1. This is an appeal filed by M/s. D.R. Sambiah against the order of the Deputy Commissioner, Appellate, who disallowed his appeal. Shri K.K. Chander Sekhar, Chartered Accountant, on behalf of the appellant and Sri Ram Manohar, Sales Tax Officer, 3rd Circle, State Representative, appeared before us. Heard their arguments.
2. Among other varieties the appellant is a dealer in silk cloth. He contends before us that he being a second dealer in silk cloth in the State he can be taxed only at the general rate on his turnover of silk cloth and not at the additional rate, as held by the Sales Tax Officer and Deputy Commissioner, Appellate.
3. The only point for consideration by us is whether the appellant is the first dealer in silk cloth in Hyderabad State and is therefore liable to pay the tax at the additional rate, under Rule 7 read with Sub-section (2) of Section 4 of the Hyderabad General Sales Tax Act of 1950.
4. Rule 7 reads as under : "The sale of any of the goods mentioned in Schedule II as referred to in Sub-section (2) of Section 3 and Sub-section (2) of Section 4 shall be subject to the tax specified in the said subsections at the stage of sale by the person who in the State is the first dealer or the casual trader as the case may be in such goods : Provided that the burden of proving that the transaction is not liable to taxation under the' said sub-section shall be on the dealer or the casual trader as the case may be.
Section 4(2) of the Act reads as under: "an additional tax at the rate of six pies in the rupee in I. G. currency on so much of his turnover for the year as is attributable to transactions in goods specified in Schedule II". Item No, 9 of Schedule II reads as under : "Silks including artificial silks and all goods but excluding silk thread and silk woven on handloom costing less than Rs. 6 per yard".
5. It is an admitted fact that the appellant purchases silk cloth from merchants outside the Hyderabad State. But his contention is that he took delivery of the said cloth in Hyderabad State and as such the nonresident seller was the first dealer in the Hyderabad State and he himself (the appellant) was only the second dealer in the State. He relied on V.O. Vakkan and Ors. v. State of Madras  6 S.T.C. 647.
In the first place there is no record to show that the silk cloth was delivered in the Hyderabad State. Even assuming that his contention is correct he will still remain the first dealer in silk cloth as the non-resident merchant is not a "dealer" for the purposes of this Act.
Dealer and non-resident dealer are two separate terms "Dealer" under the Act means a person who is engaged in the business of buying, selling or supplying goods in Hyderabad State, while non-resident dealer is a person who makes purchases and sales in the State but resides outside it. That is why in Section 18 of the Act the agent of a non-resident person is held responsible as a dealer in respect of the business he does in the State, residing therein, on behalf of the non-resident principal.
6. It is evident from this that the physical presence in the State is necessary for being a dealer for the purposes of the Act. The same is held in J.L. Morrison v. Sales Tax Officer and Ors., U.P.  6 S.T.C. 193, namely, that the physical presence of the person in the State is essential if he is to be treated as a dealer for the purposes of the Act.
7. This is further supported by the explanation to the definition of "sale" which excludes for the purposes of the Act, the transfer of property in goods by the non-resident dealer if it is exempt under the provisions of Article 286(2) of the Constitution [vide Section 2(k)], that is to say, if a sale made by a non-resident person cannot be treated as "sale" for the purposes of the Act, then such person cannot be treated as a "dealer" for the purposes thereof. This is also evident from the difference in the context in which the phrase "in the State" is used in Rule 7 and in the definition of ''dealer" in Section 2(d).
In the latter it refers to the buying, selling or supplying of goods, while in the former it refers to the "person" engaged therein.V.O. Vakkan v. State of Madras  6 S.T.C.647 is not applicable in the present case. There the non-resident seller came into the State and executed the contracts of sale and therefore their Lordships of the Madras High Court held him to be a dealer. They also observed that if for executing the contracts of delivering goods a non-resident merchant comes into the State he may not be regarded as a non-resident foreigner. In the case under appeal the non-resident merchant has not visited Hyderabad State for carrying on the business under consideration. We are unable to accept the claims of the appellant that he is not the first dealer in the State in so far as the turnover of silk cloth is concerned. Hence the appeal is dismissed.