C.A. Vaidyalingam, J.
1. O.P. 163 of 1953 and S.T.R. 1 of 1954 relate to the liability of the petitioners, Lipton & Company, Ltd., to be assessed to sales tax on certain transactions for the assessment year 1123 which is the same as the accounting period, being the year ended 15th August, 1948.
2. O.P. 133 of 1955 is again by the same Lipton & Company Ltd., disputing their liability to be assessed to sales tax on some transactions for the assessment year 1952-53.
3. As the questions arising in O.P. 133 of 1955 are slightly different from those arising in O.P. 163 of 1953 and S. T. R. 1 of 1954, we would consider O.P. 133 of 1955 after giving our decision in O. P. 163 of 1953 and the connected S. T. R. 1 of 1954.
4. By order dated 6th August, 1952, the Municipal Sales Tax Officer, Ernakulam, the first respondent in O.P. 163 of 1953 re-assesSed the petitioners, Liptons Ltd., for year of assessment 1123. It is seen from the said order that a final assessment was made on 21st June, 1949, on the basis of the return of turnover furnished by the petitioners. Subsequently, it was found by the department that exports of tea amounting in value to Rs. 23,18,044-15-6 effected during the year of assessment were not included in the turnover already assessed to tax and, therefore, those exports also are liable for assessment under the Cochin Sales Tax Act. After requiring the company to file fresh return of turnover, the first respondent added the amount mentioned above to the amount already taxed in the original order and fixed the taxable turnover at Rs. 24,26,029-15-6, and levied the necessary sales tax on this turnover. After giving credit to the amount already paid under the original order of assessment, the first respondent levied on the petitioners additional sales tax of Rs. 23,180-6-10 and as per the demand notice issued, the first respondent, by order of same date called upon the petitioners to pay the amount within the time mentioned in the notice.
5. The petitioners filed an appeal under Section 14 of the Cochin General Sales Tax Act to the Assistant Sales Tax Commissioner, Ernakulam, within the time mentioned in the Act. The second respondent, by order dated 30th June, 1953, rejected the appeal and confirmed the order of the first respondent.
6. Details of the order of the two respondents will be gone into at the appropriate place later in this judgment. But we may indicate at this stage that the petitioners disputed their liability to pay sales tax on the ground that there was no sale by the petitioners in respect of teas sent from Cochin. The petitioners' further contention was that the assessee merely acted as agent of the buyers getting only a commission of one per cent. on the purchases for their labour and trouble. The petitioners also took certain objections, in the alternative, to the amounts arrived at by the first respondent as liable to sales tax. They also took the objection that the goods, at all relevant times, were not in Cochin State. Finally, they also took the objection that the first respondent had no jurisdiction to levy the sales tax.
7. After the disposal of the appeal by the second respondent, the petitioners applied to the Sales Tax Commissioner, Travancore-Cochin State, under Section 24 of the Cochin Sales Tax Act, to refer certain questions of law to the High Court. Three questions of law were set out in the application for reference. The Commissioner of Sales Tax (1st Member, Board of Revenue, Trivandrum) has made a reference to this Court and that is, Sales Tax Reference No. 1 of 1954. In the said reference, the Commissioner has set out the facts and also his views on the three questions stated therein. The three questions referred to the High Court for its opinion are :-
(1) Whether there is any legal evidence in support of the findings in question that the transactions of the export of teas by the assessee to the American and Canadian companies amount to a sale within the meaning of the Cochin Sales Tax Act;
(2) If so, whether such sale can be held to have taken place in the Cochin State; and
(3) Whether on the facts and circumstances, the applicant company was liable to assessment for sales tax in respect of the teas purchased by it on behalf of the American and Canadian companies and shipped by it in terms of the agency agreement with the American companies.
8. The petitioners have also filed O.P. 163 of 1953 to quash the orders dated 6th August, 1952, and 30th June, 1953, of the first and second respondents respectively in respect of the levy of additional sales tax for the year of assessment 1123. As stated earlier, the reference S.T.R. No. 1 of 1954 relates also to the same period and covers the additional sales tax levied as per the order of the first respondent dated 6th August, 1952, and confirmed by the second respondent. Therefore, the points arising in O.P. 163 of 1953 and S.T.R. No. 1 of 1954 are substantially the same and they will be dealt with and disposed of together.
9. In the affidavit filed in support of 0. P. 163 of 1953, it is stated that there was an original assessment by the first respondent on 21st June, 1949, for the year ending 15th August, 1948, and the turnover was fixed at Rs. 1,07,985. Subsequently, the assessment was reopened by the first respondent and by order dated 6th August, 1952, the first respondent levied an additional sales tax on a further turnover of Rs. 23,18,044-15-6. It is further stated that this sum represented the total invoice value of export of tea arranged by the petitioners via Cochin Harbour to America, the cost of tea being Rs. 18,00,869, and the balance being freight, insurance, godown charges, commission etc., payable to the assessee.
10. The petitioners further alleged that the teas so exported were purchased by Thomas J. Lipton (INC) of New Jersey, U. S. A., and Thomas J. Lipton, Ltd., of East Toronto, Canada, from producers in India under forward contracts of sale entered into by or on behalf of those companies with the producers' brokers, Messrs Forbes Ewart and Figgs, British Cochin. The petitioners-assessees acted merely as an agent of the buyers by virtue of a written agreement dated 3rd January, 1944. The contract for the purchase was in respect of produce in the various tea estates situated outside Cochin State namely, in Madras and Travancore. Goods were depatched to Fort Cochin and Candle Island in Madras State from where they were shipped to America.
11. The petitioners challenged the original and appellate orders of the first and second respondents respectively as being passed without jurisdiction, illegal and void.
12. The petitioners contended that there is no legal evidence to support the findings of the second respondent that there was any transfer of goods from the petitioners to the American companies so as to constitute a 'sale' as defined in the Cochin Sales Tax Act (Act XV of 1121), Section 2, Clause (i), and Explanation II as amended by Act XXI of 1122. They also challenged the statements that the sales should be held to have taken place in Cochin State.
