N. Kumarayya, J.
1. The short point for determination in these two tax revision cases is, whether the petitioners were liable to tax for the years in question under section 14-A of the Madras General Sales Tax Act (IX of 1939) as agents of non-resident Bombay sellers in respect of sales of cotton textiles by such dealers to the dealers in Andhra State.
2. The facts giving rise to this controversy are few and may be briefly stated. The petitioners, Messrs Gilda Textile Agency with their office at Vijayawada, are the agents for the sale of cotton textiles by Bombay sellers to dealers in Andhra State. They were not assessees before. Consequent upon the inspection of their shop premises and scrutiny of their accounts, the Commercial Tax Officer, Vijayawada, assessed them on a turnover of Rs. 4, 15, 088 in 1954-55 and Rs. 7, 13, 519 in 1955-56 to a tax of Rs. 6, 485-12-3 and Rs. 11, 148-12-0 respectively. The petitioners contended that they were mere indenting agents and their business consisted merely in showing samples of cloth for intending buyers in Andhra State, in booking orders for them on an indent form Exhibit A-1 and sending the same to the Bombay sellers. Thus they merely established privity of contract between the Bombay sellers on one side and Andhra dealers on the other. Approval of these indents was discretionary with the Bombay sellers who is case of acceptance would send the goods by train to the buyers with railway receipts in their own name and signed by them on the reverse. They would send the invoices either through bank or directly to the buyers. The buyers would accordingly make payments before delivery. This, according to the petitioner, was the established mode of dealings between the sellers and the buyers. There were of course of few cases where the buyers on arrival would refuse to take delivery of the goods. In that case the petitioners would take delivery of the same from the railway on behalf of the Bombay sellers, stock them in one of the godowns of the Bombay sellers at Vijayawada and after arranging for fresh buyers and obtaining permission of the Bombay sellers would delivery the goods to these fresh buyers. The petitioners' contention is that even in such cases the final bills used to be issued by the Bombay sellers only. There were also cases where the drafts or cheques are handed over to the petitioners by the buyers in favour of sellers. The petitioners would then merely despatch them to the sellers. In certain other cases railway receipts would be sent by the sellers to the petitioners to do delivered to the parties. The petitioners would in such cases simply deliver them to the parties concerned. If there was any delay in payment by the buyers, the commission of the petitioners being dependent on the price realised by the sellers they would remind the buyers to remit the amounts to the sellers. Of course, the petitioners in no case would themselves collect amounts or even the advances while booking the indent for they were not empowered to do so per the terms of the appointment as agents. Their case therefore is that inasmuch as they were merely indenting agents or brokers in relation to all the abovementioned types of transactions, they do not come within the purview of section 14-A of the Madras General Sales Tax Act. The Commercial Tax Officer, who scrutinised the accounts, found that the petitioners collected the amounts in the shape of cheques and drafts, received the railway receipts, took delivery of the goods and distributed them to the local buyers, collected the money, issued final bill to the purchasers and remitted the amounts so collected to their customers at Bombay. He therefore found them liable to tax under section 14-A of Madras Act IX of 1939.The first Appellate Officer who also scrutinised the account books in the Marwari language found that the appellants were not merely indenting agents. They handled the documents of title to goods. In cases where buyers refused to take delivery of the goods they took delivery of the same from the railway having paid freight, demurrage, cooly charges etc., and used to delivery the goods to the fresh buyers after settling the dispute and even reducing rates in some cases. They also incurred expenses like travelling, telephone, telegram, postage and other incidental charges which were not collected either from the known principals or from the buyers. Further, having regard to the printed forms which showed in bold letters 'Andhra State Sales Tax Extra' and condition No. 7 of the offer from executed between the petitioners and the buyers he was not prepared to believe that the petitioners were merely the indenting agents connecting the local buyers and the sellers.
