Skip to content


Haji P.K. Moidoo Bros. Vs. State of Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberT.R.C. No. 95 of 1956 (M)
Judge
Reported inAIR1959Ker29; [1959]10STC1(Ker)
ActsMadras General Sales Tax Act, 1939 - Sections 2 and 3(1); Sale of Goods Act, 1930 - Sections 4(1), 4(3) and 23(1)
AppellantHaji P.K. Moidoo Bros.
RespondentState of Madras
Appellant Advocate M.K. Nambiar,; K.K. Venugopal,; C.K. Govinda Bhatt a
Respondent Advocate V. Rama Shenoi, Government Pleader
DispositionPetition allowed
Cases ReferredOgg v. Shuter
Excerpt:
sales tax - turnover - sections 2 and 3 (1) of madras general sales tax act, 1939 and sections 4 (1), 4 (3) and 23 (1) of sale of goods act, 1930 - officer issued notice under act of 1939 for including in their assessment alleged turnover of certain amount which according to officer escaped assessment - burden upon department to establish that there was actual sale by one 'm' to petitioners and another sale by petitioners to 'ultimate purchasers' - department had no evidence to show that there were two such sales - from mere fact that these transactions do not find place in petitioner's books of account it cannot be inferred that there were sales by one 'm' and by petitioners in their turn with ultimate purchasers - notice of officer liable to set aside. - - 60,000 and also sent the.....kumara pillai, j.1. for the financial year 1951-52 the petitioners in this case, haji p.k. moidoo bros., a firm doing business at kozhikode, were assessed to sales-tax under the madras general sales tax act by the deputy commercial tax officer, kozhikode, on a net turnover of rs. 11,44,346-15-1. this assessment was made by an order dated 17-3-1953, and from it the petitioners preferred an appeal, appeal no. 31/53-54, to the commercial tax officer, malabar (south). after hearing the appeal and reserving orders thereon, on 27-11-1954 that officer issued to the petitioners a notice under rule 17 (3-a) read with rule 17 (1) of the rules made by the government of madras under the madras general sales tax act, 1939, for including in their assessment an alleged turnover of over six lakhs of.....
Judgment:

Kumara Pillai, J.

1. For the financial year 1951-52 the petitioners in this case, Haji P.K. Moidoo Bros., a firm doing business at Kozhikode, were assessed to sales-tax under the Madras General Sales Tax Act by the Deputy Commercial Tax Officer, Kozhikode, on a net turnover of Rs. 11,44,346-15-1. This assessment was made by an order dated 17-3-1953, and from it the petitioners preferred an appeal, Appeal No. 31/53-54, to the Commercial Tax Officer, Malabar (South). After hearing the appeal and reserving orders thereon, on 27-11-1954 that officer issued to the petitioners a notice under Rule 17 (3-A) read with Rule 17 (1) of the Rules made by the Government of Madras under the Madras General Sales Tax Act, 1939, for including in their assessment an alleged turnover of over six lakhs of rupees which, according to him, had escaped assessment.

This amount is said to be the turnover in respect of certain transactions which the petitioners are alleged to have had with the Madura Sugars and Allied Products Ltd., Pandiarajapuram, a concern which will hereafter be referred to in this judgment as the Madura Mills. The petitioners objected to the proposed revision and enhancement, but after taking evidence and hearing them again, the Commercial Tax Officer held that the petitioners were doing business with the Madura Mills and that a sum of Rs, 6,34,033-12-6, being the turnover in respect of that business, had escaped assessment and they were liable to be taxed on that amount also.

He also held that the original turnover of Rs. 11,44,346-15-1 fixed by the Deputy Commercial Tax Officer had to be reduced by Rs. 69,612-14-10. In pursuance of these findings he revised the petitioners' assessment fixing their assessable turnover at Rs. 17,08,767-12-9 and passed an order accordingly on 30-3-1955. Against the Commercial Tax Officer's order the petitioners filed an appeal, Tribunal Appeal No. 441 of 1955, before the Sales Tax Appellate Tribunal, Madras, complaining, inter alia, without the inclusion of the, amount of Rs. 6,34,033-12-6, the turnover alleged to have escaped assessment.

