Chennakesav Reddy, J. - The problem that is primarily presented and debated in detail in these Tax Revision Cases preferred by the Food Corporation of India is whether the Food Corporation of India (hereinafter referred to as the Corporation), which is a corporate body, is a dealer as defined in the Andhra Pradesh General Sales Tax Act, 1957, and the Central Sales Tax Act, 1956. T.R.G. No. 33, 34 and 35 of 1976 relate to the levy of tax under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the State Act), while T.R.G. Nos. 28, 31, 32 and 40 of 1976 relate to the levy of tax under the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act) in respect of the inter-state sales of rice and Milo to other State Governments.
2. The facts are not in dispute and may profitably be made plain at the outset. The Food Corporations Act, 1964, was enacted by the Parliament to provide for the establishment of Food Corporations for the purpose of trading in foodgrains and other foodstuffs and for matters connected therewith and incidental thereto. The Corporation was established with effect from 1-1-1965 under S. 3 of the said Act.
3. During the years 1966-67, 67-68, 68-69 and 70-71 the Corporation conducted inter-state sales of paddy, rice and Milo. The taxing authority treated these transactions as sales and subjected them to tax under the Central Act. The Corporation also distributed fertilisers and pesticides within the State during the years 1968-69, 69-70 and 70-71. The turnover on these transactions was held to be exigible to tax and tax was levied under the State Act in respect of the transactions. The appeals preferred against the orders of the Assessing Authority against the levy of tax under the State Act and the Central Act to the Assistant Commissioner, Commercial Taxes, and later on to the Sales Tax Appellate Tribunal, Hyderabad, were unsuccessful. The Corporation has, therefore filed these tax revision cases.
4. The focus of controversy in these cases centred round the question whether the Corporation is a dealer within the meaning of dealer as defined in the State Act and Central Act. Sri Ananto Babu, the learned counsel for the petitioner, submits that the Corporation has no profit motive, that its operations could not be regarded as sales in the inter-state trade or commerce and that, therefore, the Corporation, is not a dealer as defined in the Central Act. He further submits that the supplies of the foodgrains were only made to different State Governments and that such supplies were not actuated by any profit motive. His further submission was that the Corporation only lent its services to the Government for the distribution of fertilisers and, therefore, cannot be called as dealer or an agent of the dealer within the meaning of the dealer as defined under S. 2(1)(e) of the State Act. On the other hand, the learned Government Pleader maintains that the Corporation conducted transactions as an agent of the Central Government and was, therefore, a dealer within the meaning of S. 2(1)(e)(iv) and the Explanation (1) to S. 2(e) of the State Act. As regards the levy of Central Sales Tax it was further his submission that the Corporation was itself established with a profit motive and that it was established with such a motive is abundantly clear from the preamble and the provisions of the Food Corporations Act, 1964.
5. The answer to this seemingly baffling issue that has gripped the cases must be found from the very definition of dealer as defined in the Acts. It would be, therefore, profitable and necessary to read first the definition of dealer as defined in S. 2(1)(e) of the State Act.
'2(1)(e) dealer means any person who carries on the business of buying, selling, supply or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes -
(i) The Central Government, a State Government, local authority a company a Hindu undivided family or any;
(ii) a society (including a cooperative society), club, firm, or association which buys goods from, or sells, supplies or distributes goods to its members;
(iii) a casual trader, as hereinbefore defined.
(iv) a 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 any principal or principals.
Explanation (1) : Every person who acts as an agent of a non-resident dealer, that is, as an agent on behalf of a dealer residing outside the State and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as -
(i) a mercantile agent as defined in the Indian Sale of Goods Act, 1930 (Central Act III of 1930) or
(ii) an agent for handling goods or documents of title relating to goods, or
(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch of a firm or company situated outside the State, shall be deemed to be a dealer for the purpose of this Act.'
6. The Law of Sales Tax has not stood still in this State. It has been dynamic and ever expanding. The Indian Commercial thought-world is so different from others that it is a problem for the administration to define the taxable transactions although the liable transactions and the persons taxable were precisely defined under the Act, the assessees had raised disputes over the interpretation of these law terms. So extensive changes have been brought about in legislation to clear the ground and widen the coverage, to prevent evasion or avoidance of tax by manipulating the pattern of trade and to bring in all commercial activities exigible to Sales Tax.
7. S. 5 of the State Act which is the charging section impose levy of tax on the dealer. The dealer is assessed to tax. He is the assessee. The Sales Tax Law is concerned with sales or purchases effected by a dealer. The sale should be by a dealer as defined in the Act. It is, therefore, necessary to have proper conception of the term. Now the definition of dealer under S. 2(1)(e) is an inclusive one. The term includes a firm, club, association, State or Central Government, an agent, a broker, an auctioneer or any other mercantile agent, by whatever name called.Under the Explanation, even an agent of a dealer residing outside the State falls within the definition of dealer.