3. The Sales Tax Appellate Tribunal after taking additional evidence classified the transactions in question into three categories. The first category related to transactions in which the petitioners took delivery of the goods from the railway, stocked them in the godown, found fresh buyers and ultimately delivered the same to the fresh buyers. And these goods formed part of the general mass of the property. As regards these transactions the Tribunal was of the view that they were clearly sales with the State and the petitioners were liable to tax under section 14-A. The second category of cases relate to the goods sold directly by the Bombay dealers to buyers in the State. The part played by the petitioners in these transactions is that besides taking indents they received the railway receipts from the sellers, handed them over to the buyers and sometimes collected the consideration and transmitted the same to the sellers. As regards this, the Tribunal came to the conclusion that by reason of the Sales Tax Laws Validation Act, 1956 (VII of 1956) the transactions were liable to tax in the State. The Tribunal further remarked that the petitioners failed to produce for inspection the correspondence between them and the Bombay sellers or the covering letters that must have accompanied the sale bills and railway receipts intended for delivery to the buyers. Having regard to the circumstances of the case they came to the conclusion that the railway receipts which had been sent must have been endorsed by the sellers either in favour of the appellants or in blank to enable the holders thereof to claim the goods from the railway, for, otherwise, according to them, there was no point in sending the railway receipts to the petitioners and not to the buyers themselves. This coupled with condition No. 7 of the indent form in their opinion brought the case of the petitioners clearly within the ambit of section 14-A, making them liable to tax. The third category of cases where the petitioners did not deal with the property nor handled the documents it was held that they were out of the purview of section 14-A and the appeal was allowed to that extent. Aggrieved by this order the petitioners have come in revision to this Court. Sri Venkatesam, learned counsel for the petitioners, argued firstly, that the principals of the petitioners do not come within the definition of dealers in Act IX of 1939. The result is that their agents also cannot be deemed to be dealers within the meaning of section 14-A. The second argument advanced is even assuming that the principals are dealers unless it is proved that they carried on the business of buying or selling goods in the State the case cannot be brought within the purview of section 14-A. The third argument is even if the second point is held against the principals, the petitioners being merely indenting agents other than commission agents cannot be deemed to be dealers within the meaning of the section. The last argument advanced is inasmuch as the sale proceeds were never received by them in the shape of cash in the State, it cannot be said that there is a turnover within the meaning of Act IX of 1939, which is liable to tax. The learned counsel has also made a grievance of reference to G.O. No. 1398 dated 11th May, 1950, by the Appellate Tribunal in their order which he contends has been wrongly relied on for enlarging the operation of section 14-A.
4. Before we deal with the legal points raised we would like to remove first the misapprehension in relation to G.O. No. 1398. That G.O. provides for exemption and not for levy of a tax not sanctioned by the Act. It in terms exempts all kinds of agents, except the mercantile agents, agents who handle goods or documents of title relating to goods or agents for collection or payment of sale price of goods. Thus the word 'agent' used in section 14-A in a broader sense has been narrowed down to those three forms or categories of agents. The Tribunal in its order has in fact considered whether the present case falls within the three categories enumerated in the G.O. as all other case of agency are now irrelevant for purposes of section 14-A, and it gave it finding thereon. Thus the plea raised as to G.O. is without substance. The main arguments advanced by the learned counsel, however, centre round the true interpretation of section 14-A which reads thus :-
'In the case of any person carrying on the business of buying or selling goods in the State but residing outside it (hereinafter 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 agent residing in the State shall be deemed to be the dealer.
(ii) The agent of a non-resident shall be assessed to tax or taxes under this Act at the rate or rates leviable thereunder in respect of the business of such non-resident in which the agent is concerned, irrespective of the amount of the turnover or such business being less than the minimum specified in section 3, sub-section (3).
(iii) Without prejudice to his other rights, any agent of a non-resident who is assessed under this Act in respect of the business of such non-resident may retain out of any moneys payable to the non-resident by the agent, a sum equal to the amount of the tax or taxes assessed on or paid by the agent.
(iv) Where no tax would have been payable by the non-resident in respect of his business in the State by reason of the turnover thereof being less than the minimum specified in section 3, sub-section (3), he shall be entitled to have the amount of the tax or taxes paid by his agent refunded to him on application made to the assessing authority concerned, or where more than one such authority is concerned, to such one of the authorities as may be authorised in this behalf by the State Government by general or special order.
(v) Such application shall be made within 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 thereof.'
