sold by the producer to the Corporation shall be delivered to such person or persons as may be specified by the Corporation in this behalf from time to time. The relevant part of that clause reads :
'3(1) Every producer shall sell
(a) the entire quantity of cement held in stock by him on the date of commencement of this Order; and
(b) the entire quantity of cement which may be produced by him during a period of three years from the date of commencement of this Order, except such quantity as may be mutually agreed upon from time to time between him and the Central Government, to the Corporation, and deliver the same to such person or persons as may be specified by the Corporation in this behalf from time to time. * * * *'
19. Clause 4 forbids the removal of cement from the premises of the producer without the permission of the Central Government. By clause 5 the producer is enjoined to maintain accounts relating to the production of cement in such form as the Central Government may direct. The controlled price of cement is the subject-matter of clause 6. The relevant part of that clause is that the producer shall sell cement at prices specified in the Schedule. There is an explanation to that clause which reads :
'The price fixed in the Schedule is exclusive of -
(i) the excise duty payable by the producer in respect of the cement produced by him; and
(ii) the cost of packing or of containers, if any.'
20. Sub-clause (2) of clause 6 reads :
'The price at which the Corporation may sell cement to any person shall be Rs. 117.50 nP. per ton of packed cement free on rail destination railway station exclusive of State and inter-State sales tax.'
21. There is a proviso to this sub-clause which is :
'Provided further that -
* * * * (ii) in respect of unpacked cement the price referred to in this sub-clause shall be reduced by such maximum amount as may be fixed by the Central Government under sub-clause (4) in respect of new gunny bag packings; **'
22. The clear meaning of these provisions to which we have referred is this : The producer is under an obligation to sell all the cement to which the Cement Control Order refers only to the Corporation. The producer is forbidden from disposing of the cement in any other way or to remove the cement from its premises except with the permission of the Central Government. The price payable by the Corporation to the producer is that specified in the Schedule and the Corporation in its turn is under an obligation to sell the cement to the consumers at the price specified in sub-clause (2) of clause 6. But in cases where unpacked cement is sold by the Corporation, that price undergoes an abatement.
23. But there is one important provision which is to be found in the third clause of this Order which provides that the producer is under an obligation to deliver the cement, which, it is under an obligation to sell to the Corporation, to such person or persons as may be specified by the Corporation in that behalf from time to time.
24. Two matters of importance which emerge in the context of the question which we are called upon to determine in this revision petition are these : The first is that although the producer sells the cement to the Corporation as it is bound to sell, the delivery of the cement has to be made by the producer to the person named by the Corporation from time to time. The second is that there is a controlled price for the packed cement and a smaller price for cement when loose cement is sold by the producer to the Corporation.
25. By an amendment made to the Cement Control Order on 17th February, 1961, the position was inverted. By clause 2 of this amending Order, the controlled price for loose cement was fixed at Rs. 104.60 per metric tonne which was the price payable to the Corporation when it sold it to its consumers. By the third explanation to this clause, it was provided that where the Corporation sold packed cement it could add to that controlled price such amount as might be fixed by the Central Government towards packing charges and the price of containers.
26. Although Mr. Government Pleader contended that we should say on the basis of these provisions of the Cement Control Order that the Corporation, whenever it purchased any cement from the producer, purchased cement which had been packed by the producer, we are clearly of the opinion that this submission is unfounded. Neither the Commercial Tax Officer nor the Deputy Commissioner or the Sales Tax Appellate Tribunal found it possible to say so. Moreover, it is clear from the provisions of the Cement Control Order that the Corporation was at liberty to purchase loose cement or cement in a packed condition, depending upon whether it wished to sell to its consumers either the one or the other. Otherwise, the distinction maintained by the Cement Control Order between the price payable to the Corporation for loose cement as contrasted with that payable for packed cement becomes unmeaning. So, it follows that according to the course of business which was carried on between the producer and the Corporation on the one hand and the Corporation and its consumers on the other, the Corporation would purchase from the producer loose or packed cement according to its requirements. Indeed as pointed out by Mr. Ullal, the learned Advocate for the dealer, the Commercial Tax Officer himself stated this in para. 3 of his order :
'The State Trading Corporation acquires either packed cement or bulk cement as the case may be.'
27. What also emerges from the provisions contained in the Cement Control Order is that the Corporation in its turn sells packed cement to those who require it and unpacked cement to those who want it. What again is clear is that the Corporation as provided by clause 3(1)(b) of the Cement Control Order, directs the producer to deliver the cement so purchased by it, to the person named by it. It is plain that the person to be named by the Corporation in that way and to whom the producer has the duty to deliver the cement, is the person to whom the Corporation sells the cement after they have purchased it from the producer.
28. When the Corporation purchased the cement from the producer, the price which it paid to the producer is that specified in the Schedule to the Cement Control Order, and when in its turn it sold the cement to its consumer, it sold it at the rates specified in clause 6(2) of the Order before 17th February, 1961, when the cement was sold in a packed condition. It was also under a duty to sell loose cement at a lower price after deducting from the price specified in that clause the amount by which it had to be reduced as directed by the Central Government under sub-clause (4) in respect of packing charges and the cost of containers.
29. The position after the Cement Control Order was amended on 17th February, 1961, was that when cement was sold in a loose condition by the Corporation to its consumers, the price payable by the consumer was that specified in clause 2 of the amending Order, namely, Rs. 104.60 nP. for each metric tonne, and where the cement sold by the Corporation is packed cement, the Corporation could recover from the consumer the packing charges and the cost of the containers as provided by the third explanation to that clause.
