1. By an order of this Court dated the 2nd May, 1958, the Commissioner of Sales-tax Rajasthan was directed to refer a question of law under Section 15 (3) of the Rajasthan Sale-tax Act (Act No. 29 of 1954) (hereinafter called 'the Act'), and it is thus that this reference comes for opinion.
2. M/s. Lalchand Jalamchand of Bikaner (hereinafter called 'the assessee') were assessed for the assessment year 1956-57 on a turnover determined at the figure of Rs. 96,992/9/9. It raised a tax liability in the sum of Rs. 12,114/1 against the assessee which they disputed on the ground that they had merely imported hydrogenated vegetable and edible oils which were sold by their commission agents M/s. Pirdan Prem Chand of Bikaner (hereinafter called 'the Commission Agent'). The assessee claimed to be not liable because they made no sales and for the commission agent it was contended that they stood exempted from payment of sales-tax as they had deposited the requisite fee in the sum of Rs. 500 pursuant to a notification No. F. 21 (7) SR/55 dated 14th April, 1955. The question which this Court formulated for answer is as follows:
'Whether Sales Tax in respect of sales amounting to Rs. 96,992 of hydrogenated vegetable edible oils belonging to the assessee effected during the year 1955 by his commission agent Messrs. Peerdan Premchand, who had been granted a valid exemption certificate in form S. T. in respect of such sales under Sub-section (2) of Section 4 of the Rajasthan Sales Tax Act, 1954 is leviable on the assessee on the ground that the aforesaid sales made by the commission agent can be treated as made by the assessee for purposes of assessment and few of sales tax under the Rajasthan Sales Tax Act?'
The question when analysed postulates that the hydrogenated vegetable edible oils, the sale whereof was effected by the agent, belonged to the assessee. For the purposes of determining as to who is liable for the payment of sales tax we shall have to examine the relevant provisions of the Act as applicable to the circumstances of this case. Under Section 3 when the turnover of a dealer in a previous year in respect of sales and supplies of goods exceeds certain limits specified in Section 3, it makes the dealer liable to pay sales tax. There is no controversy regarding the limit in the case before us. The first point, therefore, to be determined is whether it is 'the assessee' who is the dealer or 'the agent' for the sale of the hydrogenated vegetable edible oils. The term 'dealer' has been defined in Section 2 (f) as it stood for the relevant year and it reads as follows:
'(f) 'dealer' means any person who carries on the business of selling or supplying goods in the State whether on commission or for remuneration or otherwise and includes a Hindu undivided family, and also a society, club or any other association which sells or supplies goods to its members;
Explanation--Where a dealer who resides outside the State carries on the business of selling or supplying goods in the State through a manager or agent, the manager or agent shall, in respect of such business, be deemed to be a 'dealer' for the purpose of this Act.'
When a person carries on business of suiting and supplying goods in the State he comes within the ambit of the term 'dealer' as defined above. The explanation embraces within the compass of the term 'dealer' an agent or manager as well if the dealer who resides outside the State carries on business of selling and supplying the goods in the State. In the case before us both the agent and the assessee carry on business in the State of Rajasthan. The explanation, therefore, does not directly assist us in the determination of the question. The existence of this explanation, however, clearly suggests that but for it an agent who carried on business on behalf of the nonresident principal may not have been liable to sales tax The term 'dealer' as the definition goes is a person who carries on the business of selling and supplying. Now, the word 'sale' means, according to the Act with all its grammatical variations and cognate expressions 'any transfer of properly in goods for cash or deferred payment or other valuable consideration.' When examined from another aspect the question is as to who could and did transfer the right in the commodity the sale of which is sought to be liable to sale tax. As we have noticed earlier the ownership resided in the assesses He could have directly sold it thereby transferring the property in goods or he could have allowed the transfer through his agent or servant It is not necessary that the owner must himself perform the act constituting the transfer. It would not be correct to say that the transfers of the property in goods must necessarily be performed by the owner himself When it is done by the agent or the servant of the owner it is the extended hand of the principal or the master which transfers the property in the goods to the purchaser. It is nobody's case that the assessee had transferred the ownership in the goods to the agent. What the agent did was merely the performance of the physical acts for and on behalf of the principal when he transferred the property to the purchasers.
3. Learned counsel for the assessee argued, relying on Radhakrishna Rao v. Province of Madras, AIR 1952 Mad 718 (FB), that a commission agent, according to the accepted mercantile practice, has control over or possession of the goods and has the authority from the owner of the goods to pass the property in and title to the goods When a commission agent sells goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner, there is certainly a transfer of property in the goods from the commission agent to the buyer, and therefore, it was the commission agent who transferred the ownership of the property in the commodity.
4. Before we examine this argument, it will be necessary to make a reference to the status of the commission agent in the circumstances of this case. This commission agent is a person to whom an exemption certificate was granted under Section 4 (2) of the Act. The material portion of the section reads:
'4. Act not to apply to certain sales-
(2) Where the State Government is of opinion that it is necessary or expedient in the public interest so to do, the State Government may, by notification in the official gazette, exempt from lax the sale of any goods or class of goods or any person or class of persons on such conditions and on payment of such fee as may be specified in the notification.'