The Tribunal allowed certain further deductions in the original assessment made by the Deputy Commercial Tax Officer but dismissed the appeal so far as the amount of Rs. 6,34,033-12-6 was concerned. Thereupon, the petitioners have filed this revision petition, and it relates solely to the inclusion of the aforesaid amount of Rs. 6,34,033-12-6 in their assessment which, according to the petitioners, is a wrong and illegal inclusion.

2. There are no entries in the petitioners' books of account relating to this amount of Rs. 6,34,033-12-6. From the order of the Commercial Tax Officer dated 30-3-1955 it would appear that after the petitioners filed their appeal, Appeal No. 31/53-54, he came to know that in 1951-52 they were purchasing sugar from the Madura Mills and selling the same to the extent of Rs. 6,34,033-12-6.

These transactions are said to have started with a telegraphic transfer of Rs. 60,000 made by the petitioners on 17-9-1951 to the Madura Mills through the Central Bank of India Ltd., and received by the Madura Mills on 19-9-1951 and a telegram sent by them to the Mills on 17-9-1951. The petitioners admit that they made the remittance of Rs. 60,000 and also sent the telegram to the Madura Mills on 17-9-1951. That telegram reads :

'Receive sixty thousand Central Hank Maduraiadvance towards three thousand bags sugar wireperfect'.

According to the explanation which the petitioners gave to the Commercial Tax Officer in reply to the notice he issued to them under Rule 17 (5-A) this remittance was not made by them on their own behalf but on behalf of one Chandrasekhara Chettiar, a broker who had entrusted the amount to them for safe custody with a request that it should be sent to the Madura Mills on his behalf as advance for some orders which he had collected from certain dealers, and the telegram of 17-9-1951 and the remittance were sent at his instance and on his behalf.

The suspense account of the Madura Mills, extracts of which are given at page 21 of the typed case-book, would show that between 19-9-1951 and 23-11-1951 (both days inclusive) Madura Mills received in all Rs. 6,15,566-12-6 from P.K. Moidoo Bros, and Chandrasekhara Chettiar and that the said amount was wholly adjusted against the price of goods despatched from the Madura Mills from time to time and costs of transportation of the same.

The accountant of the Madura Mills, examined by the Commercial Tax Officer as a witness on the side of the department, says that the advances were made by the representatives of P.K. Moidoo Bros., Chandrasekhara Chettiar and one P.C. Ummer, and that on their instructions consignments of sugar were sent to different persons from time to time and the prices of those consignments adjusted against the advances. He says further that as and when each advance was received the Madura Mills was setting apart a quantity of sugar worth that amount and it was out of the sugar so set apart that the consignments were sent to the different persons on the instructions of the petitioners' representatives. His evidence on this matter reads :

'Against the advance made by the firm of Haji P. K. Moidoo Bros., equivalent quantity of sugar was set apart and out or that sugar was despatched to some of the persons as instructed by the representatives. Advances were made by the representatives of P.K. Moidoo Bros., Chandrasekhara Chettiar and P.C. Ummer approached us as the representatives of P.K. Moidoo Bros.'

The case of the sales-tax department as put forward before us by the learned Government Pleader is that these transactions amount really to a purchase of sugar worth Rs. 6,15,566-12-6 by the petitioners from the Madura Mills and a sale of the same sugar by the petitioners in their turn to their buyers or constituents and that as the purchases and sales by the petitioners do not find a place in the petitioners' books of account the Commercial Tax Officer has estimated the sale price realised by them including their cost price (Rs. 6,15,566-1-6) and their probable profits at Rs. 6,34,033-12-6 (the profits being estimated as Rs. 18,467, at 3 per cent of the cost price) and the petitioners are liable to pay sales-tax on this amount of Rs. 6,34,033-12-6 on the basis that it is turnover which has escaped assessment at the time of the original assessment made by the Deputy Commercial Tax Officer on 17-3-1953.