5. Obviously this provision makes the Act applicable to a person who carries on business of buying or selling goods in Andhra State though residing outside it. Under sub-section (1) his agent concerned with the business in the State though not a dealer by himself is deemed to be the dealer for purposes of the Act. Sub-section (2) provides the mode and the rate of levy of tax. Sub-section (3), without prejudice to his other rights, gives to the agent who is assessed under the Act for the business of the non-resident a right to retain the moneys of his principal to the extent of the levy imposed or paid by the agent and sub-section (4) virtually gives the benefit of sub-section (3) of section 3 of the Act (IX of 1939) by providing for refund of tax on an application made by the non-resident. Sub-section (5) however prescribes time limit for such applications. Thus according to the scheme of section 14-A it is clear a person living outside but carrying on business of buying or selling in the State cannot escape the liability of payment of tax by reason of his non-residence. In respect of his transaction or transactions in the State his agent concerned residing in the State shall be assessed to tax and he shall pay the same and shall have a right inter alia to retain a sum equal to that amount out of the moneys payable to the principal. The principal, however, is entitled to the benefit of section 3(3) of the Act and can take advantage of the same only if he adopts the procedure prescribed. It is important to note that though the term 'dealer' in section 2(b) of Act IX of 1939 means 'any person who carries on the business of buying, selling, supplying or distribution of goods, directly or otherwise, whether for cash or for deferred payment, or for other valuable consideration and includes amongst others any commission agent, a broker, a del credere agent, 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 disclosed or undisclosed principal'. Section 14-A does not expressly use the terms 'dealer' in relation to a person residing outside the State. What it says is that he should be a person carrying on the business of buying or selling in the State. The cases of supplying or distribution are out of the purview of this section. As regards his agent, the provision says that the respect of such business he shall be deemed to be the dealer for purposes of the Act. This deeming provision implies that though the agent does not come within the definition of dealer, he will be regarded as such with all the attendant consequences by reason of the legal fiction created by this provision. The only condition attached to the application of this fiction is that he should be the agent concerned with such business and residing in the state. The term 'sale' which also is material for our purpose is defined in section 2(h) and means 'Every transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract or in the supply or distribution of goods by a co-operative society, club, firm or any association to its members but does not include a mortgage, hypothecation, charge or pledge'. Similarly the term 'turnover' as defined in the Act is taken to mean 'the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash or deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer whatever be the description, name or object thereof.'Having considered the meaning and implication of section 14-A and also the terms 'sale' and 'turnover' as defined in the Act we advert to the arguments of the learned counsel. As already stated his contention is that the principal is not a dealer and so the petitioners too cannot be deemed to be a dealer. Having regard to the transactions that have admittedly taken place, it is impossible to accept this contention. The learned counsel argues that as the sales were not in fact effected or completed in the State it cannot be said that the non-resident had carried on business here. This argument fails to take into account that the petitioners in cases where the buyers refused to take delivery of the goods themselves took delivery of the same from the railway, stocked them in the godown, later on sold them to fresh buyers and ultimately delivery them to such buyers. All these operations were indeed under the authority or with the consent of the non-resident person for whom the petitioners had acted as his agents in the state. It admits of little controversy that the sales as a result of which the goods were handed over to the fresh buyers had taken place in the State and further there can be hardly any doubt as to the fact that non-resident person carried on the business of sale through his agent in the State. In this way the conclusion of the Tribunal as regards this category of transactions is unimpeachable. The petitioners in relation to these transactions as the agents of the non-resident person are therefore liable to be taxed under section 14-A as though they themselves are dealers.
6. Even as regards the second category of cases, where the goods were sent directly by the Bombay dealers to the buyers' place in the State, the above contention of the learned counsel is unacceptable. No doubt the petitioners here seem to be concerned with the transactions only so far as they have taken the indents, received the railway receipts from the sellers, handed them over to the buyers and sometimes collected the consideration and transmitted the same to the sellers. But the implication of these very acts establish that the sale took place in the State, that the petitioners are the agents concerned in the transaction and that they are not mere indenting agents. The indents which are in the form Exhibit A-1 would show that the contract was actually signed by the petitioners as well. No doubt the indent was subject to the final confirmation of the principals but that is not decisive of the subsequent uttar disconcern of the agent with the transactions as condition No. 7 which is one of the important conditions of Exhibit A-1 reads as below :-
'If the goods relating to the said order form are not taken delivery of by you, you will be held responsible for the losses to be incurred by us due to the demands to be made on us by the Bombay company and steps will be taken by us for realisation of such losses from you.'