13. The petitioners further challenged the interpretation placed by the respondents on the agreement dated 3rd January, 1944, and in particular, on Clause 3. According to the petitioners a reading of the said agreement will conclusively show that the relationship of the petitioners to the American companies was that of a buying agent and nothing more.
14. It is further stated that the purchases were made by the petitioners only with the previous approval of the American companies and with the funds provided by the latter. The petitioners cannot in law be considered to be 'sellers'' in respect of the teas exported.
15. It is further alleged that the contracts for the purchase were entered into outside Cochin State and delivery itself was also effected outside Cochin State and, therefore, the officers had no jurisdiction to levy sales tax in respect of those transactions. The fact that for purpose of placing the goods on board the ship, the goods had to pass through Cochin territory, will not make the transaction a 'sale' within the Cochin State. On these grounds the petitioners challenged the orders of assessment as being without jurisdiction, illegal and void.
16. The petitioners have also stated in the affidavit about their asking the Commissioner to refer certain questions under Section 24 to this Court.
17. In the end, the petitioners prayed for the issue of a writ of certiorari calling for the relevant records from the respondents and for quashing their orders dated 6th August, 1952, and 30th June, 1953, assessing the petitioners to sales tax, in respect of the teas in question.
18. The Sales Tax Officer, First Circle, Ernakulam, Sri T.K. Padmanabhan, has filed a counter-affidavit on behalf of the respondents.
19. The material allegations in the affidavit of the petitioners are denied. It is stated that the petitioner-company is a 'dealer' within the definition of the Cochin Sales Tax Act, XV of 1121, and that the export of tea to the American Canadian companies constituted a 'sale' within the State. The account of the assessee-company shows that they purchased the teas in question with its funds and the petitioners were dealing with the same in their own right. Several purchases from the producers were made on the orders of the petitioner-company and shipping was also effected under the instructions of the assessee and the invoices were sent along with the goods direct to the American companies who paid the assessee-company direct. Therefore, there has been a transfer of property in the goods and therefore the transaction amounts to a 'sale'.
20. Clause 3 of the agreement is to the effect that the title to the tea vested in the petitioner-company till the tea passed the ship's rail at the port of shipment. Therefore, it follows that the title remained with the assessee-company till that period and this passing of title from the assessee-company to the American Canadian companies would amount to a 'sale' by the petitioners to the foreign companies.
21. It is further stated in paragraph 7 of the counter-affidavit:- 'Admittedly, the shipment took place in the Cochin Port within the Cochin territory and so the sale has to be considered to have taken place within the Cochin State. It is not correct to say that the teas were situated in Candle Island or Fort Cochin at the time of exports.
22. It is further stated that the sending of goods to the customers outside, to whom invoices are sent direct, constitutes a 'sale'. From the definition of the term 'dealer' a commission agent also would be liable to taxation but for the exemption given by Section 8.
23. The allegations that the American Canadian companies are responsible for insuring stocks after shipments and the further allegation of a preliminary contract of purchase by the petitioners with the producers, are stated to be new developments in the case of the petitioners. Sales were effected within the Cochin territory and the goods also were situated within the Cochin territory at the time of sale.
24. The Chief Accountant of the Calcutta office of the petitioners has filed a reply affidavit controverting the material allegations of the State in its counter-affidavit. The contention that the petitioner company is a 'dealer' is challenged, at any rate, so far as the disputed transactions are concerned. It is further stated that the assessee-company purchased the teas only from and out of the funds provided by the American Canadian companies. Those companies had running account with the Liptons Ltd., and the former had provided the latter with funds from time to time to make purchases of teas on their behalf. If at any time, the advances were not enough, the petitioners supplied the necessary funds as may be required and charged interest for such sums.
25. The manner of repayment and the drawing of bills were also mentioned in the reply affidavit. It is also stated that the sellers of the teas were quite aware that the petitioner-company was buying teas on behalf of the American companies. The purchases and the shipment were made in accordance with the agreement between the American and Canadian companies and Liptons Ltd.
26. The interpretation placed upon Clause 3 of the agreement is again challenged.
27. It is also stated that the sellers of tea both under the terms of contract and the rules governing the sales of tea undertook risks only for ten days from the date of the arrival and storage in the godown of the sellers. As any risk arising thereafter would fall on the buyers, namely, the American Canadian companies, the assessee-com-pany, as the agent of such buyers insured the teas until such time as they were removed from the said godown for shipment. There have been several occasions when the American companies insured the teas so as to cover the land journey also in addition to the time the merchandise is temporarily stored on the pier until placed on board the ocean vessel and until arrival at destination. The statement that the ships were in Cochin territorial waters when the tea, exported passed their rails is also challenged and it is further alleged that there has been shifting of the grounds by the second respondent. In any event, it was stated that there were absolutely no materials before the taxing authorities especially, the appellate authority, who has given this as a reason, to justify a finding that ships were in Cochin waters.
28. Regarding the invoices sent to the American and Canadian companies, it is also alternatively pleaded that there has been no transfer of property which, if at all, took place only outside the Cochin State.
29. Finally, it is contended that even if the relationship between the assessee-company and the American Canadian companies is not one of agency but one of a vendor and purchaser with the result that the transactions constituted a sale, the sale did not take place within Cochin waters or within Cochin territory, since the bills of lading for the teas shipped were held by the petitioners and fowarded to the Lloyds Bank at Calcutta and Imperial Bank of India. In view of this, the sale could become complete only when the bills of lading were presented and delivered to the foreign companies in New York or Canada. Therefore, no sale took place within Cochin territory so as to give jurisdiction to the taxing authorities.
30. In the course of arguments, it was mentioned to us that in respect of similar transactions, the Sales Tax Appellate Tribunal, Madras, has taken the view that the assesse-company acted merely as buying agents on behalf of the American companies and that there was no sale by them to the American companies and that such transactions are not liable for sales tax. We did not think it necessary to look into the reasons given by the Madras authorities because we have to decide this application on the materials placed before us.