Pursuant to these provisions the Government of Rajasthan issued the under-mentioned notification:
'Jaipur, April 14, 1955.
No. F. 21 (7) SR/55: In exercise of the powers conferred by Sub-section (2) of Section 4 of the Rajasthan Sales Tax Act, 1954 (Rajasthan Act XXIX of 1954), the Government of Rajasthan being of the opinion that it is expedient in the public interest to do so, is hereby pleased to exempt all Commission Agents (Pacca and Kachha Arhtiyas) from the tax payable under the said Act, on the following conditions:
(1) The Commission Agent claiming exemption holds valid certificate of Exemption for which a fee calculated on the basis of turnover is hereby prescribed as follows:
If the turnover exceeds Rs. 1,00,000 then for every Rs. 25,000or fraction thereof in excess of Rs. 1,00,000
Subject to a maximum of Rs. 500/-
(2) The Commission Agent claiming exemption hereunder sells or supplies goods on behalf of known principals specified in his accounts for an agreed commission or brokerage.
(3) Except where the transaction consists of a sale by a grower of produce grown by him or on his land, the amounts for which the goods concerned in the transaction in respect of which exemption is claimed, are sold, are included in the turnover of the principals, or would have been so included, but for an exemption granted under the said Act,
(4) The Commission or brokerage agreed upon and specified in the accounts, represents the entire remuneration payable to the agent, apart from legitimate incidental charges actually incurred by him and specified in the accounts in respect of insurance, transport, loading and unloading godown rent, interest, correspondence, telegrams, telephone charges and the like.''
The agent paid a sum of Rs. 500, being the maximum fee payable under this notification, and claimed exemption from liability to sales tax. The essential conditions under which this exemption is to be granted inter alia emphasise that the goods must be sold or supplied on behalf of known principals specified in his accounts. Another condition, namely, No. 3, is that the amounts for which the goods concerned in the transaction in respect of which exemption is claimed, are sold and are included in the turnover of the principal. The condition No. 4 also limits the totality of benefits which the commission agent earns in these transactions. He gets only the commission or brokerage agreed upon and specified in the accounts. This represents the entire remuneration payable to him. It is on the fulfilment of these conditions that the exemption is available. In the Madras case, AIR 1952 Mad 718 (FB) the learned Judges considered the case where a commission agent sold goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner. The exemption envisaged under Section 4 Sub-section (2) of the Act before us operates only in respect of known principals whose names have been specified in the accounts of the agent. The circumstances of this case, therefore, are clearly distinguishable from the hypothesis on which Madras judgment proceeds. The learned Judges of the Madras High Court dealt at some length with the case in Provincial Govt. of Madras v. Veera Bhadrappa, AIR 1950 Mad 521, but distinguished it on facts and were not prepared to go to the length of holding that in no case could a commission agent be a dealer. It is unnecessary for us to examine in detail the abstract question whether in a given case a commission agent could or could not be a dealer for the purposes of the sales tax. The question before us is confined to a commission agent who has been exempted under Section 4 (2) from the liability of the sales lax when he deals on behalf of the known principals and it is within these narrow limits that we have to address ourselves. The implication of the exemption available and in point of fact availed of by the commission agent in the case before us is clear. On the condition that the principal is disclosed by the commission agent in his books of account and such principal includes in his turnover the goods sold by such commission agent and the commission agent charging nothing else excepting commission agreed upon and specified in the accounts and that being the entire remuneration, he shall not be liable as a dealer for the payment of the sales tax. Reference in this connection may be made to A. L. Mani v. State of Kerala, 1963-14 STC 657 (AIR 1962 Kerala 327) (FB). The learned Judges of the Kerala High Court have observed, while dealing with Section 9of the Travancore Cochin General Sales Tax Act (XI of 1125) which in substance makes a provision, which Section 4 Sub-section (2) and the notification made thereunder in the Rajasthan Gazette provides, as follows:
'A licence under Section 9 implies, that for an agreed commission or brokerage an agent buys or sells goods on behalf of known principals specified in his books of account in respect of each transaction. It enables the agent to claim exemption from tax in respect of his transactions, subject to two conditions which alone are material to the present case first that they were carried out in accordance with the terms and conditions of the licence, and second, that the requirements of the first proviso to Section 9 were fulfilled.'
The requirements of the first proviso to Section 9 are similar to those which are contained in condition No. 4 of the Notification under Section 4 (2) of the Rajasthan Sales Tax Act. The learned Judges have further observed :
'An agent, who does business by buying or selling and whose right may be no more than to his commission or brokerage being himself a dealer, is assessable as such and but for Section 9, has to work out his right of reimbursement against his principal, if need be, by resort to the Civil Court. The object of Section 9 is to avoid this as far as possible by exempting the agent from the tax burden, wherever and whatever extent it can be readily and indisputably laid on the principal, to whom the turnover, which is the base of the tax, really belongs; but where this is not possible, the agent is denied the exemption and is left to his remedy under the general law.'