3. Although the petitioners had a case before the sales-tax authorities that they had nothing to do with these transactions except for the first remittance of Rs. 60,000 on 17-9-1951, which, according to them, they made purely on behalf of Chandrasekhara Chettiar and not on their own behalf and the transactions were really the transactions of Chandrasekhara Chettiar and P.C. Ummer, this case was not pressed before us by their counsel in view of the concurrent finding of fact by the Commercial Tax Officer and the Sales-tax Appellate Tribunal that Chandrasekhara Chettiar and P.C. Ummer were only the petitioners' employees and' agents and the business done by them was really the business of the petitioners.

Accepting this concurrent finding of fact, Shri M.K. Nambiar, the petitioners' learned counsel, contended before us that there was no purchase of sugar at all by the petitioners from the Madura Mills or a sale of the same by them in their turn to their so-called buyers or constituents (who, for the sake of convenience, will hereafter be referred to in this judgment as the 'ultimate purchasers') and that there was really only one sale in this case, and it was only a sale by the Madura Mills direct to the 'ultimate purchasers'.

According to the learned counsel, there was no intermediate sale:--that is to say, there was no sale by the Madura Mills to the petitioners--and the Madura Mills had sold sugar direct to the 'ultimate purchasers' for the amounts paid as advances on their behalf by Chandrasekhara Chettiar and P. C. Ummer (payments, which, in view of the concurrent finding of the Commercial Tax Officer and the Sales Tax Appellate Tribunal, may be taken as payments made by the petitioners themselves), and as there has been no sale at all by the petitioners they are not liable to pay any sales-tax.

He stated that in respect of the sales effected by the Madura Mills, whether the sales were to the petitioners as alleged by the sales-tax department or to the 'ultimate purchasers' as contended by the petitioners, sales-tax has been collected by the Mills from their buyers and also paid by them to the department and that what is now being demanded' by the department from the petitioners is the tax on the sale price alleged to have been realised by the petitioners for the so-called second sale by them in their turn to the 'ultimate purchasers'.

The correctness of the statement that sales-tax in respect of the sales by Madura Mills was collected by the Mills and has been paid to the department was not disputed by the learned Government Pleader, and it is clear from the Orders of the Commercial Tax Officer and the Sales Tax Appellate Tribunal--and it was also conceded by the learned Government Pleader that what is now being demanded from the petitioners is the sales-tax in respect of the sale price said to have been realised by them from their 'ultimate purchasers'.

4. The learned Government Pleader contended that as both the Commercial Tax Officer and the Sales Tax Appellate Tribunal have found that there were two safes, one by the Madura Mills to the petitioners and the other by the petitioners in their turn to the 'ultimate purchasers,' and as this is a finding of fact, it is not open to the petitioners to contend in revision before us that there was only a sale by the Madura Mills direct to the 'ultimate purchasers' and no sale by the Mills to them and another sale by them to the 'ultimate purchasers'. He urged that there was therefore no scope for interference in revision on 'his ground.

5. The liability to pay sales-tax is created by Section 3 (1) of the Madras General Sales Tax Act, the material portion of which reads :

'3 (1) Subject to the provisions of this Act,-- (a) every dealer shall pay for each year a tax on his total turnover for such year;' x x x x

'Dealer' is defined in Section 2(b) of the Act as'any person who carries on the business of buyingor selling goods; and 'turnover' in Section 2 (i) as 'theaggregate amount for which goods are either boughtby or sold by a dealer, whether for cash or fordeferred payment or other valuable considerationprovided that the proceeds of the sale by a personof agricultural or horticultural produce grown byhimself or grown on any land in which he has aninterest whether as owner, usufructuary mortgagee,tenant or otherwise shall be excluded from his turn-over.

It is clear from these provisions that the liability to pay sales-tax will arise only if there is a sale under which a person has either purchased or sold goods and that there is no liability to pay sales-tax in respect of other business transactions carded on by him. 'Sale' is defined in Section 2 (h) of the Madras General Sales Tax Act as :

'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge.'