31. From the contentions set out earlier, it will be seen that the substantial question that arises for consideration would be as to whether the disputed transactions amounted to a 'sale' within the definition given in the Cochin Sales Tax Act of 1121 as amended by the Act of 1122. This itself will very largely depend upon our view as to the exact relationship in law occupied by the assessee-company with the American Canadian companies, that is, whether the assessee-company was only a buying agent of the latter.
32. Section 2, Clause (i), of the Cochin Sales Tax Act, XV of 1121, as amended by Act XXI of 1122 runs as follows:-
(i) 'sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge.
Explanation II-Notwithstanding anything to the contrary in the Cochin Sale of Goods Act, XXV of 1122, the sale of goods shall wherever the contract of sale as defined in that Act is made, be deemed for the purpose of this Act to have taken place in Cochin, if-
(i) the goods are actually in Cochin at the time when the contract for sale in respect thereof is made, or;
(ii) the goods were manufactured in Cochin and the sale is effected by the manufacturer or his agent.
In the counter-affidavit of the respondents, it is stated that the sales were effected within the Cochin territory and the goods also were situated within the Cochin territory at the time of sale. Explanation II of Section 2(i) is very much relied upon. On the other hand, the case of the assessee is that there is no legal evidence to prove that the goods were in Cochin State at the relevant time mentioned in the Explanation.
33. Before dealing with the contentions of the learned counsel for the petitioners and for the State, it is desirable to set out the grounds on which the first and second respondents have put the case against the assessee. In a short order, the first respondent has stated that the goods in dispute were shipped from Cochin and were all lying in godowns in Cochin at the time of the contract for sale by the assessee-company and, therefore, all these exports are liable for assessment under the Cochin Sales Tax Act. In this view, the first respondent has made a revised assessment. It will be seen that the reason given by the first respondent is that the goods were lying in the godowns in Cochin at the time of the contract of sale.
34. In the memorandum of appeal filed by the assessees to the second respondent, it has been stated that the transactions do not amount to sales. In paragraph 3, it was further stated that the contracts were for the purchases of the produce of teas from the various tea estates situated in Madras State and were despatched to Fort Cochin, Madras State, from where they were shipped to America. Therefore it was stated that the view of the first respondent that the goods were all lying in the godowns in Cochin State at the time of the contract of sale, is not correct. This conclusion, it is stated, has been arrived at arbitrarily without considering the facts of the case or giving an opportunity to the assessees to place their entire view point. The teas were neither produced nor manufactured in Cochin State and Explanation II has no application at all.
35. The second respondent has noted two contentions: (a) the transaction does not amount to a sale; and (b) the teas were purchased from outside Cochin and were in the assessees' godown at Port Cochin, Madras State, and that no purchase or sale was effected within the Cochin State. Regarding the first contention, after a perusal of the agreement relied upon by the assessees, the second respondent mainly on the basis of Clause 3 of the agreement, came to the conclusion that till the tea passes the ship's rail, the title is with the assessees, they having purchased the goods with their own money. When the goods passed the ship's rail, there is a transfer of goods by the assessees to the American companies, which, in law amounts to a sale as per the definition in the Cochin Act. Regarding the second contention, the appellate authority held that the tea was exported from the Cochin Port. Then he says :
As the ships were in Cochin territorial waters when the tea exported passed the rails, the sales have to be considered as taken place in the Cochin State.
In this view, the second respondent confirmed the order of the first respondent.
36. It will be seen that the reasons given by the appellate authority are slightly different from those given by the first respondent. The first respondent put the case against the assessees mainly on the ground that the goods were all lying in godowns in Cochin. Evidently, the appellate authority was satisfied that this finding of the first respondent was not correct because the goods were kept only in the godowns at Fort Cochin, Madras State. But the appellate officer has held that the ships were in Cochin territorial waters when the tea exported passed their rails and, therefore, the sales should be considered to have taken place in Cochin State. This finding of the second respondent is attacked on the ground that there is no legal evidence before the officer for arriving at such a finding. The assessees could not have anticipated this finding because the reasons given by the first respondent were completely different.
37. Mr. M.K. Nambiar, the learned counsel for the petitioners, very strongly contended that the order of assessment is illegal, void and one passed without jurisdiction. The disputed transactions cannot, in any sense, be considered to be 'sales' within the definition of the Cochin Act 1121 as amended by the Act of 1122. The relationship between the petitioners and the American-Canadian companies was one only that of a buying agent. All purchases were made by the assessees on instructions received from the American-Canadian companies and their respective rights and liabilities are governed by the agreement dated 3rd January, 1944. The goods were purchased substantially with the funds provided by the foreign companies and, therefore, there is no question of any 'sale' in law by the assessees to the American-Canadian companies. Further, the findings of fact, on the basis of which the transactions have been held to be sales, have been arrived at by the first and second respondents without any legal evidence before them. Mr. Nambiar criticised the interpretation placed upon the agreement of 1944, particularly, Clause 3, by the second respondent. In the alternative, Mr. Nambiar has also contended that even if the transactions amount to a 'sale', such sales took place not within Cochin State territory, but only in America or Canada which will be seen from the way in which the document of title has been dealt with by the assessee-company.
38. On the other hand, the learned Advocate-General appearing for the State, has supported the interpretation place upon the agreement by the department. He has contended that the agreement clearly shows that the purchases are to be made independently by the assessee-company and that they are capable of passing title independently to the American-Canadian Company and that it is in this connection Clause 3 of the agreement becomes very material. He has contended that the disputed transactions are sales as defined in the Cochin Act and as such, are liable for the levy of sales tax. The orders of the first and second respondents are within jurisdiction and not illegal. The question about the ships being in Cochin territorial waters appears to have been admitted before the second respondent or, at any rate, it has not been controverted by the assessees till a very last stage in this Court. In any event, when the officers have got jurisdiction to make the assessment in law, any error in the construction of the agreement cannot be made the subject of a writ of certiorari.
