1. The appellants are an advertising firm. They receive orders for the advertisements of their clients in newspapers and other journals, and where a picture is to appear in the publication of any advertisement they have to entrust the work of making the blocks to a different firm, to which they give orders for the blocks required, giving particulars of their kind and size and also giving the names of the clients. They leave the details of the bill to be submitted blank, which, after being filled in by the block-making firm, is returned to the appellants, wherein the charge is made or shown ."less discount 15 percent." They receive a similar discount from the newspaper or other journals and recover the amounts of the bills, without showing the discounts received by them, from their clients, In this case we are concerned with the subject of the blocks which are got prepared and utilised by the newspapers or other journals concerned. The view taken by the authorities below is that the blocks are actually purchased by the appellants and again sold to their clients and that on such sales the sales tax can legitimately be charged, and the tax has been charged accordingly. In support of those orders Shri Kabe has relied on Sections 211,213, 216, 217 and 218 of the Indian Contract Act, and argued that it cannot be said that there was any relation of principal and agent between the clients and the appellants. It is, however, to be seen that the appellants informed the clients of the rates charged by the different newspapers and journals stating that the said rates were subject to changes at any time and that they did not cover typesetting, artwork, blocks, stereos, mats, packing, postage, etc., and that in the form in which the above is stated there is a column in the following form : "We approve this estimate and hereby authorise you to contract and release advertisements on our behalf". This statement is signed by the clients of the appellants. In our opinion, this document constitutes the appellants, the clients' agents for getting the advertisements printed in the newspapers or journals concerned, and as the clients' names are clearly disclosed in the order given by the appellants to the block-makers, the contract with the block-makers would not be a contract falling within any of the classes mentioned in the second paragraph of Section 230 of the Indian Contract Act, 1872, so that the appellants, the agents, would not be "personally bound" by the contract as regards the block-making. In this view the statement made in the order of the Collector of Sales Tax that the "mention of the clients' names by applicants in the form of order placed with the block engraver (Exhibit C) is of no significance whatsoever to the block engraver" appears to us to be clearly erroneous. The view held by the. Collector that there is privity of contract for the manufacture and sale of materials between the block engravers and the appellants is also, therefore, erroneous. It cannot, therefore, be held, as held by the Collector, that what takes place between the block-makers and the appellants is a sale of the blocks by the appellants to their clients.
When the principal is known, as in this case he is known to the block-makers, there is prima facie no contract with the agent, although when the principal is not known, then prima Jade the agent, though known to be an agent, does not bind himself personally, the other party not being presumed to give credit exclusively to an unknown principal.
(Pollock on Contracts, Twelfth Edition, page 80). Here the agent, by contracting with the block-makers in such a form as made it appears on the face of the contract that he was contracting as an agent and not for himself as principal, can be held to exempt himself from liability under the contract.
2. The circumstances under which the transactions in question were entered into have been stated at length by the appellants in their application to the Collector, which was under Section 19 of the Bombay Sales Tax Act of 1946 and Section 27 of the Bombay Sales Tax Act, 1953, for determination whether the appellants were dealers within the meaning of the Bombay Sales Tax Acts of 1946 and 1953, and other questions arising therefrom. These circumstances have not been denied by the Collector and may be said to set out "the custom which prevails" in the business which is done by the appellants within the meaning of Section 211 of the Indian Contract Act, which deals with the agent's duty in conducting the principal's business. We have no doubt that though the appellants have received the commission of 15%, that must be regarded as the agent's brokerage and cannot be held to constitute the appellants as purchasers and vendors of the blocks in question. It is to be rioted that the clients make no payments to the appellants for the work undertaken by them apart from the said commission, which they give the appellants a chance of earning in their business. It is also to be noted that the blocks in question cannot be sold by the appellants in the market to other customers as the designs for the blocks are approved by the clients exclusively for their own purposes, and would be useless to any other persons. It cannot, therefore, be held that the appellants had such dominion over the blocks, after they are received from the custody of the block-makers, as a purchaser would have, because even if it can be said that the blocks were purchased by the appellants, it must be held that they were purchased not on their own account, but on their clients' behalf. In our opinion, our decision in Umeschandra Hariprasad v. The State of Bombay (1953) 3 Bom. S.T.T.S.D. 25 applies to the facts of this case. Similarly, in Bhogilal Kuberdas v. The State of Bombay (1954) 3 Bom. S.T.T. S.D. 91, it was held that the appellant in that case had not been shown to have been a buyer or a seller of any goods in which he dealt and that he was not, therefore, a dealer as defined under the Act. We, accordingly, hold that the decisions of the authorities below cannot be allowed to stand, as the mere fact of the receipt of the commission of 15% from the block-makers cannot be construed to mean that they either purchase the blocks or sell them as principals to their clients. The appeal is, therefore, allowed and the orders of the authorities below are set aside.