M.C. Desai, C.J.
1. This is a reference made by the Judge (Revisions), Sales Tax, under Section 11(1) of the U.P. Sales Tax Act, at the instance of the assessees, inviting this Court's answers to the following questions :
(1) Whether the assessees are dealers within the meaning of the explanation to the definition of 'dealer' as given in Section 2(c) of the U.P. Sales Tax Act ?
(2) Whether the explanation is ultra vires of the Legislature ?
(3) Whether the assessees are not agents of ex-U.P. principals ?
(4) Whether the sales were inter-State sales under Article 286 of the Constitution of India ?
(5) Whether Tulai charges formed part of the selling price ?
2. The connected reference is at the instance of another assessee and the questions raised are the same. In both cases we are concerned with the assessment year 1951-52. The assessees have been assessed to sales tax on proceeds of sales of two kinds, (1) sales of own goods as dealers and (2) sales of goods belonging to other persons residing outside Uttar Pradesh, i.e., non-resident dealers, as their commission agents. The liabilities of the assessees to the sales tax on the turnover of sales of the first kind are not in dispute. What is disputed is their liability to pay sales tax on the turnover of the sales effected as commission agents. They obtain these goods from ex-U.P. dealers and sell them on commission in Uttar Pradesh. They remit the sale price of the goods to the ex-U.P. dealers and charge their commission on it from the buyers in Uttar Pradesh. They also charge weighing dues from the buyers and appropriate them to themselves. The main question raised is whether they are dealers with regard to these sales. The definition of 'dealer' in the Sales Tax Act at the time of its enactment in 1948 was :
any person...carrying on the business of buying or selling and supplying goods in the United Provinces whether for commission, remuneration or otherwise
and there was an explanation to the effect:
The agent of a person resident outside the United Provinces who carries on the business of buying or selling or supplying goods in the United Provinces on behalf of such person shall, in respect of such business, be deemed to be a dealer for the purposes of this Act.
3. The question raised before us is to be answered with reference to this definition. Apparently the assessees come within this definition of dealer as they are persons carrying on the business of selling and supplying goods in Uttar Pradesh, even though for commission or remuneration, but it was contended by Sri Raja Ram Agarwal on behalf of the assessees that the definition refers to a person selling own goods, even though for commission or remuneration, and not to a person selling goods belonging to another person as his commission agent. He pleaded that there are three manners in which a person can sell goods not manufactured or produced by him: (1)he buys them and sells them at any price he likes as an ordinary shop-keeper, (2) he buys them and sells them at the cost price and charges the buyer only a commission, and (3) he does not buy them but obtains them from their owner, sells them as an agent and either remits to them the sale price and charges the buyer a commission for own appropriation or deducts his commission from the sale price for own appropriation and remits the balance to them, and that a person selling goods in the first or second manner is covered by the definition and not a person who sells goods in the third manner. There is no difficulty about a person who sells goods in the first manner; he is undisputedly a dealer. There is also no doubt that a person who buys goods from an owner and becomes their owner and then sells them at the price he had bought them plus commission, is a dealer, but the question is whether the words 'whether for commission' mean only such commission. As regards the third manner, it was contended that, since a commission agent is not the owner of the goods, he cannot be said to be selling them, that when he sells them it is really the owner who is selling them through him and that, since he sells them for a price and appropriates his commission worked out at a certain percentage of the price and remits the balance to his principal or charges the buyer commission for own appropriation in addition to the price which is remitted to the owner, he cannot be said to be selling 'for commission'. The words 'whether for commission, remuneration or otherwise' are wide enough to include everything and are used by way of abundant caution. All that is required for a person to come within the definition is that he must carry on the business of selling and supplying goods in Uttar Pradesh. If he is carrying on this business he is a dealer regardless of conditions or terms on which he does the business ; the words 'for commission, remuneration or otherwise' are simply meant to prevent an objection that a person, though carrying on . business of selling and supplying goods in Uttar Pradesh, is not a dealer because of certain conditions or terms. The words far from excluding any person from the definition are intended to prevent any person from being excluded. If the assessees are found to be carrying on the business of selling and supplying goods in Uttar Pradesh they are dealers.