(Explanations are omitted as they are immaterial for purposes of this case). Section 4 (1) of the Indian Sale of Goods Act, 1930, defines a contract of sale of goods as :

'a contract whereby' the seller transfers or agrees to transfer the property in goods to the buyer for a price.'

Clause (3) of the same section enacts :

'Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.'

It is clear from these provisions that without an actual transfer of the property in the goods, that is to say, without an actual transfer of the ownership in the goods, by the seller to the purchaser, there can be no sale at all. In the face of these provisions it is idle to contend that the question whether there has been a sale or not is a pure question of fact. The question whether there has been a sale or not cannot be answered without considering whether the property in the goods has been transferred by the seller to the buyer, and that is not a pure question of fact but a mixed question of law and fact.

To substantiate the contention of the sales-tax department that there were two sales in this case, one by the Madura Mills to the petitioners and the ether by the petitioners in their turn to the 'ultimate purchasers', it has to be established that the property in the goods (i.e., the 3000 bags of sugar) was first transferred by the Madura Mills to the petitioners and that they in their turn transferred the property in the same to the 'ultimate purchasers'. There could be no sale by the petitioners in respect of which sales-tax could be claimed if the property in the 3000 bags of sugar had not vested in them at any time.

We are, threfore, unable to accept, the learned Government Pleader's contention that the question raised by the petitioners' counsel is a pure question of fact and cannot be gone into by this court in revision.

6. Neither the Commercial Tax Officer nor the Appellate Tribunal has considered the legal aspect of the question whether there has been a sale by the Madura Mills to the petitioners and a sale by the petitioners to the 'ultimate purchasers'. Relying upon the evidence of the accountant of the Madura Mills that Chandrasekhara Chettiar and P.C. Ummer were the employees and agents of the petitioners and the advances were made by them for and on behalf of the petitioners and the goods were despatched on their instructions to the persons mentioned by them, the Commercial Tax Officer and the Sales Tax Appellate Tribunal found that the transactions were really the transactions of the petitioners and not those of Chandrasekhara Chettiar and P.C. Ummer; and without considering the legal aspect of the question whether there has been a sale to the petitioners and a sale by them to the 'ultimate purchasers' both of them have assumed, on the strength of the above finding, that the petitioners purchased the goods from the Madura Mills and sold them in their turn to the ultimate purchasers'. No doubt, the Sales Tax Appellate Tribunal has observed in its order that

'the enquiries made by the Commercial Tax Officer at the appeal stage have proved that the appellants paid for and ordered sugar bags from the Madura Sugars and Allied Products Ltd., and had them despatched to their constituents in different places completely omitting them from the records'. But this is no consideration of the question of law raised by the petitioners' counsel. Even as regards the alleged enquiries by the Commercial Tax Officer, his order does not show that for coming to the conclusion he has arrived at he had had any materials before him beyond the statement of the accountant of the Madura Mills and the documents produced by him. In his order the Commercial Tax Officer has not relied on anything more. All that he has said about the alleged purchases and sales by the petitioners is contained at page 12 of the typed case-book; and the material portion of his order reads :'The sum and substance of his (the accountant's) evidence was that the appellants had brought sugar from them (the Madura Mills) through the agency of Chandrasekhara Chettiar and also P.C. Ummer. The above agents used to go to the seller firm, and arrange purchase of sugar and for sales on behalf of the appellants. The witness has filed copies of the telegram and the post copy of the telegram dated 17-9-1951 signed by Haji P.K. Moidoo a partner, which relate to the purchase of 3000 bags of sugar against an advance of Rs. 60,000 remitted to them by T. T. In cross-examination also the witness was very definite that the whole business was in fact that of the Appellant's Haji P.K. Moidoo Bros., only and that the business was got done through their men Chandrasekhara Chettiar and P.C. Unnner.........I find there is nothing in them (i.e., the petitioners' reply and arguments) which go to disprove the categorical statement of the accountant that the business was really that or the appellants. I consider that it is only the appellants who had done the business by advancing each, got supply of sugar and making on the spot direct sale to their customers.'