39. The learned Advocate-General contended that the alternative plea of Mr. Nambiar will not avail his clients. Once the title to the tea passes under Clause 3 to the American-Canadian companies when the goods pass the ship's rail, it is immaterial to consider in what way the assessees took the documents of title. Even there, the learned Advocate-General has further contended that the practice adopted by the assesssees will clearly show that title has already passed to the American-Canadian company notwithstanding the absence of payment in full.
40. At the outset, we may note an objection raised by the learned Advocate-General to the effect that this Court should not permit the assessees to rely upon letters or other correspondence not placed before the taxing authorities. We do not think that this objection is well-founded because the main point we have to decide is whether the officers had jurisdiction to make the assessments in law. If so, in our opinion, it is open to the petitioners to place the necessary material to show that the orders of assessment are without jurisdiction. Though, the agreement is the main document to be construed, in order to consider the legal relationship between the assessees and the American companies, the other correspondence and letters and insurance policies relating to the transactions in question are of great assistance to the Court to arrive at a proper decision.
41. As stated earlier, the main controversy in these proceedings relates to the interpretation to be placed upon the agreement dated 3rd January, 1944. We are fully aware of the decisions of the Supreme Court regarding the power of the Courts to interfere under Article 226 of the Constitution on grounds of errors of law. We are also satisfied that in this particular case, there is such an error of law rendering the speaking order of the respondents a clear ignorance or disregard of law. The agreement, Exhibit P-1, is dated 3rd January, 1944, and has been entered into between (1) Thomas J. Lipton (Inc.) of Hoboken New Jersey in U.S.A.; (2) Thomas J. Lipton Limited, East-Toronto in Ontario (Canadian company)-both collectively referred to as the American-Canadian companies-and (3) Lipton Limited situaited in City Road, London (called English company), Clause (c) of the preamble states that the American-Canadian companies have been relying on the organisation of the English company to procure for them teas of suitable qualities and for other technical advice as per an agreement dated 20th March, 1939. Clause (d) states that the said agreement shall be cancelled and the relationship between the parties in future will be governed by the present agreement.
Clause 1 specifically makes provision for the present agreement regulating the relationship of the parties from 1st January, 1944.
Clause 2 provides that all tea required to be produced outside U.S.A. and Canada by the American-Canadian companies for their business 'shall be purchased on behalf of the American-Canadian companies by the English company in its own name or otherwise as the English company shall think fit.' There is also a prohibition against the foreign companies purchasing tea from any other source outside U.S.A. and Canada without prior consultations of the English company.
Clause 3 provides for the English company using its best endeavours to purchase teas on most favourable terms for the American-Canadian companies having regard to availability of supplies, Government regulations etc. Then it provides: 'Tea so purchased shall be shipped to the company requiring it in such quantities and of such qualities and at such times and to such places as the company requiring it may from time to time specify but upon the terms that the title to the tea passes to the American or Canadian company, as the case may be, as soon as the tea. passes ship's rail at the port of shipment.
Clause 4 casts an obligation on the English company making all necessary arrangements with regard to the actual shipments of tea.
Clause 5 states that the foreign companies shall respectively repay to the English company the expenses incurred by the English company in the purchase and shipment of tea acquired on their behalf. The items for which repayment is to be made are: (a) the purchase price of the tea acquired; (b) trade brokerages; (c) charges for carriage insurance etc., from the time of purchase of tea to the time when it shall pass ship's rail; and (d) freight and other charges incurred by the English company with regard to the shipment.
Clause 6 provides for the foreign companies making arrangements for insurance of any shipment required by them and it also says that the English company shall be under no such obligation unless otherwise agreed to.
Clause 7 states that in consideration of the services to be rendered by the English company as buying agents for the foreign companies, the American-Canadian companies are to pay to the English company a commission of one per centum on the net purchase price on all such teas,
The said clause further provides that the said commission is payable to the English company whether or not such tea is purchased through the agency of the English company.
Clause 8 deals with the general assistance and advice to be given by the English company in certain matters mentioned therein.
Clause 10 provides for the agreement remaining in full force for an indefinite period and it also provides for determination of the agreement in the manner and after the period mentioned therein.
Sub-clause (i) of Clause 10 states among other things : 'such power of determination shall extend only to the buying agency.
Clause 11 puts a bar to the right of the American-Canadian companies to sell or part with the business without the previous written consent of the English company. Sub-clause (b) of Clause 11 states that the English company cannot withhold its consent to such a sale provided the purchaser enters into a direct agreement with the English company to its satisfaction both regarding its agency and other matters.
42. Mr. Nambiar, the learned counsel, very strongly relied upon several of the clauses in this agreement and, particularly, Clauses 2, 3, 5, 7, 10(i) and ll(b) to show that the assessees were only buying agents of the American-Canadian companies. According to the learned counsel the document has to be read and construed as a whole and Clause 3 should not be cut out from its context. Clause 2 specifically refers to a purchase by the assessees 'on behalf of the American-Canadian companies in its own name or otherwise as it shall think fit.
Clause 3 starts by casting an obligation on the English company to use its best endeavours in the matter of purchase of tea required by the American-Canadian companies. Later on, the clause says: 'The tea so purchased shall be shipped to the company'. Such a shipment is to be in such quantities and of such qualities and at such times and to such places as the American-Canadian companies requiring it from time to time specify. Though Clause 3 refers to title to the tea passing to the American-Canadian companies as soon as the tea passes the ship's rail at the port of shipment, it has to be really read along with Sub-clause (c) of Clause 5 and Clause 6.
Clause 5 specifically speaks of the American-Canadian companies agreeing to 'repay to the English company the expenses mentioned in Clauses (a) to (d) therein in respect of the purchase and shipment of tea acquired on their behalf'. The expression used is 'repay' which will show that all the purchases and other expenses were by the English company, not on their own account, but on behalf of the American-Canadian companies. This is made clearer in the said clause itself by stating : 'purchase, and shipment of tea acquired on their behalf as follows.' The expression 'on their behalf' refers to the American-Canadian companies. One of the items of expenses is mentioned in Sub-clause (a) as the purchase price of the tea acquired. Sub-clause (c) further includes in the expenses incurred by the English company the charges for carriage insurance incurred by the English company from the time of the purchase of tea to the time when it shall pass the ship's rail. Clause 6 makes it obligatory on the part of the American-Canadian companies to make arrangements for insurance of any shipment required by them. It further says that the English company is not under any obligation to make any such insurance on their behalf unless otherwise agreed to.