7. This condition is pregnant with meaning and gives a clue to certain obligations of the petitioners as against their principals in relation to the transactions thus contracted which falsify the story that the petitioners are only the indenting agents merely establishing a privity of contract between the principals and the buyers. That the petitioners used to receive the railway receipts, collect the consideration, though in the shape of drafts or cheques and hand them over to the sellers furnish further proof of their power to handle title deeds and deal with the goods. In these circumstances their agency cannot be deemed to be one as has been exempted under the G.O. mentioned above. It is further clear that the title over goods passed to the buyer only in the State as the consignment and the railway receipts were in the name of sellers. Though this circumstance has been denied the Tribunal has found that the railway receipts must have been sent either in the name of the seller or in blank to the petitioners so that the seller or his agent may have power and control over the consignment to deal with it according as the buyers had expressed their assent or dissent to the delivery of the goods. This is a natural and logical inference from the nature and conduct of business between the parties as detailed above. The learned counsel however argued that delivery of railway receipts through an agent or bank does not postpone the transfer of ownership in the property till the actual delivery of the goods when the goods have been in pursuance of the contract of sale, selected and delivered to the common carried for transport. We do not think there is must force in this argument. As held in The Bank of Morvi v. Barlein Brothers (A.I.R. 1924 Bom. 325), in order to determine whether the property in the goods passed from the seller to the buyers the real point for consideration would be whether the seller has parted with the control over the disposal of the goods. If he endorses the bill of lading in blank and hands it over to the agent for delivery with instructions that he shall not hand it over until the goods are paid for, that will indicate that the seller had expressed his intention to retain the disposal of the goods under control. In The State of Madras by the Collector, Visakhapatnam v. Messrs Tuppala Peda Venkataramaniah & Sons (1958 9 S.T.C. 54; 1957 2 An. W.R. 378), to which one of use was a party, this question was dealt with more elaborately. In that case the goods were selected, weighed in the presence of the buyers or their agents and despatched in their presence. The invoices were prepared showing the freight, fare and other incidental charges. Some advance was even paid at the spot by the buyers or their agents. The signature of the buyers or their agents was taken in token of the correctness of the entries. The balance of the sale price was even debited to the account of the buyers. But since the railway receipt was taken in the name of the seller and presented through the bank, it was held therein that the sales were completed only where the buyers obtained delivery of the goods by paying the balance of the sale price to the agents of the seller. It was argued therein the section 23 of the Sales of Goods Act had applied to the case. This contention was negatived observing that that section would apply only if there was an unconditional appropriation in the goods to the contract and that the goods were selected, weighed and were delivered to the common carrier for transport are not necessarily indicative of unconditional appropriation. It was further observed that section 25 is the relevant section which concludes the matter for under that section the seller can by the terms of appropriation reserve the right of disposal until certain conditions are fulfilled, that in such cases the goods will not pass to the buyer until the conditions imposed by the seller are fulfilled and that the delivery of goods to a carrier for transmitting them to the buyer by itself would not therefore determine the question of the passing of the ownership in the goods if the seller reserved jus disponendi by taking out the railway receipts which are the documents of title in his own name manifesting his intention to remain the owner and to retain control over the goods till the buyer makes the payment in the bank. In these circumstances it admits of no doubt that the sales of second category too took place or completed in Andhra State. The Tribunal even under the Explanation to clause (1) of Article 286 of the Constitution held that the sales in relation to these goods took place in the Andhra State and found justification for the levy of tax in the Sales Tax Laws Validation Act (VII of 1956) which received the assent of the President on 21st March, 1956. The learned counsel relying on Mahadayal Premchandra v. Commercial Tax Officer (1958 9 S.T.C. 428) has raised a number of pleas to take the case out of the purview of section 14-A. It was argued that having regard to the decision in that case the agent is not liable as he himself did not carry on business of selling goods in the Andhra State. He further argued that as the sale price was not received by the petitioners even though they may be agents it could not be included in the gross turnover of the petitioners. These arguments are in our judgment untenable. The case cited is not on all fours with the case on hand. The facts of that case were altogether different. To show how it is distinguishable it would be sufficient if we refer to some of the passages in that judgment. At page 437 their Lordships observed :-
'The business was, if at all, one of selling goods in Kanpur and despatching them to West Bengal for the purpose of consumption therein. These transactions were, therefore, not covered by the Explanation 3 to section 2(c) of the Act and the appellants could not in respect of such business be deemed to be a 'dealer' within the meaning of that explanation.'
8. At another place on the same page, there appears another passage as below :-
'The only thing which was done in this connection was that the appellants canvassed orders as commission agents of the Mills in West Bengal and forwarded these orders to the Mills, which accepted them and executed the same. The privity of contract was established between the customers on the one hand and the Mills on the other; but, that also could only be on the acceptance of these orders by the Mills in Kanpur.'
9. At page 438 it was further observed :-
'The invoices were all made out in the names of the customers and the relevant documents were negotiated by the Mills with the customers through the Banks. The customers released those documents from the Banks on payment of the relevant drafts and the sale price of the goods was thus received by the Mills through those Banks. At no time whatever was there any handling of the goods or the receipt of the sale price thereof by the appellants in regard to the goods in question and under those circumstances the sale price thereof could not be included in the gross turnover of the appellants ......'
10. These are the various features which distinguish that case from the case on hand. Having regard to the circumstances of this case, as already discussed, it cannot be said that the sales were not completed in this State or that the petitioners were not the agents for the bombay sellers concerning such sales or were not concerned in any other manner than in merely establishing the privity of contract between the Bombay sellers and Andhra buyers in relation to the transaction of sale. In our judgment, the petitioners in relation to the transactions in question come within the ambit of section 14-A and the orders under revision are unassailable.
11. In the result, these petitions fail and are dismissed with costs. Advocate's fee Rs. 250 in each petition.