It is clear from the two passages extracted above that because of their finding that the transactions put through by Chandrasekhara Chettiar and Ummer were really the transactions of the petitioners both the Commercial Tax Officer and the Sales-Tax Appellate Tribunal assumed that there were purchases and sales by the petitioners without adverting to the legal aspect of the question whether those transactions amounted to a sale effected by the Madura Mills and another effected by the petitioners and what were the facts disclosed by the evidence of the accountant of the Madura Mills which had a bearing on the question of the sales.

7. To start with, the accountant had stated categorically in his cross-examination by the petitioners' representative :

'Sugar was not sold to Haji P.K. Moidoo Bros.'

The Commercial Tax Officer has not referred to this statement at all in his order; and beyond extracting in its order all that he had said in his cross-examination and re-examination the Appellate Tribunal also has not adverted to this statement. The learned Government Pleader contended that, although the accountant had made this statement, other statements in his evidence would show that this statement is false or incorrect and, that there were really a sale of sugar by the Madura Mills to the petitioners and another sale by the petitioners to the 'ultimate purchasers'. The statement in the accountant's evidence particularly relied upon by the Government Pleader in this connection are the following :

'They (i.e., Chandrasekhara Chettiar and Unnner) used to come to our office whenever they wanted sugar. They would instruct us about the names of the persons, i.e., their buyers, in whose name the invoices had to be prepared, (these two sentences occur in the chief examination).........The advances made by Haji P.K. Moidoo Bros, were only for the purchase of sugar. They have placed orders with the Company. The telegram will prove it. The Company has complied with the telegram.

Against the advances made by the firm of Haji P.K. Moidoo Bros, equivalent quantity of sugar was set apart and out of that sugar was despatched to some of the persons as instructed by the representatives. Advances were made by the representatives of P.K. Moidoo Bros., Chandrasekhara Chettiar and P.C. Ummer approached us as the representatives of P.K. Moidoo Bros. (These statements occur in re-examination)'.

It was contended that these passages in the accountant's evidence would show that the petitioners had ordered and purchased sugar from the Madura Mills through their agents, Chandrasekhara Chettiar and P.C. Ummer, that the purchases were effected by appropriation from lime to time of specific goods from the stock available at the Madura Mills, that the goods so appropriated for the petitioners were kept in the godowns of the Madura Mills itself, and that they were subsequently despatched to the 'ultimate purchasers' as per the instruction of the petitioners conveyed through their agent after the petitioners had in them turn effected the sales to the 'ultimate purchasers'.

According to the learned Government Pleader, the appropriation of specific goods for the petitioners as disclosed by the accountant's statement, 'against the advances made by the firm of Haji P.K. Moidoo Bros, equivalent quantity of sugar was set apart', would be sufficient to effect the transfer of the property in the goods from the Madura Mills to the petitioners, and so, the property in the goods had become vested in the petitioners before the goods were despatched to the 'ultimate purchasers' and the despatch of the goods from out of the stock to the 'ultimate purchasers' would be evidence of a subsequent sale by the petitioners to them. He also laid emphasis on the words 'their buyers' occurring in the sentence : 'They would instruct us about the names of the persons i.e., their buyers, in whose name the invoices had to be prepared', extracted above from the accountant's chief examination.

8. The course of these transactions as seen from the accountant's evidence was as follows : Advances were received from time to time by the Madura Mills, once from the petitioners themselves and at other times from their, agents, Chandrasekhara Chettiar and P.C. Ummer. Against these advances specific quantities of sugar were set apart as and when the amounts were received by the Madura Mills.

Subsequently, Chandrasekhara Chettiar and Ummer would come to the Mills and give instructions as to the persons to whom the sugar was to be sent and the quantity to be set to each. Acting under these instructions the Madura Mills would send sugar to the persons specified by Chandrasekhara Chettiar and Ummer--the invoices being prepared in the names of the persons to whom the sugar was sent and also sent to them. The prices and the transportation charges were also being adjusted against the advances. The accountant says in his evidence :

'But their representatives used to come to us and ask us to prepare invoices in the names of certain persons......... Sales invoices are issued when sales are made. No invoices have been issued in the name of Haji P.K. Moidu Bros..... There was no intimation to Haji P.K. Moidoo Bros, at the time adjustment was made.........When goods are sold to 'Raman Nair' invoices will be made only in his name'.