43. The learned Advocate-General appearing for the State has relied very strongly on Clause 3 with particular reference to the portion providing for the title to the tea passing to American-Canadian companies as soon as the tea passes the ship's rail at the port of shipment. According to the learned Advocate-General, this clause concludes the matter against the assessees and clearly shows that even the foreign companies contemplated a transfer of title to them from the English company, namely, the assessees. According to the learned Advocate-General, this clause puts the matter beyond all doubt that the English company is vested with the right to pass title to the foreign companies. The learned Advocate-General also contended that the assessee will be 'dealers' within the definition of the Sales Tax Act. The assessees will also be 'commission agents' who will come within the definition of 'dealer'. The learned Advocate-General also contended that even if the assessees are only 'buying agents', still in law they will be vendors of goods so as to constitute the transaction one of sale.
44. This last argument of the learned Advocate-General will be dealt with by us later in the judgment. But we can dispose of the argument of the learned Advocate-General that the assessees will be 'dealers' which term will take in a commission agent also. The expression 'dealer' is defined in Section 2, Clause (c), of the Cochin Sales Tax Act (Act XV of 1121) as follows :-
(c) 'dealer' means any person, local authority, company, firm, Hindu undivided family, undivided Marumakkathayam tarward or other association of persons engaged in the business of selling or supplying goods in Cochin whether for commission, remuneration or otherwise and includes any society, club or association which sells or supplies goods to its members.
Explanation I-The manager or agent of a dealer who resides outside Cochin and carries on the business of selling or supplying goods in Cochin shall, in respect of such business, be deemed to be a dealer for the purposes of this Act;
Explanation II-A person who sells agricultural or horticultural produce grown by himself, or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be deemed to be a dealer for the purposes of this Act.
This contention that the assessees will be dealers cannot be accepted and it may be even unnecessary to consider the same because the case has not been put against the assessees by respondents 1 and 2 on this ground. No doubt, in the counter-affidavit filed here by Sri Padmanabhan on behalf of the respondents, the contention that the assessees are dealers has been taken for the first time. In the absence of any other material placed by the department, it is not possible for us to straightaway give any decision on this contention. But if the argument is based on a construction of this agreement, then it is open to us to consider whether the assessees can be said to be engaged in the business of selling or supplying goods in Cochin. The main question that we have to consider on the terms of the agreement is, as to whether the assessees are buying agents or persons capable of selling goods. So far as these transactions are concerned, it is not the case of even the department that they have sold or supplied goods to anybody other than the American-Canadian companies. Therefore on a consideration of the agreement, if we come to the conclusion that the assessees are only buying agents, it will naturally follow that the assessees cannot be considered to be persons engaged in the business of selling or supplying goods.
45. A reading of the agreement as a whole gives us the impression that the assessees are only constituted as buying agents by the American-Canadian companies. We have extracted the relevant clauses above. Clause 3 has to be read along with Clauses 5 and 6. It should not be cut out and treated as if that clause alone remains without the other clauses. Even Clause 3 specifically starts by saying that the English company undertakes to use its best endeavours to purchase tea required by the American-Canandian companies and the teas so purchased are to be shipped to the company requiring the same at such times and in such quantities and to such places. All these clearly contemplate minute instructions being given to an agent by a principal from time to time. Clause 5, as mentioned earlier, speaks of the liability of the American-Canadian companies to repay which implies that the English company has spent those amounts already on behalf of the foreign companies. If there is any doubt, it is made clear by the expression 'acquired on their behalf'. From Sub-clause (c) of Clause 5, it is evident that the parties contemplate an insurance by the English company from the time of purchase to the time when it passes the ship's rail. After the goods passing the ship's rail, Clause 6 comes into force and it is for the foreign companies S-60 to make such arrangements as they may think proper for making necessary insurance on the goods so shipped. Therefore, a reading of Clauses 3, 5 and 6 will indicate that the intention of the parties is that the responsibility of the agent should cease when the goods passed the ship's rail and that the further travel of the goods is really the concern of the foreign companies. It is not as if that the parties intend as between themselves that the agent should pass a title in the goods to the foreign companies when they pass the ship's rail. On the other hand, the interpretation to be put on Clause 3 fits in with the explanation given by the learned counsel for the petitioners that it is only from the insurance point of view that such a statement has been made. There is also evidence to show that notwithstanding this clause, the foreign companies have undertaken the insurance even covering the land journey of the goods till it reaches its destination in America or Canada. As the responsibility of the agent in the matter of insurance ceases under the agreement with the shipping of the goods, Clause 3 has been so worded in the interests of the foreign companies themselves. When the relationship between the assessees and the foreign companies is that of only a buying agent and a principal, it will be doing violence to the intention of the parties to say that by virtue of Clause 3, the foreign companies intended their agent to pass a title in the goods.
46. Clause 7 further specifically describes the English company as buying agents and also speaks to services rendered by the English company as buying agents. Later on, in the said paragraph, regarding the commission of one per centum, the English company is entitled to get this percentage of commission not only in respect of teas 'purchased through the agency of English company' but also on other purchases mentioned therein.
Sub-clause (i) of Clause 10 again speaks of the power of determination extending only to the buying agency.
Again Sub-clause (b) of Clause 11 is very clear that the new purchaser must settle with the English company in consideration of their agency and other services. Therefore, the document itself speaks of the assessees as buying agents and services done as buying agents in several places. Therefore, we are not able to accept the contention of the learned Advocate-General that the interpretation put upon Clause 3 by the respondents is correct. In fact, even in the interpretation of this document, the second respondent has misread the document. From this clause, the second respondent states that it is clear that till the tea passes the ship's rail, the title of the tea which is purchased by the assessees with their own money, rests with them.
