1. This is a reference under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, made by the Board of Revenue at the instance of the assessee M/s. Patram Sitaram of Morena. The question referred to this Court is :
Whether on the facts and circumstances of the case the transactions of the value of Rs. 20,632.10 paise as per details furnished give rise to two taxable events in the hands of the assessee, (i) when the assessee debited the value of purchases in the accounts of the principal, and (ii) when the assessee sold the goods so purchased in and out of Madhya Pradesh according to the instructions of the principal
2. The Board of Revenue had made the reference initially by its order dated 18th September, 1967. However, this Court by its order dated 23rd April, 1970, directed it to make a fresh statement of the case mentioning the relevant facts in detail on the basis of which necessary inferences have to be drawn. In compliance with that order, fresh statement of the case was drawn up by the Board of Revenue by its order dated 2nd September, 1970.
3. The facts of the case as found by the Board of Revenue may be briefly stated thus. The assessee is a registered dealer engaged in the business of purchase and sale of oil-seeds, grains, etc. The assessee also carries on business as a commission agent. For the period 9th November, 1961, to 27th November, 1962, the assessee declared his assessable turnover to be Rs. 599.60. The taxable turnover was determined at Rs. 21,552.36 by the Sales Tax Officer. A tax of Rs. 431.57 was assessed and penalty of Rs. 2 was imposed for late submission of one return. In the appeal filed before the Appellate Assistant Commissioner of Sales Tax, Gwalior, the assessee remained unsuccessful. In the second appeal, the contention raised on behalf of the assessee was that the transactions of the value of Rs. 20,632.10 which were held to be taxable turnover could not be assessed as they did not constitute any sale having been made by the assessee. Admittedly, the assessee had made purchases for Shrilal Babulal of Badi and Vinod Kumar Oil Mills of Agra. The case of the assessee was that when he debited the accounts of these principals with the value of the purchases, no fresh transaction of sale was made as originally he had purchased the oil-seeds on the instructions of these principals.
4. The nature of the disputed transactions in both the cases is similar. The assessee after making the purchase of sarson debited the account of his principals on the very same day exactly for the amount for which the purchases were made by him. These entries were recorded by him in the mal bahi. The assessee debited the accounts of the principals with the respective amounts of purchase and credited the accounts of the persons from whom he had made them. Simultaneously the assessee made payments to the sellers in cash and debited the accounts of the principals in the cash books with those amounts. Subsequently the assessee sent bijaks showing the amount of purchases exactly according to the price which was paid to the sellers and he separately charged amounts showing his remuneration for the services rendered, handling charges and expenses. The copies of the bijaks retained by the assessee were produced by him before the Board of Revenue for the first time and therefore it has been remarked by it that the veracity of the bijaks had not been tested by the sales tax authorities.
The sales tax authorities reached the conclusion that when the assessee debited the account of principals with the respective amounts of purchase, a sale was made by him to the principals on the various occasions. Those entries were recorded and therefore the said entries gave rise to a taxable event in the hands of the assessee.
5. The facts aforesaid are all the facts on record for answering the first question referred to us. Having heard the learned Counsel on both sides, we are of the view that the facts on record lead to a clear inference that the making of debit entries in the accounts of the principals by the assessee in the facts and circumstances of this case did not give rise to a taxable event. It is true that the assessee did not produce or prove the instructions which were given to it by the principals for the purchase of the oil-seeds yet in our opinion from the facts that on the very day when the purchases were made an entry was made debiting the accounts of the principals on the same date and for precisely the same amount which had been paid as purchase money by the assessee clearly goes to show that the assessee was acting under instructions of purchase from the principals. The authority of the assessee to purchase, in our opinion, can properly be inferred from the circumstances proved in the case. In Commissioner of Sales Tax, M.P. v. Nandram Ramkaran 1971 J.L.J. 71, the facts were that the buying agent had purchased the goods in the name of the mills. However, the payment of the price was made by him and debited to the account of the mills and it was credited to the account of the mills when the money was received from the mills. The authority of the assessee to purchase was inferred from these circumstances and it was observed that the Tribunal was justified in coming to the conclusion that the assessee was acting as an agent on behalf of the mills as no circumstances had been brought out by the department which would indicate that the cotton purchased by the assessee was actually not supplied to the mills or that any price came from some source other than the mills. The principle of that decision in our opinion applies squarely to the facts and circumstances of this case.
6. The other significant fact is that the assessee charged his commission which has been shown separately in the bijak account. If the entries which were made in the mal bahi immediately after the assessee had purchased the goods from the sellers represented a fresh sale by him to the principals he would have recorded in the books the price which had been settled between the assessee and the purchasers and it was wholly unnecessary to record in the mal bahi those precise amounts for which he had purchased the goods initially. It is true that the mere fact that the assessee charged commission on the purchases made by him is not conclusive to show that he acted as the purchasing agent, yet in the absence of any other circumstances to indicate that there was a relationship of a pakka adatiya and his constituent between the assessee and the aforesaid two principals, there is no basis to conclude that the assessee had entered into a transaction of sale when the aforesaid entries in the nakal bahi were recorded. In our opinion, the entries in the nakal bahi do not constitute the transaction of sale but furnish evidence of the fact that the assessee had purchased the goods on the instructions of its principals.
7. It is true that with regard to the bijaks it has been observed in the statement of case that their veracity was not tested by the sales tax authorities. However, merely because the veracity of the bijaks was not put to test it cannot be concluded that the bijaks axe not genuine. If the sales tax authorities were not satisfied about the genuineness of the bijaks, they could send for the original bijaks which were sent by the assessee to his principals and if necessary could also record further evidence with a view to find out as to whether the bijaks were genuine or not. It is sufficient to observe that none of the sales tax authorities has found the bijaks produced to be non-genuine.
8. The learned Counsel for the department placed reliance on the decision of their Lordships in Bayyana Bhitnayya and Anr. v. Government of Andhra Pradesh A.I.R. 1961 S.C. 1065, and contended that the principle of the said decision applied to the present case and it should be held that there was a fresh transaction of sale between the assessee and Shrilal Babulal of Badi and Vinod Kumar Oil Mills of Agra when entries showing sale to them were made in the mat bahi. In our opinion, the decision of the Supreme Court does not help the department. The facts of that case were very different. In that case the mills did not accept the third parties as contracting parties but only as agents of the assessees and it was also clear that the third parties had purchased the goods by payment of an extra price. In the instant case the goods have not been sold at an extra price to the two principals. The charging of remuneration for the work done for the principals cannot be equated with the payment of extra price.
9. As regards the second question referred to us, the learned Counsel for the assessee conceded before us and, in our opinion, rightly, that when the assessee sold the purchased goods in and out of Madhya Pradesh according to the statement of the principals, it gave rise to a taxable event in the hands of the assessee. It cannot be disputed that the transactions were sales and the assessee was a dealer within the meaning of the definition given in Section 2(d) of the Act and therefore these transactions could be assessed when made by the assessee.
10. On the conclusions reached, we answer the two questions referred to us in this way:--
(1) On the facts and circumstances of the case the transactions of the value of Rs. 20,632.10 paise as per details furnished did not give rise to a taxable event in the hands of the assessee when the assessee debited the value of the purchases in the account of the principal, and
(2) On the facts and circumstances of the case the transactions of the value of Rs. 20,632.10 paise as per details furnished gave rise to a taxable event when the assessee sold the goods so purchased in and out of Madhya Pradesh according to the instructions of the principal.
11. As one of the questions referred to us has been answered in favour of the assessee and the other against it, we would leave the parties to bear their own costs.