As to how goods were despatched to the 'ultimate purchasers' -- whether through the petitioner; or by Madura Mills direct -- there is evidence only as regards 1000 bags. Regarding these bags the accountant says :

'I am producing copies of voucher for the debit of Rs. 250 and the connected supporting bills of N.N. Ramachandran for unloading, loading and booking charges. The above cover the de patch of 1000 bags of sugar to Kozhikode consigned to 'sell'. The R. Rs. are endorsed and transferred to the buyers. The sale was in respect of free market sugar.'

9. Sri M.K. Nambiar contended that mere appropriation of specific goods by the seller for the buyer without the letter's consent would not effect transfer of the property in the Roods to the buyer and would not be sufficient to effect a sale and that the evidence furnished by the accountant himself as regards the despatch of the 1000 bags mentioned above would show that the Madura Mills were heating the goods even after the so-called appropriation as their goods and were despatching the goods to the 'ultimate purchasers' as it' they belonged to them and not to the petitioners.

According to him, the property in the goods belonged to the Madura Mills until the R, Rs. are endorsed to the 'ultimate purchasers' and thereafter it belonged to the 'ultimate purchasers' and at no time did the property in the goods vest in the petitioners. He contended that there was, therefore, no sale either by the Madura Mills to the petitioners or by the petitioners to the 'ultimate purchasers' and that there was only one sale by the Madura Mills direct to the 'ultimate purchasers'.

10. Section 23 (1) of the Indian Sale of Goods Act, 1930, provides :

'Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. 'Such assent may be expressed or implied, and may he given either before or after the appropriation is made.'

A mere appropriation by the seller without the consent of the buyer, either express or implied, would not pass the property in the goods from the seller to the buyer. Mulla, J., has observed in N. Buch and Co. v. Gordhandas, AIR 1923 Bom 92 (A):

'Of course, a mere appropriation by the seller does not pass the property in the goods to the tuyer. The effect of appropriation is that the seller looses the possibility of withdrawing the goods from' the contract and he would break his contract with the buyer if he offered any other goods to him, though the goods still remained his property. The appropriation must be assented to by the buyer to pass the property.'

If there is no assent to the appropriation by the buyer even the despatch of the appropriated goods through the railway to the buyer will not effect a transfer of the property in the goods when the goods are consigned to 'self'; for, in that case, until the R. Rs. are endorsed and transferred to the buyer the seller has complete dominion over the goods and can do anything with them as he chooses, cancelling even the intended delivery to the seller. Cotton, L. J., has observed in Mtrabita v. Imperial Ottoman Bank, (1878) 3 Ex D 164 (B) :

'If, however, the vendor, v/hen slopping, the articles which he intends to deliver under the contract, takes the bill of lading to his own order, and does so, not as agent or on behalf of the purchaser, but on his own behalf, it is held that he thereby reserves to himself a power of disposing of the property, and that consequently there is no final appropriation, and the property does not on shipment pass to the purchasers.

When the vendor on shipment takes the bill of lading to his own order, he has the power of absolutely disposing of the cargo, and may prevent the purchaser from ever asserting any right of property therein; and accordingly In Wait v. Baker, (1848) 2 Ex 1 (C): Ellershaw v Magniae, (1848) 6 Ex 570 (D), and Gabarron v. Kreeft, (1875) 10 Ex 274 (E), (in each of which eases the vendors had dealt with the bills of lading for their own benefit), the decisions were that the purchaser had no property in the goods though he had offered to accept, bills for or had paid the price.