4. The contention that what is intended by the Legislature is that the person must sell his own goods merits serious consideration. That the definition includes a person selling goods for commission does not necessarily indicate that it includes an agent or is not intended to apply exclusively to an owner, if an owner, as stated above, also can sell his goods for commission. If he sells goods in the second manner mentioned above, he sells own goods and for commission. If so, the use of the word 'commission' in the definition does not necessarily mean that it includes an agent.
5. 'Sale' is defined in Section 2(h) to mean 'transfer of property in goods'. If there is transfer of property in goods, they are sold regardless of how the transfer takes place. An owner of goods can certainly transfer his property in them but that is not the only way of transfer of his property. The law allows his property to be transferred by his agent's or servant's etc. act and does not compel him to do the act constituting transfer himself. An act constituting transfer can be authorised by him to be done by another person such as a servant or an agent and if the latter does it, there is a sale. It is an erroneous idea that property in goods can be transferred only by an act of the owner of the property or the goods. It may be that the act done by an agent or a servant constituting transfer of property is imputed to the principal or the master, but the physical act is of the agent or the servant. The Indian Sale of Goods Act explains how property in goods is transferred. Transfer of property means, and cannot be effected unless there are done, certain physical acts, such as making a contract for the sale, putting the goods into a deliverable state, appropriating goods to the contract, delivering goods, paying the price etc. All these acts can be done by the owner or by his agent or servant. There is, therefore, sale even when goods are sold by an agent or a servant. A question may arise-who is the seller, the owner or the agent or the servant; but there is no doubt that there is a sale.
6. A person carrying on the business of selling and supplying goods in Uttar Pradesh is a dealer. As we pointed out in Tika Ram v. Sales Tax Officer Misc. S.T.R. No. 144 of 1958 the words 'in Uttar Pradesh' qualify the verb 'carrying on' and not the verbs 'selling' and 'supplying'; the business should be carried on in Uttar Pradesh and it is not necessary that the act'of selling goods should be done in Uttar Pradesh and that the goods should be supplied in Uttar Pradesh. The essence of the definition of 'dealer' is business and not the act of selling or of supplying goods.
7. The definition does not take into consideration residence of the person carrying on the business. A person can carry on business in Uttar Pradesh and reside in another State ; a person must carry on business in Uttar Pradesh in order that he becomes a dealer and it is not further necessary that he should reside in Uttar Pradesh. Similarly the definition does not take into consideration how the business is carried on, whether by own labour or through an agent or servant. A business can be carried on in either way and if a person carries on business either through own labour or through an agent or servant in Uttar Pradesh, he is a dealer. He becomes a dealer even though he not only resides outside Uttar Pradesh but also does not act for the carrying on of the business. He is a dealer even though he himself does not sell goods. It is to be noted that he becomes a dealer and not the agent or servant who does all the acts required for the carrying on of the business. Even though sales are effected by the agent or servant he does not become a dealer. This would be the position under the definition. But it is subject to the explanation reproduced above. The words 'be deemed to be a dealer' support the conclusion that when an agent carries on a business on behalf of his principal the latter is a dealer according to the definition and not he. The exact scope of the explanation is not clear and probably it is a misnomer to call it an 'explanation'. The proper function of an explanation is to explain and not to add or even alter. If there is something ambiguous in a provision it is made clear through an explanation. But what is done through the explanation in the instant case is to say not that something is included in the definition but that it is to be deemed to be included in it. In other words, but for the explanation it would not have been included in the definition and thus the explanation really adds to it. An agent becomes a dealer by virtue of the explanation. The position is quite clear when a servant of an owner of a business carries it on; nobody would have any difficulty in saying that the owner and not he carries on the business even though all the acts required for carrying it on are done by him. The position of an agent employed by an owner to carry on his business is not different in the eye of law. There is a distinction between a servant and an agent, but it is in respect of matters which have no relevancy to the question who carries on the business, and if in one case it is said that the master carries it on, in the other case also it must be said that the principal carries it on.
8. A person who carries on another person's business as his agent must be distinguished from a person who, in the course of own business, sells, i.e., whose business is to sell, as an agent, goods belonging to another person. In the former case it is the principal who is carrying on the business and not the agent and, therefore, the principal is a dealer (if the explanation did not exist). In the latter case the agent carries on his own business and, therefore, is a dealer and his principal may be another dealer. The test is whose business is carried on, i.e., who is the owner of the business. The explanation applies when the principal is the owner of the business carried on by his agent.