Here again, there is another mistake committed by the second respondent that the purchases are with their own money. There is again evidence placed before us to show that the foreign companies had put the assessees with necessary funds and that there was a running account as between them. There is also again evidence to show that the goods from the producing centres were purchased by the assessees as far as possible under instructions from the foreign companies. These circumstances can point only to one thing, namely, that the assessees are agents of the foreign companies.
51. To conclude, in our opinion, under the agreement dated 3rd January, 1944, the assessee-company is only a buying agent of the American-Canadian companies. In view of the fact that the assessees are only buying agents, there is no question of any 'sale' by them to the foreign companies. In this view, it is unnecessary to consider the provisions of the Sale of Goods Act regarding the passing of property and other incidental matters stated therein, which provisions will apply only if there is a 'sale'.
52. According to Mr. Nambiar, even if the assessee-company is considered to be not an agent, still in view of the fact that the documents of title at the time of shipping are taken in the majority of cases in the name of the shipper or to his order, the property in the goods will not pass to the foreign buyers till payment is made against documents and as the documents are presented only in New York or Canada there is no question of any sale in law within the limits of Cochin State. He has furnished a tabular statement of the shipments between (sic.) which relates to the disputed transactions. Mr. Nambiar has also contended that even in those cases where the bill of lading has been taken in the name of the buyer, it cannot be considered in law to be an unconditional appropriation of the goods so as to pass title to the buyers forthwith. Even then, according to the learned counsel, as payment is necessary, title will pass only when the payment is made. Till that time, it must be considered to be only a conditional appropriation. The learned counsel has referred us to a decision of Rajagopalan and Rajagopala Ayyangar, JJ., reported in Gandhi Sons v. State of Madras A.I.R. 1955 Mad. 722. In some of the invoices which the learned Judges had to consider, it was stated that the goods had been shipped from Cochin to London by the assessees therein 'on account and risk of the buyers'. It was contended before the learned Judges by the State that the property in the goods passed to the buyers before the goods crossed the customs office at the Cochin port. The learned Judges at page 726, in dealing with this contention observe as follows :'In dealing with this point made on behalf of the State it might be noticed that the bills of lading were taken in the name of the buyers making the goods deliverable to their order. This feature would undoubtedly render Sub-section (2) of Section 25 unavailable to the assessee but there is abundant authority for the view that the taking of a bill of lading in the name of a buyer does not ipso jure negative a conditional appropriation or the reservation of a right of disposal. If authority is needed reference may be made to the decisions in Moakes v. Nicolson (1865) 19 C.B. (N.S.) 290 and the Kronprinessan Margarete, The Parana  1 A.C. 486, at page 514. In. the latter case the bills of lading were taken in the consignee's name and these were sent with an invoice and a sight draft for its amount through collecting agents of the consignors to be presented to the bank. The question was whether the property in the goods passed to the neutral sellers on shipment, or whether this occurred only on payment of the draft. Lord Summer delivering the opinion of the Privy Council said:'In these circumstances what can be inferred as to the passing of the general property What is there to show an intention to pass that property for anything less than payment and what motive is there for such an intention The appellants, Messrs Lundgren and Rollven, have to show that it passed to them and passed, too, before the beginning of the voyage. If it did, then the consignors no longer owned the goods and had nothing to show against them, except a draft of their own, which could not be enforced and a bill of lading, which would not entitle them to delivery of the goods, though its retention might seriously inconvenience the new owners, the consignees. Rights to stop in transitu or to exercise an unpaid vendor's lien need hardly be discussed, for, on a question of intention in fact as to which there is a good deal of evidence, it would be artificial to assume that the consignors' minds were actually determined to the contrary by consideration of legal remedies, of which it is not shown that they had any knowledge, let the legal presumption be what it will cases, in which it has been held that taking the bill of lading in the shipper's own name negatives any unconditional appropriation to the buyer by the delivery of the goods on ship-board and indicates one conditional on the documents being taken up, can throw only an indirect light on the question here involved. Certainly no case was found, in which it was held that taking the bill of lading in the buyer's name, while withholding delivery of it until presentation and taking up of the documents, would not be, as an appropriation, equally conditional.
49. After considering the terms of the arrangement between the parties in that case, the learned Judges held that there was no unconditional appropriation because the seller had further duties in connection with the goods which included loading them on board the ship and obtaining a proper bill of lading for conveyance of the goods to the contracted destination and the seller in his turn was entitled to payment in exchange for these shipping documents. The learned Judges further observed at page 727 :
When the goods arrived at the railway station at Cochin and were taken delivery of by the sellers through their representatives and cleared through the customs, the goods still remained their property. They were then placed on board the ships and bills of lading were taken in the name of the buyers as consignor. This would be the earliest point of time when any contention could be raised that the property in the goods passed to the buyers. The bills of lading though taken in the name of the buyers were retained by the sellers and were deliverable only against payment. Two views are possible as to the inference to be drawn from the goods being consigned in the name of the buyers. One is that the seller reserves the jus disponendi in himself till the documents are presented to the buyer and the payment is made. That is the case which is provided by Section 25(3) of the Sale of Goods Act. The other is that the property passes immediately and the seller retains possession of the bills only for the purpose of claiming a lien on the goods to secure payment of the price, he having parted with the property in them. That the first of the above alternatives is the normal rule would appear to be favoured by the judgment of the Supreme Court in Commissioner of Income tax, Madras v. Mysore Chromite Ltd.  27 I.T.R. 128 : A.I.R. 1955 S.C. 98. (Vide also the passage from the judgment of Lord Sumner in The Parana already extracted).