8. Stripped of all embroideries and inessentials the real issue in those cases is whether the Corporation carried on business as an agent of Central Government.
9. Undisputedly, fertilisers were placed at the disposal of the Corporation for distribution by the Government of India and the Corporation disposed them of to private persons. Under the Fertiliser Control Order, the importation and distribution was taken over by the Government of India and the Corporation was an agent of the Government of India through which distribution was effected. Apparently, the Corporation was functioning as an agent of the Central Government for effecting the distribution and supplies of fertilisers. Therefore, the Corporation must be deemed to be a dealer within the meaning of Explanation (1) to S. 2 (1)(e) of the State Act. The turnover of the Corporation relating to the supply and distribution of fertilisers must, therefore, be held to be exigible to Sales Tax under the State Act. A reading of S. 2(1)(e) clearly shows that the Central Government or a State Government, or a local authority is also included within the definition of dealer for the purposes of the Act. Further, under S. 2(1)(e)(iv), an agent who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal or principals is a dealer. Therefore, it must be held that the Corporation is also a dealer withing the meaning of S. 2(1)(e)(iv) of the Act. It would be quite apposite at this stage to refer to some of the relevant authorities referred to by the learned counsel on this traditional issue.
10. In The Joint director of food, Visakhapatnam vs. The State of Andhra Pradesh, the Supreme Court had occasion to consider whether the sales of foodgrains and fertilisers made by the Joint Director of Food appointed by the Central Government stationed at Visakhapatnam to the Andhra Pradesh State were liable to sales tax under the Central Act and the State Act respectively. The Supreme Court held :
'it is well on the agenda of State activity that it carries on trade or business in essential commodities because it has the power to do so because it is obligated to ensure even distribution of vital goods for the needy sections of the people. We see no difficulty in inferring that the systematic activity of buying foodgrains and fertilizers and selling them by the State, 'although in fulfilment of a beneficent national policy is nevertheless trade or business. Necessarily, Government becomes a dealer by definition and carries on business within the meaning of the Central Act and the State Act (Omitting for a moment the distinction in the two definitions based upon the motive to make gain or profit). The conclusion, therefore, is inevitable that the appellant, representing the Central Government, is rightly held to be the assessee.'
11. In Union of India vs. Sri Ladulal Jain, the Supreme Court held that the profit element is not a necessary ingredient of carrying on business, though usually business is carried on for profit. In Kandula Radha Krishna Rao vs. The Province of Madras, Rajamanner, Chief Justice, delivering the opinion of the Full Bench observed that even a commission agent is a dealer within the meaning of the definition of the dealer under the Madras General Sales Tax Act, 1939. The learned Judge observed :
'Neither the definition of dealer nor of sale contemplates as a necessary condition, that the goods sold should belong to the person selling or buying. There can be a sale or purchase on behalf of another.'
12. A similar question fell for consideration before the Kerala High Court in Food Corporation of India, Cochin vs. State of Kerala. The learned Judges held :
'There can be no doubt that the petitioner - Food Corporation of India - was functioning as the agent of the Central Government in effecting the supply and distribution of the fertilisers. Hence by virtue of the terms of the above explanation, the petitioner has to be deemed to be a dealer for the purpose of the Act. For the purpose of the said explanation, the supply or distribution of the goods need not be in the course of business and hence the existence or otherwise of a profit motive is of no material relevance. The Tribunal was, therefore, right in holding that the petitioner was a dealer in respect of the transactions of distribution of fertilisers.'
13. We, have, therefore, no doubt or difficulty in holding that the corporation is an agent of the Central Government selling goods on behalf of the Central Government and is, therefore, a dealer within the meaning of S. 2(1)(e) of the State Act.
14. The learned counsel for the petitioner, however, submits that the petitioner was only a servant of the Government and not an agent and that the Corporation merely receives only service charges as remuneration for the services and so cannot be called as an agent of the Central Government. He contended that the Food Corporation of India was only obeying instruction of the Government and distributing the fertilisers in accordance with the instructions of the master, the Central Government. He relied upon a decision of the Supreme Court in Lakshminarayan Ram Gopal & Sons Ltd. vs. Government of Hyderabad. In that case, the Supreme Court observed :
'The distinction between a servant and an agent is thus indicated in Powells Law of Agency, at page 16 :
(a) Generally a master can tell his servant what to do and how to do it.
(b) Generally a principal cannot tell his agent how to carry out his instructions.