9. When under a definition a person is a dealer but under an explanation to it another person is deemed to be a dealer, it means that the latter is deemed to be a dealer in place of former. Therefore, the effect of the explanation is that a person carrying on the business of a nonresident person as his agent is to be treated as a dealer instead of the latter and not that both are to be dealers. The Legislature clearly intends only one person to be a dealer in respect of one business. When there is only one business carried on by an agent on behalf of its nonresident owner he is to be deemed to be a dealer, i.e., the owner is not to be deemed to be a dealer. It seems that the Legislature found it more convenient to deal with a local person than with a non-resident person and, therefore, enacted the explanation. It could not have intended to tax both the principal and the agent because there was no justification for its taxing in addition to the agent the principal only if he was nonr resident. If a person residing in Uttar Pradesh carries on business through an agent, he remains a dealer notwithstanding the explanation and the agent would not be a dealer at all ; so only he would be liable to be taxed. There was no reason for the Legislature's desiring to tax the agent and also the principal if he is non-resident and, therefore, the explanation meant that the agent was to be a dealer in substitution of the principal. It is not understood why in the explanation the words 'for the purposes of this Act' have been added because all definitions are only 'for the purposes of this Act' ; see the opening words of Section 2. The words are obviously redundant.
10. The words 'in respect of such business' in the explanation are not without significance. If a person carries on businesses (of buying or selling and supplying goods) of two principals as an agent of each and one of them resides outside Uttar Pradesh and the other in Uttar Pradesh, he is a dealer in respect of the business of the former principal and the latter principal will himself be taken to be a dealer. The person is not a dealer in respect of the business carried on by him as an agent of the resident principal.
11. By Act 19 of 1958 another explanation was added to the definition of dealer and it is :
A commission agent or arhati or any other mercantile agent by whatever name called,...who carries on the business of buying or selling goods...on behalf of his principals,...shall be deemed to be a dealer for the purposes of Sections 3-D and 3-E.
12. Since he is 'deemed to be a dealer' and that too only for certain purposes of the Act, it shows that but for the explanation he would not be a dealer. Since the business is of the principal and he carries it on as his agent, the principal would be a dealer and not he. Of course, if the principal resides outside Uttar Pradesh, he would not be a dealer at all and under the original explanation the agent would be deemed to be a dealer for all purposes of the Act.
13. Section 6 provides for a licence being granted to a person, who, for an agreed commission, sells as agent on behalf of a disclosed principal, and for exempting the transactions carried on by him in accordance with the conditions of the licence from being taxed under Section 3. This refers to a person who acts as an agent not for carrying on the principal's business but for selling his goods on commission; he does this in the course of his own business of selling goods. He is a dealer because he carries on his own business of selling goods even though he sells them on commission. While Section 6 might cover the case of a person who buys goods from the principal and sells them on an agreed commission or brokerage, the person who is obviously covered by the section is one who without buying them sells them as goods of the principal. He is a dealer and, therefore, liable to be taxed under Section 3, and Section 6 was enacted to exempt him because the principal would be assessed on the same sales. The section makes it clear that a person who sells another's goods as an agent is a dealer liable to be taxed under Section 3 and that it is wrong to say that a person is not a dealer unless he sells own goods. Second proviso to the section lends further support to this view ; when an agent buys goods from his principal and instead of selling them at the same price and charging commission sells them at a different price, he is to be treated as a dealer and is not to be exempted. The Legislature has distinguished from a dealer, who as an agent sells goods for an agreed commission, a dealer who as an agent sells own goods at his own price; the latter is not to be exempted whereas the former may be.
14. A business may be carried on for commission, remuneration or profits. A manufacturer or producer of goods carries on business for profits. An agent, such as the one exempted under Section 6, carries on business for commission. An agent who buys goods and sells them at a price different from the price at which he purchased them, carries on the business for profits.
15. 'Turnover' is defined to mean the aggregate of proceeds of sale by a dealer. If a dealer transfers property in goods the proceeds of the sale are to be unconditionally included in his turnover. Any question, such as whether he transfers his own property in the goods or somebody else's, is wholly irrelevant. He can transfer another's property in the goods if authorized to do so. I have shown that an agent who sells his principal's goods as his agent in the course of own business is a dealer and sale proceeds of the goods are his turnover. Even if he sells them on commission they are his turnover.