50. The learned Judges finally held following the decision of the Supreme Court in Commissioner of Income-tax, Madras v. Mysore Chromite Ltd.  27 I.T.R. 128; A.I.R. 1955 S.C. 98, that the property in the goods did not pass to the buyer until the relevant bills of lading were presented to the buyers or, in any event, at least not until the goods were pat on board the vessels at Cochin harbour. The latter aspect regarding shipment at Cochin harbour arose because in that case, there was a contention raised based upon Article 286(1)(b) of the Constitution. The principle laid down by the learned Judges on a reference to the English authorities is:-
There is abundant authority for the view that the taking of a bill of lading in the name of a buyer does not ipso jure negative a conditional appropriation or the reservation of the right of disposal,
This observation of the learned Judges clearly shows that the contention of the learned Advocate-General here that the taking of the bill of lading in the name of the buyer in this instant case transfers the property in his name cannot be accepted. Further, the terms of the agreement are very clear, particularly, Clause 5. The American and Canadian companies are to re-pay the English company the expenses incurred by the English company in respect of the purchase and shipment of the tea acquired on their behalf. The items of expenses mentioned therein are the purchase price, trade brokerage, carriage insurance, freight and other charges incurred with regard to the shipment. Therefore, even in those cases where the bill of lading has been taken in the name of the buyer, it cannot certainly be the intention of the assessee that the property in the goods is to pass to the buyers unconditionally without payment. Therefore, in our opinion, property in the goods, even in those cases, will pass only when the documents are accepted and payment made by the American-Canadian companies and there is no dispute that the documents were presented only in New York or Canada and payments made. In no instance have the documents been accepted and payment made within Cochin territory. In view of this, it is also clear that it cannot be the intention of Clause 3 that the assessees should pass title when the goods pass the ship's rail under Clause 3.
51. In the view that we have expressed that the assessees are only buying agents and that there cannot be a sale by an agent to a principal, the liability of the assessees to sales tax does not exist. Even on the alternative basis, that they can transfer property to the foreign principals, we have indicated our view that the property passes, if at all, only in New York or Canada where the documents are presented to the buyers and the latter pay the price. In either view, it becomes unnecessary to consider the contention of Mr. Nambiar that there is no legal evidence for the second respondent to come to the conclusion that the ships were in Cochin territorial waters when the tea exported passed their rails. If the matter has to be considered, we are of opinion that there is absolutely no legal material for the officer to arrive at such a finding. The jurisdiction of the officer to assess sales tax can be invoked only when there is a 'sale' as defined in the Cochin Sales Tax Act together with the explanations. The State in its counter-affidavit has stated that Explanation II to the definition of 'sale' will apply. Unless the department is able to show positively that the ships were in Cochin territorial waters at the relevant time, Explanation II cannot be invoked in which case the officer will have no jurisdiction to levy sales tax even on the basis that Clause 3 can be construed as passing title to the buyers when the goods pass the ship's rail.
52. The learned Advocate-General has stated that there must have been an admission by the assessees or their representatives before the officers about the ships being in Cochin territorial waters and that, in any event, this contention is very belated.
53. We are not able to find anything in the record from which we could find any such admission on the part of the assessees. The first respondent did not decide the case on this basis. He relied upon the goods being in the godowns in Cochin and this finding was challenged in the memorandum of appeal and has not been accepted by the appellate authority. It was the appellate authority who has given a fresh ground namely, that the ships were in Cochin territorial waters. We do not find even in the order of the appellate authority that his statement about the ships being in Cochin territorial waters is based upon any admission of the assessees or their representatives.
54. Excepting reiterating in paragraph 7 of its affidavit that admittedly, the shipment took place in the Cochin port within the Cochin territory, the State has not placed any further material from which such an admission could be inferred. Therefore, on this basis, even the construction placed upon Clause 3 of the agreement by the second respondent will not give him jurisdiction to levy the sales tax in the circumstances of this case. The learned Advocate-General finally contended that even an agent, situated in the position of the assessees in this case, can be considered to be a vendor and as such, the transaction entered into by him can be considered to be a sale in law. The learned Advocate General relied upon the decision in Ireland v. Livingston (1872) L.R. 5 H.L. (E. and I.) 395. Particularly, he relied upon the observations of Justice Blackburn at page 408 as follows :
It is quite true that the agent who in thus executing an order, ships goods to his principal, is in contemplation of law a vendor to him. The persons who supply goods to a commission merchant sell them to him, and not to his unknown foreign correspondent and the commission merchant has no authority to pledge the credit of his correspondent for them. There is no more privity between the persons supplying the goods to the commission agent and the foreign correspondent than there is between the brick-maker who supplies bricks to a person building a house, and the owner of that house. The property in the bricks passes from the brick-maker to the builder, and when they are built into the wall, to the owner of that wall and just so does the property in the goods pass from the country producer to the commission merchant; and then when the goods are shipped, from the commission merchant to his consignee. And the legal effect of the transaction between the commission merchant and the consignee, who has given him the order, is a contract of sale passing the property from the one to the other; and consequently the commission merchant is a vendor, and has the right of one as to stoppage in transitu.
These observations have been also quoted by Govinda Menon and Mack, JJ., in the decision reported in Province of Madras v. Firm of Kanigolla Sivalakshminarayana (1949) 1 M.L.J. 530. The learned Judge Mr. Justice Govinda Menon observes at page 531 :-
This dictum of Blackburn, J., has been considered by the Court of Appeal in Cassaboglou v. Gibb (1883) 11 Q.B.D. 797, but for the purpose of the present case it is unnecessary to deal with the criticisms or discussions either by the Master of the Rolls or by the Lord Justices in that case.
55. The learned Chief Justice in delivering the leading judgment of the Full Bench in the decision reported in Radhakrishna Rao v. Province of Madras A.I.R. 1952 Mad. 718, in dealing with the decision in Ireland v. Livingston (1872) L.R. 5 H.L. (E. and I.) 395, observes at page 725 as follows :-
We are not concerned as to how far Lord Blackburn's dictum about the relationship between a commission agent and a foreign consignee as being that of vendor and purchaser is correct law....
I do not therefore propose to deal at any length with either the decision in Ireland v. Livingston (1872) L.R. 5 H.L. (E. and I.) 395, or Cassaboglou Gibb (1883) 11 Q.B.D. 797.