(c) A servant is under more complete control than an agent,' and also at page 20 :
(a) Generally, a servant is a person who not only receives instructions from his master but is subject to his masters right to control the manner in which he carries out those instructions. An agent receives his principals instructions but is generally free to carry out those instructions according to his own discretion.
(b) Generally, a servant, qua servant, has no authority to make contracts on behalf of his master. Generally, the purpose of employing an agent is to authorise him to make contracts on behalf of his principal.
(c) Generally, an agent is paid by commission upon effecting the result which he has been instructed by his principal to achieve. Generally, a servant is paid by wages or salary'
The statement of law contained in Halsburys Laws of England-Hailsham Edition, Vol. 22, page 113, para 192 may be referred to in this connection :
'The difference between the relations of master and servant and of principal and agent may be said to be this : a principal has the right to direct how the work is to be done.'
15. The decision of the Supreme Court in A. Venkata Subbarao vs. State of A.P., may also be of some relevance in this context. There the question was whether the rice millers were agents of the Government or in any event, stood in a fiduciary capacity to the Government, so that the latter had a right to call on them to disgorge any profit they might make in their business of procuring and selling foodgrains over and beyond the remuneration permitted to them by the relevant agreements. The Court observed at page 1785, paragraph 32 :
'No doubt the description in the procurement Order and the agreement as agent is of some value, but is not decisive and one has to gather the real relationship by reference to the entire facts and circumstances. To state with, it is clear that as the purchases were made by the procuring agents out of their own funds, stored at their own cost, the risk of any deterioration, driage of short-fall fell on them, they were the full owners of the paddy procured and they pledged the goods for raising funds. This aspect of their full ownership of the grain purchased is highlighted by the fact that they entered into agreements with the Government itself to sell the rice with them to District Supply Officers at the controlled market prices. Any contention that the procuring agents were not full owners of paddy or rice procured by them must manifestly fail as being inconsistent with the basis upon which this agreement by them to sell to Government was entered into. If further confirmation were needed it is provided by the fact that on the sales by procuring agents to Government under their supply agreement sales tax was payable which on the terms of the Madras General Sales Tax Act in force at the relevant time, would not have been payable if the paddy and rice were that of Government and which they were holding merely as commission agents on behalf of the Government.'
16. Here, as there, the Food Corporation of India is an autonomous body, as already noticed, and the main purpose of the Food Corporation of India as a State Agency was to deal in foodgrains. The Food Corporation of India is a statutory body brought into existence by an Act of the Parliament for the purpose of undertaking trading in foodgrains in a commercial manner in order to effectively implement the Governments policy of ensuring that the primary producer obtains the minimum price that may be announced from time to time and to protect the consumer from the vagaries of speculative trade. The Corporation is the first organised attempt to take up state trading in foodstuffs on an appreciable scale. According to the statement of objects and reasons the Corporation is the state agency and the agency is meant to be used to build up gradually buffer stocks. The statement of objects and reasons further states that the Corporation may it self discharge certain incidental functions as provided for in the Bill in consultation with the Central Government and that the Corporation will be encouraged to function generally as an autonomous organisation working on commercial lines. Thus it is clear that the Corporation is an autonomous State Agency brought into existence for trading in foodgrains in a commercial manner but within the framework of an over-all Government policy. We have, therefore, no option bus to reject the contention of the learned counsel that the Food Corporation of India is only a servant and not an agent of the Central Government.
17. The learned advocate, in so far a levy of Central Sales Tax is concerned, further contends that there is no profit motive in the dealings of the Food Corporation of India and therefore, the Corporation of India and therefore, the Corporation of India is not a dealer within the meaning of S. 2(b) of the Central Sales Tax Act and the transactions of the corporation are not, therefore, exigible to sales tax S. 2(b) of the Central Sales Tax Act, defines a dealer as follows :
'2(b). In this Act, unless the context otherwise requires :-
'dealer' means any person who carries on the business of buying and selling goods, and includes a Government which carries on such business of buying and selling goods, and includes a Government which carries on such business.'
18. The word business is not defined in the Act. But, however, the word turnover is defined under S. 2(j) as : liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in accordance with the provisions of this Act and the Rules made thereunder.'
19. In The Joint Director of Food, Visakhapatnam vs. The State of Andhra Pradesh, the Supreme Court observed :
'..... the ordinary concept of business has the element of gain or profit, whose absence negatives the character of the activity as business in S. 2(b) of the Central Act. A person becomes a dealer only if he carries on business and the Central Government can be designated as 'dealer' only if there is profit-motive .... So far as the State Act is concerned, this question does not arise for the straightforward reason that the definition in S. 2(1) (bbb) of that Act expressly includes within the concept of 'business' any trade or any adventure or concern in the nature of trade or commerce carried on or undertaken whether or not 'with a motive to make gain or profit and whether or not any gain or profit accrues therefrom'. Profit-making in the State Act, it was conceded by the counsel for the Union, was irrelevant in contrast to its pertinence in the Central Act. If this be the correct position in law, it follows that the State Sales Tax Officer is entitled to collect sales tax from the appellant in regard to intra-State sales even assuming that there is no profit motive or profit accrual.The reverse is the case so far as Central sales tax is concerned.