30. From clause 3 of the Cement Control Order, it is reasonable to infer that the Corporation normally in the context of the sale by it to its consumers would direct the producer to deliver the cement so sold to its consumers, either in a packed condition or in an unpacked condition and the producer would despatch the cement accordingly. It is also clear that the despatch by the producer would be to the consumer named by the Corporation.
31. If that be the course of business carried on by the Corporation with respect to the sales made by it, it becomes indisputable that when the cement is packed by the producer, as undoubtedly it was done in the case before us during the period with which we are concerned, such packing would be made by the producer at the request of the Corporation in the context of a sale by the Corporation to its own consumers. It would not be reasonable to think that even without there being a consumer to whom the Corporation had agreed to sell the cement, the Corporation would quite unnecessarily require the producer to load the cement into containers and pack them. Likewise, it is obvious that when the producer is asked by the Corporation to despatch cement in a loose condition without packing it in containers, it does so because the consumer to whom the Corporation has agreed to sell or sold the cement wants it in that condition.
32. The many provisions contained in the Cement Control Order such as the power of the Corporation to direct delivery to the person named by the Corporation, the specification of a smaller controlled price for sale to those who want it in a loose condition as contrasted with the higher controlled price fixed by the Order for sale of packed cement, and the fact that the producer sends the cement either in a packed condition or in a loose condition as the case may be when the Corporation asks it to do so, are all circumstances from which the conclusion becomes irresistible that the packing is done by the producer only when the Corporation asks the producer to do so for the consumer.
33. Mr. Government Pleader, however, urged that even if the Corporation asked the producer to load the cement into containers and pack it in them for delivery to a consumer who wishes to purchase the cement in that condition, the packing done by the producer is a service rendered only for the Corporation and not for the consumer. We do not agree. The argument advanced by Mr. Government Pleader is obviously founded on the view taken by the three tribunals below which seem to think that unless the Corporation itself does the packing, the service is not for the consumer but for the Corporation and does not fall within rule 6(5)(f)(ii) of the Rules. This view taken by the tribunals is to our mind artificial and unconvincing. A service may be rendered by a dealer the value of which could be deducted under rule 6(5)(f)(ii) not only when the service is rendered by himself but also when it is rendered for the consumer by some on through whom the dealer renders such service. It is not necessary that in all cases the dealer himself should render such service personally. A service for the consumer which otherwise falls within rule 6(5)(f)(ii) is service which is relevant for that sub-clause provided it is done for the consumer in the context of a sale whomsoever may be the person through whom such service is got rendered.
34. That being the position, the fact that the producer was asked by the Corporation in the context of a sale by the Corporation to its consumers, to pack the cement in a particular way and to despatch the same to them, can lead to the only conclusion that the packing charges constituted the value of services rendered for the consumer.
35. What we have said so far displaces the correctness of the supposition made by the tribunals below that the Corporation purchased cement from the producer in a packed condition and that the packing done by the producer was a service rendered by the producer for the Corporation as contended by Mr. Government Pleader and as supposed by the three tribunals below.
36. We are of the opinion that the cement purchased by the Corporation is packed by the producer only when the Corporation after having made the purchase asks the producer to do the packing for the consumer to whom the Corporation has sold or is about to sell it. That being the position the view taken by the Commercial Tax Officer, the Deputy Commissioner and the Sales Tax Appellate Tribunal that the dealer was not entitled to the deduction claimed by him cannot be supported and is opposed to the plain provisions of the Cement Control Order as it was in force on 17th February, 1961, from which nothing is easier than to understand clearly the course of dealing in regard to the sale of cement by the producer to the Corporation and by the Corporation to its consumers. This, however, was entirely missed by the three tribunals below.
37. Mr. Government Pleader, However, urged that it was not the case of the dealer at any stage that the packing of the cement was done by the producer for the consumer, but that the stand taken by the dealer was that whether or not the packing was done for the consumer, so long as the packing charges were stated and specified separately in the bill as not forming part of the price, the dealer was entitled to a deduction to that extent. In support of this submission, Mr. Government Pleader asked attention to that part of the assessment order of the Commercial Tax Officer in which he summarised that contention which was urged on behalf of the dealer. Mr. Government Pleader is right in asking us to say that that was one of the contentions. But it is clear that that was only one of the contentions urged by the dealer and the argument of the Government Pleader misses the other contention which was summarised for the Commercial Tax Officer in the following way in para 1 of his order :
'Without prejudice to the above contention, it is urged that the packing of the cement is done by the Associated Cement Companies Ltd. on behalf of the State Trading Corporation and whatever services are required in packing the cement, are rendered by the Associated Cement Companies Ltd. on behalf of the State Trading Corporation.'
38. The clear meaning of this contention is that the producer rendered the service on behalf of the Corporation for the consumer, and so the argument that that contention was not urged before the Commercial Tax Officer is unavailable.
39. We therefore allow this revision petition and modify the orders made by the Deputy Commissioner and the Sales Tax Appellate Tribunal.
40. We hold that the petitioner was entitled to the deduction of the sum of Rs. 1,24,156.95, which represented the packing charges, under the provisions of rule 6(5)(f)(ii) of the Rules. The Commercial Tax Officer will now modify his assessment accordingly and if the tax attributable to this amount has been paid, it will be refunded.
41. The petitioner is entitled to the cost of this revision petition. Advocate's fee Rs. 100.
Ahmed Ali Khan, J.
42. I agree.
43. Petition allowed.