56. The observations of Justice Blackburn have been commented upon in Cassaboglou v. Gibb (1883) 11 Q.B.D. 797. At page 807, Fry, Lord Justice, in dealing with these observations, observes as follows :
No doubt in that case Lord Blackburn uses stronger language, and says that the 'the legal effect of the transaction' is a contract of sale passing the property from the one to the other, and consequently the commission merchant is a vendor and has the right of one as to stoppage in transitu ; but by the legal effect of the transaction he means the legal effect of an analogous contract to that of a contract of purchase and sale. It is important also to observe that Lord Chelmsford in that case puts the matter so as to conclude the existence of any contract of purchase and sale. He says, 'I would preface what I have to say by stating my opinion that the question is to be regarded as one between principal and agent, though the plaintiffs might in some respects be looked upon as vendors to the defendants, so as to give them a right of stoppage in transitu'. Therefore in such a case as the present there is in fact no contract of vendor and purchaser. If that be so, then is the principle on which the damages are to be assessed to be governed by that which is applicable to the case where there exists such a contract I think not, and that it is to be governed rather by that which is applicable to the case of principal and agent.
Therefore the decision in Ireland v. Livingston (1872) L.R. 5 H.L. (E. and I.) 395. has not been approved even in England and Fry, Lord Justice, treated the case before him only as one of principal and agent and not of a vendor and purchaser.
57. We are not therefore able to accept the contention of the learned Advocate-General that the assessees in the present case, even treated as agents, can still be considered to be vendors in relation to the foreign buyers.
58. In the result, the orders dated 6th August, 1952, and 30th June, 1953, of the first and second respondents respectively, are quashed and the rule nisi issued by this Court made absolute. As all the questions referred to us in S.T.R. 1/54 have been dealt with by us in O. P. 163/53, we think it unnecessary to separately answer those questions over again. Our decision in O.P. 163/53 will govern S.T.R. 1/54 also.
59. O.P. No. 133 of 1955, as already stated, relates to the assessment year 1952-53. The Sales Tax Officer, First Circle, Pulleppadi, Ernakulam, has by his order dated 26th March, 1955, assessed the company to sales tax. According to the officer the assessee-company did not include in their monthly turnover their sales of goods delivered at the Cochin harbour for the American-Canadian companies. The officer has not accepted the contention of the assessees that those transactions are not liable for payment of sales tax. In the memorandum of grounds filed before the Appellate Assistant Commissioner, the assessees have challenged the order of assessment on several grounds. One of the grounds, we find, relates to the sales taking place in the course of export outside the territory of India. Evidently, this has reference to Article 286 of the Constitution, though the Article as such is not mentioned in the grounds. The appeal is pending before the Appellate Authority, In the meanwhile, Messrs Lipton Ltd., the assessees had filed 0. P. No. 133 of 1955 in the then Travancore-Cochin High Court. The reliefs asked for in the application are for the issue of a writ of prohibition or any other appropriate writ or order prohibiting the Sales Tax Officer, First Circle, Pulleppadi, Ernakulam, who is the sole respondent, from enforcing his order dated 31st March, 1955. There is also another prayer for the issue of writ of prohibition or other direction prohibiting the said officer from proceeding to levy sales tax on similar exports made by the assessees from Cochin harbour in 1953-54, detailed in the schedule attached to the applicant's letter dated 23rd March, 1955.
60. We do not propose to go into the merits of the contentions raised by the applicants or by the State in the affidavits filed in this Court. Apart from challenging the order of the Sales Tax Officer on the merits, the grievance of the applicants appears to be that no opportunity was given to the applicants to adduce necessary evidence regarding the several contentions raised by them including their contentions based on Article 286 of the Constitution. It is also clear from the affidavit that the assessment relates not only in respect of transactions with the American-Canadian Companies, but also with one Hayes G. Shimp (Inc.) and Hayes G. Shimp, Canada Ltd.
61. No doubt, in the counter-affidavit filed on behalf of the State the material statements in the affidavit filed in support of this petition have been challenged. It is also stated that the petitioners had no case that the sales were exempt under Article 286(1)(b) of the Constitution. There are also several other matters mentioned in the counter-affidavit.
62. As stated earlier, we do not propose to discuss the several contentions raised on the side of the petitioners and the State. As the appeal is still pending before the appellate authority, we are not inclined to interfere at this stage and issue the writ of prohibition as prayed for. Though the existence of a remedy by way of an appeal provided under the statute is not a bar to invoking our jurisdiction under Article 226, yet we do not feel inclined to interfere in this case.
63. We have already expressed our opinion about the position occupied by the assessees in relation to the American-Canadian companies under the agreement dated 3rd January, 1944. The learned Advocate-General is well-founded in his contention that there is lack of materials before us regarding the transactions with Shimps.
64. The appellate authority will consider all the objections of the assessees with regard to all matters and dispose of the appeal now pending before it in the lignt of our decision in O. P. 163/53 and S.T.R. 1/54.
65. But we must point out that the statement in the counter-affidavit that the petitioners had no case about the bar based on Article 286(1)(b) of the Constitution, does not appear to be correct. In the records placed before us, we find a letter dated 5th March, 1955, by the respondent to the applicants requesting them to furnish figures regarding exports as either purchasing agents or selling agents from Cochin harbour on or before 15th March, 1955, for the periods 1952-53 and 1953-54.
66. On 17th March, 1955, the applicants have sent a reply stating that the required information will be furnished within a few days. It is stated in the said reply: ' It is our contention that any exports made through Cochin Harbour are exempt from sales tax etc.' In their further reply dated 23rd March, 1955, apart from other matters, the applicants have taken the point that apart from the question of sales, these are export shipments and cannot be liable to sales tax, in view of the provisions of Article 286(a)(1) and (2) of the Indian Constitution. Therefore, the appellate authority will consider all the contentions including that based on Article 286 of the Constitution.
67. It is not also possible for us to grant prayer (b) in O.P. 133/55 regarding the levy of sales tax on similar exports made by the applicants in 1953-54. We do not know the nature of those transactions and we are sure that the Sales Tax Authorities will consider all the objections of the assessees and pass appropriate orders.
68. With these observations, 0. P. 133/55 is dismissed. All parties will bear their own costs in the two 0. Ps. and in the reference.