20. What is clearly discernible from this decision is that the Central Government becomes a dealer only when the business carried on by them has the element of gain or profit. A reading of the provisions of the Food Corporations Act, 1964 establishes that the very establishment of the Food Corporation of India was with a profit-motive. The statement of object and reasons of the Act says that it is considered desirable to set up a State Agency for the purpose of undertaking trading in foodgrains in a commercial manner in the interests of increased agricultural production as well as in the interests of the common consumer. The preamble of the Act itself reads that the Food Corporations are established for the purpose of trading in foodgrains and other foodstuffs. The functions of the Food Corporation of India under S. 13 of the Act are to undertake the purchase, storage, movement, transport, distribution and sale of foodgrains and other foodstuffs. In Chapter V dealing with finance, accounts and audit, S. 33 deals with allocation of surplus profits. It enjoins on the Food Corporation to establish a reserve fund to which shall be credited every year such portion of its annual net profits as that corporation thinks fit. The Section further provides that after making such provision for reserve fund and for bad and doubtful debts depreciation in assets etc., the balance of its annual net profit shall be paid, in the case of the Food Corporation of India, to the Central Government and in the case of a State Food Corporation to the Central Government and the Food Corporation of India in the same proportion as the capital provided by them, S. 34 provides that the Food Corporation should maintain proper accounts and other relevant records and prepare an annual statement of accounts including the profit and loss account and the balance sheet in such form as may be prescribed.
21. Rule 19 of the Food Corporation Rules and Regulation prescribes the forms for the balance-sheet in Form A, a Schedule of fixed assets attached to and forming part of the balance-sheet B and a profit and loss account in form C. It is clearly discernable from the several provisions of the Food Corporation Act and the Rules referred to above that the Corporation is a trading concern and was established with the dominant intention to make profit or gain. Therefore, the contention of the learned that there is no profit-motive in the transaction of the Corporation must be rejected.
22. Then there survives the subsidiary contention relating to the levy of Central Sales Tax At 1 1/4 % in respect of inter-State sales of paddy and rice. It is pleaded by the learned counsel for the Corporation that the levy at 1 1/4 % is illegal. Greatest support is sought to be granted for this submission from G.O.Ms. No. 1090, Revenue, dated 20-9-1966. G.O.Ms. 1090, Revenue, dated 20-9-1966 reads as follows :
'In exercise of the powers conferred by sub-S. (5) of S. 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Governor of Andhra Pradesh hereby directs, in a partial modification of the notification issued in G.O.Ms. No. 411, Revenue dated the 29th March, 1966, and published at page 1 of part I of the Andhra Pradesh Gazette, Extraordinary dated the 1st April, 1966, that the tax payable under sub-S. (1) or clause (b) of sub-S. (2) of S. 8 of the said Act by a dealer having his place of business in the State in respect of sales by him from any such place of business, of paddy or rice in the course of inter-State trade or commerce shall be one per cent.
Provided that it is proved by such dealer to the satisfaction of the assessing authority that in the case of paddy, such paddy or in the case of rice such rice (or the paddy which was converted into such rice) was taxed at the rate of five paise per rupee in the case of paddy and six paise in the rupee in the case of rice under the Andhra Pradesh General Sales Tax Act, 1957 (Andhra Pradesh Act VI of 1957).'
23. It is true that this notification provides for the levy of Central Sales Tax on paddy or rice in the course of inter-State trade or commerce at one per cent. But in view of the provisions of sub-S. 2-A of S. 8 and in view of non-obstante clause, 'notwithstanding anything contained in sub-S. (1A)of S. 8', this contention cannot be upheld. Sub-s. 2(a) of S. 8 reads :
'Notwithstanding anything contained in sub-S. (1A) of S. 6 or sub-S. (1) of sub-S. (2) of this Section the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than three per cent whether called a tax of fee or by any other name shall be nil or as the case may be, shall be calculated at the lower rate.'
24. By virtue of this provision contained in sub-S. (2A) of S. 8, the inter-State sales of rice obtained from paddy that suffered from the State Sales Tax Act are liable to tax at 1 1/4 %, the rate of tax at which such sales of rice are taxable under the State Act. The said rate being less than 3%.
25. In the up shot, the tax revision cases are devoid of any substance and they are accordingly dismissed with costs two sets. Advocates fee Rs. 250/-.