This is one of the reasons why the exemption is available under Section 4 (2) of the Act. Where a commission agent deals with the goods of a known principal and the principal includes the sales price of the goods sold in his own turnover and the commission agent merely charges his brokerage he is not answerable for the sales tax if the principal carries on business in Rajasthan and is otherwise liable. Similarly, in Sarju Pd. Pritamlal v. Judge. Revisions, Sales Tax. U. P., 1963-14 STC 884 (All), the learned Judges of the Allahabad High Court while considering the provisions of Section 6 which provides for a licence under the U. P. Sales Tax Act (XV of 1948) similar to the one envisaged under Section 4 (2) of the Act, observed:
'Section 6 provides for a licence being granted to a person, who, for an agreed commission, sells as agent on behalf of a disclosed principal, and for exempting the transactions carried on by him in accordance with the conditions of the licence from being taxed under Section 3.'
Another case to which our attention was invited in this connection is Stale of Andhra Pradesh v. Firm of Illur Subbayya Chetty and Sons, AIR 1961 Andh Pra 512 (FB) The learned Judges relying on Radha Krishna Bao's case. AIR 1952 Mad 718 (FB) and the definition of the 'dealer' came to the conclusion thata commission agent will be a dealer and, there fore, liable to sales tax Dealing with the question of exemption the learned Judges held. 'Advantage could he taken of this section by a commission agent by obtaining a licence. Further, the benefit of this section will be available only to agents who act on behalf of known principals specified in their accounts. It is also essential that he should fulfil the terms and conditions of such a licence. In this case, admittedly, the respondent firm had not taken a licence for doing commission business. Nor do their accounts disclose that they had acted only as commission agents. Therefore, Section 8 is inapplicable and the plaintiff-firm cannot claim any exemption.' This case does not render any direct assistance in answering the question before us. In our case the agent is admittedly an exempted agent. The assessee before the Sales Tax Officer exhibited his 'Arath Khata' obtained from the commission agent. This showed a turnover of Rs. 96,992/9/9. The Sales Tax Officer has noted in his order dated the 30th May, 1950 that the assessee in the quarterly returns in form ST5 disclosed that his 'taxable turnover amounts to sales by M/s. Peerdan Premchand, Bikaner.' The clear implication of this is that while the assessee included in his turnover the sales conducted by his agent, the agent claimed an exemption under Section 4 (2) of the Act. The condition No. 3 of the Notification read with Section 4 (2) to our mind clearly indicates the scheme of the Act. Where a commission agent merely works on commission and effects sales of goods of a disclosed principal and the principal includes in his turnover the sale price of the goods sold by the agent, it is the principal who is the dealer for the purposes of sales tax.
5. The learned counsel for the assessee vehemently argued that in this case the agent could nut collect the tax because of the exemption certificate and because he ran the risk of being prosecuted and the assessee could not collect the tax because they had not effected any sale and had no opportunity to do so and the sales tax being an indirect tax on the consumers is in result being exacted from the seller. The seller could not pass it on to the consumers and collect it from them. In the first place, this Court directed the Board of Revenue for Rajasthan, Ajmer, to ascertain whether the assessee or the commission agent had charged any sales tax from the buyer in respect of goods sold by the commission agent and the answer that it returned is to the effect that by reference to the account books of the commission agent, it cannot be said with certainty whether the sales tax was charged by the commission agent The assessee also produced no accounts despite a promise made to the Board and submitted that the account books were not available. Therefore, there is no data before us to conclude that no sales tax was collected either by the purchaser (sic) or the commission agent. The primary liability to pay the sales tax so far as the State is concerned is on the seller. In this connection reference may bemade to Tata Iron and Steel Co., Ltd. v. State of Bihar, AIR 1958 SC 452 (462). The real seller in our opinion is the assessee and not the commission agent.
6. Another argument raised on behalf of the assessee was that the agent having paid a sum of Rs. 500 by way of so-called exemption fee in substance paid consolidated sale-tax and this demand of sales tax from the assessee is an exaction twice over. To reinforce his submission he sought to draw strength from the circumstance that the so-called 'fee' was itself regulated by reference to the quantum of the commission agent's turn-over. In our opinion, this argument is without merit. In the first place, what the State charges is an exemption 'fee' as distinguished from tax. While the quantum of turnover may regulate the quantum of fee but the ceiling therefor is only Rs. 500 irrespective of the turnover. Graduated fees are not unknown to law. A reference in this connection may be made to the fees chargeable for registration of documents depending on the quantum of consideration which a transaction involves. That the State Government intended to give a complete sales-tax holiday to the commission agents stands negatived by the nature of the conditions subject to which an exemption is granted.
7. The answer to the question, therefore, in our opinion, is that the sales tax in respect of the sales amounting to Rs. 99,992 and add of hydrogenated vegetable edible oils belonging to the assessee effected in the year 1955 by his commission agent M/s. Peerdan Premchand (exempted under Section 4 (2) of the Act) is chargeable from the assessee, who as a dealer effected the sale thereof through his exempted commission agent.
8. This reference is, therefore, answeredas above. The assessee shall pay a sum ofRs. 100 by way of costs to the State for thisreference.