The Judgment of the Court was delivered by
A.P. Srivastava, J.
1. A joint reference was submitted to this Court under Section 11 of the U.P. Sales Tax Act. It had been made at the request of four firms, Messrs Samad Carpets Ltd., Messrs Mohammad Ayub & Sons, Messrs Mohammad Macki Mohamood Alam and Messrs Reliance Carpet Co. All these four firms belong to Bhadohi, district Banaras, and were traders in carpets. The first named firm supplied carpets to orders placed by Messrs Bowden Carpet Co. Ltd., while the other three firms did the same against orders placed by Sri H. W. Fenoulhet. All the four firms were assessed to sales tax on the basis that they were dealers as defined in the Sales Tax Act and had sold carpets to the persons to whom the carpets had been supplied by them. They raised two objections to the assessment. The first was that they were not dealers as they had not sold the carpets. They claimed to be only manufacturing agents who had manufactured carpets against orders placed with them on a commission basis. The second was that as the carpets had been exported outside India no sales tax was payable. Both these objections were overruled by the Sales Tax Authorities. A request was then made to the Judge (Revisions) Sales Tax that as the questions raised by the assessees were questions of law they should be referred to this Court under Section 11 of the Sales Tax Act. This request was acceded to and the following two questions were referred to this Court:
(1) Whether the assessees were manufacturing agents and not dealers as defined in the U. P. Sales Tax Act ?
(2) Whether on the facts proved, the sales took place in the course of export of the goods out of the territory of India within the meaning of Article 286(1)(b) of the Constitution of India?
2. The reference relating to two of the firms, viz., Messrs Samad Carpets Ltd. and Messrs Mohammad Ayub and Sons became ready for hearing first and were taken up on the 6th of January, 1958. It was then discovered that the referring Judge had not approached the matter from the correct point of view and had not brought on record the materials necessary for the decision of the questions referred to. It was pointed out that:
The real test which would be conclusive on the question whether the assessees had sold the carpets or had only manufactured them as manufacturing agents on commission basis would be to find out in whom the title to the carpets in question vested from the time of their manufacture by the weavers to the time when the railway receipts in respect of them were endorsed in favour of Messrs Fenoulhet and Bowden Carpet Co. Ltd. Sales tax could be charged from the assessees in respect of the carpets only if they had been sold by them and they could be held to have sold them only if the title in the carpets at any stage vested in them and had been transferred by them by the endorsements of the railway receipts.
3. Those two cases were therefore sent back to the revising authority for submitting an additional statement on the point whether the carpets in question had at any time or at any stage belonged to the assessees and if so in what manner and at what stage the title had been transferred by the assessees to the persons on whose behalf they were actually exported out of the country.
4. The additional statement received in those cases showed that so far as the firm Messrs Samad Carpets Ltd., was concerned it had worked only as a manufacturing agent and that the title in the carpets never vested in it at any stage. As regards the other firm Messrs Mohammad Ayub and Sons it was found that the carpets supplied by that firm fell in two categories. Those falling in the first category had been manufactured by the firm as a manufacturing agent and the title in them did not vest in the firm at any stage. Those falling in the second category had been purchased by the firm from the market. In respect of those which had been manufactured by these firms it was held that the firms could not be considered to be dealers and could not be assessed to sales tax as such. The first question so far as it related to those firms and the carpets manufactured by them was therefore answered in their favour. No opinion was expressed in respect of the carpets which had been purchased ready-made and supplied by the firm Mohammad Ayub and Sons, as that was not found included in the reference made to this Court. The second question was left unanswered because it did not arise in view of the answer to the first question.
5. The cases of the two remaining assessees Messrs Mohammad Macki Mahmood Alam and Messrs Reliance Carpet Co., are now before us. Notices were issued to them but no one has appeared on their behalf. We have, however, beared the learned Junior Standing Counsel for the State. On facts the cases of these two assessees have not been shown to be in any way different from the cases of the two assessees in respect of whom the reference has already been answered. Those answers and the principles on which they were based appear to be applicable to the cases of these two assessees also. In their cases too therefore the first question referred to must be answered by saying that in respect of the carpets which they have only manufactured to the order of Mr. Fenoulhet and in respect of which the title never vested in them they could not be considered to be dealers and could not be assessed to sales tax. In connection with the carpets of this kind the second question does not arise and need not be answered. If these firms too have supplied any carpets after purchasing the same from the market we do not express any opinion on the assessability of the transactions because we think they are not covered by the present reference.
6. We answer the reference accordingly. In the circumstances of the case there will be no order as to costs.