16. The assessees are dealers because they carry on the business of selling goods as agents for commission. All the ingredients that are required for their being dealers are there; if there are certain additional facts, such as that the goods sold are not theirs but of their principal's and that they carry on the business of agency not exclusively on behalf of one principal but on behalf of several principals, they are immaterial and do not detract from their status as dealers. I find nothing in the Act to support Sri Raja Ram Agarwal's suggestion that the explanation to the definition of 'dealer' covers the case of a person who is an agent of only one principal. If a person carries on businesses of two principals I see no reason for saying that he is not a dealer in respect of either.
17. If a person in the course of his own business sells goods belonging to two or more principals, there is no warrant for saying that he is not a dealer. If he was a dealer when he was selling goods of only one principal, he does not cease to be just because he starts selling goods of another principal also.
18. In answer to question No. (1) I would, therefore, say that the assessees are dealers, but under the definition and not the explanation.
Question No. (2)-This question does not arise because the explanation is found to be not applicable to the assessees.
Question No. (3)-They are agents of principals residing outside Uttar Pradesh but for selling their goods in the course of their own business of selling goods on commission and not for carrying on the principals' businesses (of selling goods) in Uttar Pradesh.
Question No. (4)-This question was not pressed and is answered in the negative.
Question No. (5)-It was contended on behalf of the assessees that weighing dues are charged separately from buyers in addition to the price of the goods sold to them and are appropriated by them, that they are for services rendered by them as weighman and not for the goods, that they are realised aforesaid according to the custom of the market without there being any specific agreement in respect of their payment between them and the buyers and that they are not a part of the sale proceeds but in addition to them. The price of the goods is remitted to the principals by the assessees but the weighing dues are retained by them and, therefore, it was contended that they are not proceeds of sale. I do not agree with these contentions. We have to bear in mind that the assessees are dealers and that they have sold goods, even if belonging to their principals, to the buyers and have realized from them not only the price but also the dues. They are dealers and have received the dues from the buyers on account of sale of the goods. The right to the dues accrues from the sale of the goods. In other words, the dues proceed from the sale of the goods and are, therefore, part of the proceeds of sale. The question whether they are proceeds of sale or not is to be ascertained with reference to the moment at which they are received and what they do subsequently to them is of no consequence. Because they split up the receipts, remit one part to the principals and retain the other part, it cannot be said that only the first part forms proceeds of sale. Explanation 1 to the definition of 'turnover' is that proceeds of sale include any sums charged for anything done by the dealer in respect of the goods sold at the time or before the delivery thereof. It furnishes a complete answer to the contention of Sri Raja Ram Agarwal that the dues are for services rendered and that services are not goods. The goods have to be weighed before they are sold and delivered, i.e., for completing their sale, and anything charged for doing so comes within the scope of the explanation. If the services are in respect of the goods and incidental to their being sold, the dues charged for them are to be included in sale proceeds. It is wrong to say that the explanation applies only where an agent charges any sum on behalf of his principal for something done by him in respect of the goods sold; there is no such limitation in the explanation. When we have to consider the turnover of a dealer who is an agent we have to consider only the proceeds of sale made by him and we are not concerned with the question of the terms of contract between him and the principal. If he retains a part of the proceeds of sale on the ground that they are weighing dues and remits the balance to the principal, he does so only because it is permitted under the terms of his contract. Simply by splitting up the proceeds in two parts and remitting one only to the principal he cannot prevent the whole from being proceeds of sale.
19. It has been held in George Oakes v. State of Madras  13 S.T.C. 98, and George Oakes (Private) Ltd. v. State of Madras  12 S.T.C. 476, that a dealer's turnover includes the sales tax realised by him from buyers. Weighing dues are not distinct from sales tax in this respect. Sales tax is realised in addition to the price and for payment to the State; still it is to be included in proceeds of sale and there is no justification for not including weighing dues. The question is, therefore, answered in the affirmative.
20. Copies of this judgment should be sent to the Judge (Revisions), Sales Tax, U.P., and the Commissioner, Sales Tax, U.P., under the seal of the Court and the signature of the Registrar as required by Section 11(6) of the U.P. Sales Tax Act. The assessee should pay to the Commissioner the costs of this reference, which is assessed at Rs. 100.