So, if, the vendor deals with or claims to retain the bill of lading) in order to secure the contract price, as when he sends forward the bill of lading with a bill of exchange attached, with directions that the bill of lading is not to be delivered to the purchaser till acceptance or payment of the bill of exchange, the appropriation is not absolute, but, until acceptance of the draft or payment, or tender of the price, is conditional only, and until such acceptance, or payment, or tender, the property in me goods does not pass to the purchaser; and so it was decided in Turner v. Trustees of Liverpool Docks, (1851) 6 Ex 543 (F); Shepherd v. Harrison, (1869) 5 QB 196 (G), Ogg v. Shuter, (1875) 1 CPD 47 (H)'.

So, until the 'ultimate purchasers' got the railway receipts endorsed and transferred in their favour the property in the goods remained with the Madura Mills, and after the endorsement and transfer of the railway receipts there can be no doubt that the property in the goods passed only to the 'ultimate purchasers' and not to any intermediate person.

11. Although there is documentary evidence in this case only as regards 1000 bags of sugar as to how the despatch was made, the accountant's evidence is that the sugar 'was not sold to Haji P.K. Moidoo Bros' and that the bags were being sent by the Madura Mills direct to the 'ultimate purchasers' and the invoices also sent to those purchasers. The department has also not caved to ascertain whether the sales-tax collected by the Madura Mills were collected by them from the petitioners or from the 'ultimate purchasers'.

Since there can be no liability to pay sales-tax without an actual sale the burden in this case was upon the department to establish that there was an actual sale By the Madura Mills to the petitioners and another sale by the petitioners to the 'ultimate purchasers'. The department has absolutely no evidence in this case to show that there were two such sales. The facts established, accepting the concurrent findings of the Commercial Tax Officer and the Sales Tax Appellate Tribunal that Chandrasekhara Chettiar and Ummer were the petitioners' employees and agents and the transactions put through by them were really the petitioners' business, are fully consistent with the petitioners being the commission agents of the 'ultimate purchasers' or financiers who had supplied the money for advances to be made on their behalf.

From the mere fact that these transactions do not find a place in the petitioner's books of account it cannot be inferred that there were sales by the Madura Mills to the petitioners and by the petitioners in their turn in the 'ultimate purchasers'. Nor does the use of the expression 'their buyers' by the accountant in his chief examination while referring to the 'ultimate purchasers' conclude the matter. He had stated categorically that there was no sale by the Madura Mills to the petitioners and that the goods were being despatched directly by the Mills to the 'ultimate purchasers'.

In these circumstances, the expression 'their buyers' cannot mean anything more than 'their' constituents'. If the petitioners were acting in these transactions as the commission agents or financiers of the 'ultimate purchasers', 'ultimate purchasers' would undoubtedly be their constituents.

12. For the reasons stated above, we hold that it Has not been established in this case that the petitioners had either purchased from the Madura Mills the sugar involved in these transactions or sold it to the 'ultimate purchasers'. Consequently, we hold that they are not liable to pay any sales-tax in respect of the alleged turnover of Rs. 6,34,033-12-6 and that the assessment made on them in respect of this amount by the Commercial Tax Officer has to be quashed.

13. On behalf of the petitioners it was also contended before us that Rule 17 of the Madras General Sales Tax Rules including Rule 17 (3-A) under which the Commercial Tax Officer has acted and made the assessment in question is itself invalid and that the assessment is, therefore, unsustainable, for that reason also. As we have found the assessment to be unsustainable even otherwise, it is not necessary to consider this alternative contention in the present case.

14. In the result, the order of the CommercialTax Officer dated 30-3-1955, in so far as it assessesthe petitioners to sales-tax on the sum of Rs.6,34,033-12-6 mentioned in that order as escapedturnover, and the order of the Safes Tax AppellateTribunal, Madras, dated 30-11-1955, in so far as itrelates to the said amount of Rs. 6,34,033-12-6, areset aside; and it is hereby ordered that the petitioners are not liable to be taxed on that amountand if any tax has been realised in respect of thesame it shall be refunded to them. The Tax Revision Petition is allowed as above with costs, counsel's fee Rs. 200.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //