Satyanarayana Rao, J.
1. All these four second appeals by the Provincial Government of Madras raise interesting and difficult questions of law under the Madras General Sales Tax Act, 1939 (Madras Act (IX  of 1939) referred to in the judgment as 'the Act'). The appellants were unsuccessful in both the Courts and hence these second appeals.
2. The four suits out of which these second appeals arise were instituted in the District Munsif's Court of Bellary by different plaintiffs against the Provincial Government for a declaration that the assessment of sales-tax imposed upon them was illegal and void. As the suits raised common questions of law and similar questions of fact, by consent of parties they were tried together and disposed of by a common judgment both by the District Munsif and by the learned District Judge.
3. The plaintiffs are commission agents who carry on trade at a place called Adoni in Bellary district. Besides the commission business, they also carry on independent business of their own. Under Section 8 of the Act, they were granted licences permitting them to carry on commission business which is styled dalali agency in the judgment. Under the terms of the licence, the plaintiffs are not liable to pay sales-tax in respect of their commission businesses. There was no trouble till March 1943 as no tax was imposed upon them by the Deputy Commercial Tax Officer in respect of the commission business. In the years 1943-44, however, the Deputy Commercial Tax Officer thought fit to impose upon the plaintiffs sales-tax on the ground that they had violated the terms of the licence and were, therefore, disentitled to the exemption. The plaintiffs carried the matter in appeal to the Commercial Tax Officer and also in revision in the Board of Revenue but they were unsuccessful throughout. Hence these suits.
4. The main ground on which the Commercial Tax Officer imposed sales-tax was that the plaintiffs collected double commission in respect of the same transaction of sale both from the buyer as well as the seller and that the commission received from the purchaser was not entered in the seller's account. In addition to this, it was also contended by the defendant that the plaintiffs collected certain amounts as rusums for Dharmam, Gumastha, Vasool, etc., and without spending these amounts for the purpose for which they were collected they were in the hands of the plaintiffs without even rendering an account of such collections from the buyer in the seller's account. For these reasons it was alleged by the Government that the conditions of the licence had been violated and that, therefore, the plaintiffs should be treated as not entitled to any exemption and should be deemed to be 'dealers' within the meaning of the Act. Various issues have been raised in the suits covering the contentions between the parties. Most of these points on which there was controversy in the Courts below have now not been urged before us in the second appeals and it is not, therefore, necessary to advert to them in detail.
5. Before referring to the relevant provisions of the Act and the rules framed thereunder, it is necessary to refer to the nature of the business carried on by the plaintiffs as established by the evidence in the case. The findings of fact by the Courts below have been accepted on behalf of the appellants in these second appeals. The nature of the business which was proved by the evidence in the case was not seriously contested by the Government in the trial Court. The learned District Munsif carefully considered the evidence and stated his conclusion in very clear terms on this aspect of the case. In order to better appreciate the contentions that have been urged before us it is necessary to have those conclusions as background for this judgment. The matter has been ably and clearly summarised by the learned District Munsif in para. 8 of his judgment as follows :
'The villagers who raise groundnuts on their lands or on the lands taken by them on lease go to the shops of the plaintiffs and take empty gunny bags. Sometimes they also borrow money in advance. Sometime later after the groundnut crop on the land has been plucked, the ryots fill up the bags and bring their groundnuts to the plaintiffs' shops early in the morning. At these shops there will be certain coolies who will unload the carts for which they were immediately paid. A little later in the morning, the plaintiffs (who will hereafter be referred to as dalali merchants) send for prospective purchasers of the groundnuts. They are usually persons who purchase groundnuts to be sold again or to be used for expelling oil. From the accounts it is seen that most of the purchases were made by one T. G. Lakshmayya whose clerk has been examined as P. W. 6 T. G. Lakshmayya's accounts have been filed as Exs. A-52 and A-53. After these prospective purchasers go to the shops the Dalali merchants allow them to inspect the goods brought by the ryots. Thedifferent purchasers select their own bags. Thereafter the Dalali merchants and the prospective buyers enter into a bargain about the prices. The ryot who is the principal seller would be consulted in the matter of fixation of prices and when the principal seller and the prospective buyer agree upon a definite price the sale by the ryot to the buyer is concluded. This would be done sometimes in the morning. Thereafter the buyer sends his clerk to the shop of the Dalali merchant and in his presence and in the presence of the clerk of the Dalali merchant and in the presence of the principal seller the groundnuts would be weighed by certain coolies who are called the chintalu coolies, the word 'chintalu' meaning weighment. At the time of weighing the goods, entries would be made in the chintalu books. Exhibits A-25 and A-26 are the chintalu account books of Neeli Veerabadrappa. Exhibits A-27 and A-28 are the chintalu account books of Chakoli Abdul Huq and Exs. A-29 and A-30 are the chintalu account books of Pratap Venkatasami and Eranna. After the weighment is over, the Dalali merchant draws up a patti in favour of the purchaser. In this patti, the number of bags sold, the weight of the goods and the price thereof would be noted. To this would be added two items. Item 1 is the commission which goes to the commission agent and item 2 is the chintalu cooly paid to the coolies who weigh the goods. This cooly amount is paid immediately to the coolies who naturally would not wait for their payments being postponed. The commission agent's clerk goes to the shop of the buyer and gets the amount due on the patti. Out of the amounts received, the commission agent retains dalali, gives away the chintalu cooly and the balance represents the value of the goods which is given to the seller ryot. But the seller is called upon to pay certain amounts. He has to pay dalali or commission. He will be charged certain other small sums which are called Gumastha, Dharma, sample rusum and receipt amounts. The payment of those sums is consented to by the principal seller, to whom a patti would be given including these amounts. This has been the customary method of commission agency in Adoni market as can be deduced from the evidence in the suit. The plaintiff who acts as commission agent in respect of the ryot-seller therefore takes certain commission for himself and he takes certain other items which are all agreed upon. He takes commission from the buyer with the knowledge of the seller.'
The learned District Munsif also recorded a finding on the various grounds of attack which have been levelled on behalf of the Government. The first ground was that the plaintiffs collected commission both from the seller as well as from the buyer which was the ground on which the Deputy Commercial Tax Officer sustained his order imposing sales tax. But in the written statement filed by the Government and in the arguments before the learned District Munsif it was conceded that there was no legal objection for collecting commission both from the buyer as well as the seller if it was agreed to by the principals. The next ground urged was that in the account of the seller maintained by the plaintiffs the commission paid by the purchaser has not been included, The learned District Munsif was satisfied on an examination of the entries in the books that the commission collected from the buyer was also entered in the account books and that the charge was unfounded. The commission was collected both from the seller and the buyer with the knowledge of the principals and when the principals concerned were known principals. He overruled the contention of the defendant that certain items besides the commission such as the cooly charges were appropriated by the plaintiffs themselves. The cooly charges were collected from the buyer and not from the seller direct and were immediately paid to the cooly. The gumasta, dharma, sample rusum and receipt amounts were collected from the ryot from a long time and were the usage of the trade which was well known in Adoni and other places and therefore they were incidental or part of the agreed commission and brokerage. The last of the objections was that some items were not utilised for the purpose for which they were intended. On this part of the case the learned District Munsif found that in some instances it was, in fact, utilised but in others they were retained in the hands of the plaintiffs.
He therefore came to the conclusion that none of the terms of the licence were violated by the plaintiffs and that even if the amounts collected by the plaintiffs were not appropriated for the purpose for which they were paid by the principal that would not be a violation of any of the terms of the licence so as to entitle the Government to levy sales tax. The learned District Munsif went further and held that even if the plaintiffs had violated the terms of the licence they would not by that fact become 'dealers' within the meaning of the Act unless it was established that, in fact, in any particular case they purchased the goods as their own and sold them as such. It was pointed out that in cases where the plaintiffs bought goods for themselves and sold them for their own private gain they maintained separate accounts in respect of such transactions and these were included in their turnover. The transactions relating to the commission business were separate and were independent from the transactions on their own account. He summarises his findings on the various issues in the suits in para. 22 of his judgment. He found on issue 1 that the plaintiffs in these suits are licence holders, on issue 2 that they are exempted from sales tax on commission agency business, on issues 3 and 4 that they are entitled to charge double commission which was being credited in the accounts and that even if it is not credited it is not a violation of the terms of the licence--and that the collection of double dalali is customary and does not violate the terms of the licence; on issue 5 that the collection of rusum, dharmam is not a violation of the terms of the licence, and on issue 6 that plaintiffs were agents and not dealers in groundnuts in respect of agency business. In the result, he granted a decree in favour of the plaintiffs as prayed for.
6. On appeal, the learned District Judge agreed with most of the conclusions of the learned District Munsif on law and fact. He seems, however, to differ from the learned District Munsif in his view that even if the terms of the licence were violated the plaintiffs would not become 'dealers.' In another part of his judgment, he expresses the view that unless the commercial tax authorities prove that the plaintiffs become dealers and carried on transactions as dealers in violation of the terms of their licence as commission agents they would not be liable to pay tax. It is not clear, however, from the judgment of the learned District Judge whether he finally takes the view that mere violation of the terms of the licence would constitute the plaintiffs dealers and therefore liable to pay tax as dealers if it is not otherwise proved that they bought or sold goods on their own account and not on behalf of known principals. He, however, accepts the view that the Government failed to establish that the plaintiffs were dealers in respect of any of the impugned transactions, i.e., in the sense that they were sellers and buyers themselves on their own behalf and not merely persons who acted on behalf of known principals. The learned District Judge was in entire agreement with the learned District Munsif in holding that there was no breach of any of the terms of the licence and that the tax imposed by the Commercial tax authorities was not legal.
7. The position, therefore, now is that most of the grounds on which the Commercial tax authorities imposed the sales tax on the plaintiff were unfounded and, in fact, when the matter came to trial they were not able to sustain some of the grounds on which the tax was imposed upon the plaintiffs. On behalf of the defendants there is a clear attempt to shift the ground from time to time and to sustain the orders imposing taxes by some means or other --whether the Government was justified or not. I was constrained to refer to this aspect of the case as it would be quite unsafe to leave entirely the decision of the legality of the imposition of sales tax to taxing authorities themselves as it seems to me that the authorities concerned find it delicate to acknowledge their own mistakes.
8. The legality of the taxes imposed in these cases has to be considered under the provisions of the Act and the rules framed thereunder, before they were amended in 1947 and 1948. It is necessary at the outset to refer to the relevant provisions of the law as they stood before 1947. Section 3 of the Act is the section which imposes the tax, It is as follows :
'Section 3--(1) Subject to the provisions of the Act, every dealer shall pay in each year a tax in accordance with the scale specified below :
(a) (i) If his turnover does not ... Ninety six rupeesexceed fifteen thousand rupees,(ii) If his turnovers exceeds fifteenthousand rupees but does not exceedTwenty thousand rupees ... One hundred andforty-four rupees(b) If his turnover exceeds twentythousand rupees ... One per cent. ofsuch turnover Provided that any dealer whose turnover in any year is less than ten thousand rupees shall not be liable to pay the tax under this sub-section for that year ;
Provided further (1) that in respect of the same transaction of sale, the buyer and the seller shall not both be taxed, but only one of them, as shall be determined by the rules made in this behalf under Sub-section (2), shall be taxed thereon, and (2) that, when the amount for which any goods were bought by a dealer has been included in his turnover, the amount for which the same goods were sold by him shall not be included in his turnover, for the purposes of this Act.'
9. Sub-section (2) empowers the Provincial Government to frame rules to determine the turnover. Sub-section (3) is not very important and is therefore omitted. This section uses the words 'dealers' and 'turnover.' 'Dealer' is defined in Section 2 (b) thus :
'' Dealer' means any person who carries on the business of buying or selling goods ;
Explanation (1) : A co-operative society, a club, a firm, or any association which sells goods to the members is a dealer within the meaning of this clause.
Explanation (2): The agent of a person resident outside the Province who carries on the business of buying or selling goods in the Province, shall be deemed to be the dealer in respect of such business for the purposes of this Act.'
10. 'Turnover' is defined in Section 2 (1) thus : ''Turnover' means the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration provided that the proceeds of the sale by a person of 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 excluded from his turnover.'
11. There is an explanation to this definition which contains three sub-clauses. Of these Sub-clause (iii) is relevant. It says :
'Where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former;'
12. 'Sale' is defined by Section 2 (h) thus: ' '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 for or deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge';
13. The explanation provides : 'A transfer of goods on the hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be sale.'
14. Sections 5 and 8 provide for exemption from tax. Section 5 relates to general exemption from taxation in respect of the turnover by the sale of cotton yarn and handloom etc. Section a deals with licensing and exemption of agents. It is as follows :
'The Provincial Government may, on application and on payment of such fee as may be prescribed in that behalf, licence any person under this section who for an agreed commission or brokerage buys or sells on behalf of known principals specified in his accounts in respect of each transaction and may exempt from the tax under Section 3 such of his transactions as are carried out in accordance with the terms and conditions of his licence:
Provided always that, save where the transaction consists of a sale by a grower of produce grown by him or on his land, no such exemption shall be given unless the amounts for which the goods concerned in such transactions are sold, are included in the turnover of the principals or of the dealers from whom purchases were made, or would have been so included but for an exemption provided under this Act.'
Turnover and assessment rules were made by the Government under Section 3 (2) of the Act, Under Rule 4 'the gross turnover of a dealer for the purpose of these rules shall be the amount for which goods are sold by him.' That is Sub-clause (1). Sub-clause (2) enacts a method by which the gross turnover of the goods specified therein has to be calculated. It says:
'In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by him.'
Among these is included groundnut. The result of this rule is that when the groundnuts are purchased by a dealer and sold subsequently he has to pay the turnover tax only on the cost price and not on the sale price. Under the rule-making powers conferred by Section 19 of the Act, Sales-tax Rules have been framed by the Government. These provide the method and the manner of issue of licenses and also other provisions. Part II of the Rules deals with the licences to be given under Sections 5 and 8, Under Rule 8, if the conditions of the licence were not observed, the Deputy Commercial Tax Officer is empowered to cancel the licence. Rule 12 requires the dealers and agents to maintain separate accounts in respect of their transactions also as commission agents.
15. The arguments before us covered a wider field viz., the question whether a commission agent could ever be a 'dealer' and liable to be assessed to tax on his turnover under Section 3 of the Act. The learned Advocate-General on behalf of the Government contended for a restricted and narrower interpretation of 'agent' in order to justify the exemption under Section 8 of the Act while Mr. Muthukrishna Aiyar, the learned advocate for the respondents, argued that the word ''agent' should receive its ordinary meaning as understood in law and that Section 8 of the Act is either an unnecessary section or an infructuous one, assuming that a commission agent is a dealer within the meaning of the Act and that he is bound to apply for a licence under Section 8 in order to secure exemption from taxation under the Act, as it has now been found by the Courts below that the terms of the licence were not violated by the plaintiffs, the imposition of the tax in these cases, is in any event, not justified. These findings have not been challenged before us except that a faint suggestion is made that there was no strict pleading by the plaintiffs in their plaints. It was contended that in the plaints the plaintiffs claimed to be the agents only of the sellers and never disclosed that they were also agents of the buyers. But this contention was negativedby the learned District Judge and, as rightly pointed out by him in his judgment, the pleading does not suffer for want of any particularity. The findings of the Courts below which have been accepted by the appellants, as they could not assail those findings of fact, are really sufficient to dispose of these second appeals in favour of the respondents. But as arguments have been addressed on the larger question we think it is necessary to consider them and state our conclusions as the questions raised are of considerable importance both to the Government and the merchants who carry on the business of commission agents.
16. The learned District Munsif expressed the view that even if there was a violation of the conditions of the licence that could not make the agent a 'dealer' within the meaning of the section and would not entitle the sales tax officer to impose a tax treating the commission agency transactions as sales or purchases on their own account and as constituting their then 'turnover.' The learned District Judge does not seem to agree with this view. If a commission agent is not a 'dealer' within the definition of the word and the 'turnover' cannot be deemed to be his turnover it is not possible to bring him within the taxation section--Section 3. In that event Section 8 providing for exemption subject to certain conditions enumerated in the licence and in the section is wholly unnecessary.
17. According to the learned Advocate-General, Section 8 was intended to avoid double taxation on the turnover of the principal --whether a seller principal or a buyer principaland at the same time treating such turnover as the turnover of the agent also. The word 'agent' according to him should be interpreted as applying only to a person who acts more or less, to use his own expression, as a 'conduit pipe' in bringing together the seller and buyer in respect of goods. After the two are broughttogether the agent disappears from the scene. This argument excludes an agent who acts on behalf of a seller as well as an agent who acts on behalf of a buyer when he does not bring the seller and the buyer together. He may be acting on behalf of a disclosed principal or maybe acting on behalf of an undisclosed principal. The tax is leviable under Section 3 on every dealer on his turnover. Rule 4 of the turnover rules contemplates two different schemes of taxation--a seller's scheme on the gross turnover of a dealer, i. e., the amounts for which goods are sold by him, and a purchaser's scheme on the gross turnover of a dealer, i. e., the amounts for which the goods are bought by him. The latter scheme is confined to certain goods which are enumerated in the rules. Therefore, the turnover usually is the amount for which the goods are sold by a dealer. But in the case of particular classes of goods, it is on the cost price at which the goods were (sic) are purchased. The definition of 'dealer' applies to a person who carries on the business of buying or selling goods. Prima facie, it means a person who carries on business on his own account and buys or sells goods on his own account. That, in my opinion, is the primary meaning of the definition. It does not mean the business of the commission agent but refers to the business of buying or selling goods, When an agent buys or sells goods on behalf of a principal, the business of buying or selling can only be the principal's business of buying or selling and the purchase of the same could only be on the principal's account. This cannot be treated as the purchase and sale of the agent on his own account. This interpretation of the definition receives support from Expln. 2 to the definition which includes within the definition the agent of a person resident outside the Province who carries on the business of buying or selling goods in the Province. If the definition is comprehensive enough to include within its scope and ambit an agent of a person whether resident outside the Province or inside it, it is unnecessary to add an explanation--Expln. 2. This explanation is now transferred to a new section--Section 14A--by the amending Act. Section 3 requires that the turnover liable to taxation under the Act must be the turnover of the dealer as it refers in both Clauses (a) and (b) to his turnover. Can it be said that when an agent buys or sells on behalf of a principal the turnover is the turnover of the agent and not that of the principal? But what is turnover? It means, according to the definition, the aggregate amount for which goods are either bought or sold by a dealer. In order to constitute the turnover of the agent he must buy or sell goods for himself. 'Sale' is defined as a transfer of property in goods by one person to another in the course of trade or business. It implies, therefore, that the property in the goods at the time of the sale vested in the person who sells and by reason of the sale the purchaser obtains a transfer of the property in the goods from the seller. An agent has no property in the goods which is vested in the principal and cannot transfer the property in the goods except under the authority of his principal. Under Section 27, Sale of Goods Act, it is enacted that where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precludedfrom denying the seller's authority to sell. There is a proviso which states :
'Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same : provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.'
18. If the agent has not title to the goods, it is impossible for him to convey the title to the goods unless he is authorised by the principal to sell the goods. In the case of mercantile agents the possession of the goods or the document of title to the goods clothes him with authority to convey the title to the goods though he is not the owner thereof provided the buyer acts in good faith. So that except in the limited classes of cases contemplated by Section 27, Sale of Goods Act, it is impossible for an agent to convey or transfer property in the goods except under the authority of the principal. Rules 22 to 23, General Sales tax Rules, impose a liability to tax in the case of incapacitated persons such as minors, lunatics and idiots or the persons who carry on business on their behalf such as guardians, trustees and Court of Wards, Administrator-General, Official Trustee, Receiver, Manager, etc. Rule 22 contemplates also the possibility of agent of a minor. This, I think, is anomalous as, in law, it is impossible for a minor to constitute an agent as he is incapable of entering into any contract.
19. The word 'agent' is not defined in the Act, and the definition in Section 182, Contract Act, may therefore be adopted. 'Agent' according to that section is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who so is represented, is called the 'principal.' So that from this definition it is obvious that there is no rule restricting the meaning of the word 'agent' merely to one instance of his acting for another, viz., where he acts as a 'conduit pipe' in bringing the seller and buyer together. He may represent another in the matter of sale and he may equally represent a principal in the matter of purchase. The two may not be connected and may not form part of the same transaction of a sale and purchase brought about by the agent between two persons. From this discussion, it follows that a commission agent who sells or buys on behalf of the principal is not a 'dealer' and is not liable to taxation in respect of the purchases and sales effected by him on behalf of the principal at his instance and that such transactions do not constitute his turnover.
20. If a person, therefore buys or sells on behalf of a known principal, the exemption under Section 8 is really unnecessary. The expression-'known principal' in Section 8 is not the same as 'disclosed principal' and ought not to be contrasted with an 'undisclosed principal' familiar under the law of contracts. 'Known principal' is used in the section to emphasise that the principal on whose behalf the agent purports to act should not be a fictitious or non-existent principal so as to enable the agent to camouflage his transactions and escape taxation. The undisclosed principal is a person certainly known to the agent though not known to either the seller or the purchaser as the case may be. Proviso to Section 8 also requires that in order to claim the exemption in the case of sale the amounts for which the goods concerned are sold should be included in the turnover of the principal and in the case of purchase the cost price should be included in the turnover of the purchaser. This again indicates in my opinion that the object is that the tax should not be evaded by a person purporting to act as agent of an unknown or fictitious principal; but so long as the principal is known and is clearly indicated in the account so as to enable the Government to proceed to levy the tax on the turnover of such principal the agent is exempted from taxation. The object of Section 8 according to the learned Advocate-General is to fix liability in case where an agent acts on behalf of an undisclosed principal. According to him in such cases the transactions whether of sale or purchase are really the transactions of the agent and the turnover would be the agent's turnover and, but for Section 8, he would be a dealer within the meaning of the definition. He also relies strongly upon the fact that the existence of Section 8 itself is an indication that an agent is a dealer. Section 8, it must be remembered, is not a taxing section but a section which creates exemption on the assumption that otherwise the person is liable to taxation. If that assumption falls to the ground, as shown already, there is no need really for the exemption. It may be that the section was enacted by way of abundant caution in order to make the machinery of taxation move smoothly and with speed; but that cannot be treated as a section imposing a charge. The learned Advocate-General went to the length of even suggesting that purchases and sales in the case of undisclosed principals by an agent constitute the agent the vendor or purchaser and the contract between him and the principal would constitute the relationship of vendor and purchaser. He relies very strongly in support of this position upon Section 230, Contract Act and the decision of the House of Lords in Ireland v. Livingston, (1871) L. R. 5 H. L. 395 : 41 L. J. Q. B. 201. The group of Sections 230 to 234, Contract Act deal with the position of the agent in relation to an undisclosed principal. Under Section 230: 'In the absence of any contract to that effect, an agent cannot personally enforce contracts entered by him on behalf of hit) principal, nor is he personally bound by them.
Such a contract shall be presumed to exist in the following cases :
(1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad ;
(2) where the agent does not disclose the name of his principal;
(3) where the principal, though disclosed, cannot be sued.'
The section, in the three exceptions, recognises a personal right of enforcing the contract even though the contract was entered into by him as an agent of a principal. In the case of a merchant resident abroad the inconvenience of suing each a merchant is obvious and it is for that reason that the exception in favour of the agent was recognised. The second exception relates to a case where the principal is not disclosed. All these exceptions do not constitute the agent the vendor or purchaser as the case may be as between himself and the principal. It is not a section dealing with the property in the goods. Merely because direct right of action is recognised on the basis of a contract entered into by him on behalf of an undisclosed principal it does not follow that that relationship between him and his principal was that of a vendor and purchaser or even that he acquires the title to the goods which he purchased on behalf of the principal or is clothed with a title to sell goods of his principal. The decision of the House of Lords above referred to is not, in my opinion, an authority for holding that the relationship between a principal and an agent when he buys goods on behalf of a foreign principal and sends them to him is that of really a vendor and purchaser. The plaintiff in that suit was a commission agent in Mauritius. The defendant was a resident of England, Two letters between the parties brought about a contract by which the commission agent, the plaintiff, was asked to supply 500 tons of sugar at a particular rate including freight and insurance. The contract gave discretion to the agent that the quantity may be 50 tons more or less and that he should despatch them if possible by ship to London, Liverpool or Clyde and that if that was not possible at least to Liverpool or London, The commission agent was able to procure about 400 tons of sugar which he purchased from different persons and shipped in one vessel to Liverpool. The principal refused to accept delivery and cancelled the order. The goods were subsequently sold by the plaintiff at London and an action was instituted for recovery of the difference between the price paid for the goods and the price realised at the sale. The main defence to the action was that the agent did not supply the total quantity of 500 tons and the tender of a lesser quantity was not a proper performance of the contract; further that the option contained in the letters regarding the shipment was also not observed. The question therefore turned really upon the construction of the two letters which constituted the contract between the parties. It was ruled that the plaintiff was entitled to succeed and that the refusal of the defendant to accept the goods when tendered was improper and there was a decree for the plaintiffs as prayed for. Blackburn J. examined in the course of the judgment the relationship between the consignor, the agent and the purchaser in London. In considering the relationship he observed that in such circumstances, particularly in the case of an agent and a foreign principal, in certain circumstances the agent would be in a position to pass title to the goods purchased by him on behalf of the principal and would also be entitled to a right of stoppage in transitu if the price was not paid, At p. 408 it was observed:
'It is quite true that the agent who is 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 person 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 a 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.'
21. In the earlier part of the judgment, it was pointed out by the learned Judge that it was common for the consignor to be an agent who does not bind himself absolutely to supply the goods but merely accepts an order by which he binds himself to use due diligence to fulfil the order. Of course he is bound to get the goods as cheap as he reasonably can. The contract is construed to be a contract by which a consignor agrees to procure goods at a particular price and below a certain rate and ships them to the person ordering the goods. At p. 409 it is pointed out that in some respects it was a contract between the vendor and the vendee but that does not mean that it was not a contract between the principal and the agent. He observed :
'My opinion is, for the reasons I have indicated, that when the order was accepted by the plaintiffs there was a contract of agency by which the plaintiffs undertook to use reasonable skill and diligence to procure the goods ordered at or below the limit given to be followed up by a transfer of the property at the actual cost, with the addition of the commission; but that this superadded sale is not In any way inconsistent with the contract of agency existing between the parties by virtue of which the plaintiffs were under the obligation to make reasonable exertions to procure the goods ordered as much below the limit as they could.'
22. Lord Chelmsford in his judgment at p. 416 prefaces his remarks by observing that the question should be regarded as one between principal and agent though the plaintiffs may, in some respects, be looked upon as vendors to the defendant so as to give them a right of stoppage in transitu. The learned Lord says 'But the transaction began as a contract of agency, and in that light I am disposed to consider it.'
23. The decision in Ireland v. Livingston, (1871) L. R. 5 H. L. 395 : 41 L. J. Q. B. 201 and the observations of Lord Blackburn in that judgment were considered by the Court of Appeal in Gassaboglou v. Gibbs, (1883) 11 Q. B. D. 797: 52 L. J. Q. B. 538. That case related to a contract between a principal who was a merchant in London and an agent abroad wherein the agent was asked to buy for the principal a certain description of opium from merchants abroad and ship it in England. The agent did not buy the opium which was ordered and did not inform the principal that he could not buy the opium ordered, The agent, however, without using sufficient care purchased and shipped some opium which had not answered the description of the opium which was ordered. The agent drew the bill on the principal for the price of the opium and for commission as agent. On the faith of the opium despatched the principal entered into contracts of sale with other merchants who when it was delivered found that the opium was of a different and inferior quality to that which was ordered and the principal was therefore obliged to satisfy the claim for damages made by the purchasers. Some of the opium was rejected on its arrival The question that had to be considered in the circumstances was as to the proper measure of damages to which the principal was entitled. He claimed that he was entitled to recover damages on the basis that the contract between the principal and agent was that of vendor and purchaser and that he was entitled to recover the difference between the price stipulated and the market price on the date of the breach as the market then went up. For the agent it was contended that it was only a contract between principal and agent and that he was liable to make good the actual loss suffered by the principal on account of the breach. The decision in Ireland v. Livingston, (1871) L. R. 5 H. L. 395: 41 L. J. Q. B. 201 and the observations of Blackburn J. were relied on behalf of the principal in support of the contention that the contrast between the principal and the agent was one of vendor and purchaser. Brett M. R. pointed out in the course of his judgment at page 803 :
'The decision of the House of Lords considered the point only with reference to two matters; one with regard to the theory of passing the property in the goods and the other as to the power of stopping the goods in transitu, and as to those two matters he (Lord Blackburn) has said with reference to the first of them that if the foreign commission agent has purchased the goods which he was ordered to purchase and has put them on board consigned to the principal, by that appropriation the property in the goods passed from the commission agent to the principal as if such agent were a vendor. Then as regards the power to stop in transitu, Lord Blackburn had said that if the commission agent abroad is bound to pay for the goods to the foreign seller of whom he bought them and if after he has shipped them to his principal such agent has not been paid and his principal is insolvent so that the foreign seller could only have the agent to look to for payment the Courts have held that such agent may stop the goods in transitu as if he were a vendor, or in the position of a vendor. And that is how it is understood is pointed out in Benjamin on Sales, 2nd Edn. page 689, where it is said 'stoppage in transitu' is so highly favoured on account of intrinsic justice that it has been extended by the Courts to quasi vendors, to persons in a position similar to that of vendors. But it is only said that the commission agent is to be as if he was a vendor when he has brought for his principal the goods which were ordered, which was not the case here. I asked Mr. Pollard how he applied such a rule as that to the present case because the measure of damages in the case of a vendor and purchaser would be the difference between the market price and contract price at the time of the breach and the only answer he gave me was that the plaintiff was entitled to be placed in the same position he would have been in if the defendants had fulfilled their contract with him, It is obvious to my mind that the contract of principal and agent is never turned into a contract of vendor and purchaser, for the purpose of settling the damages for the breach of duty of the agent. It is not necessary that I should give any opinion, and I, therefore, refrain from doing so, as to what would be the measure of damages if opium could have been bought of the description ordered.'
24. Fry, L. J., in the same case at page 807 considered the statement of law by Lord Blackburn in Ireland v. Livingston (1871) L. R. 5 L. H. 395: 41 L. J. Q. B. 201 and he pointed out:
'No doubt in that case Lord Blackburn used stronger language and says that 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 .... 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.'
I have abstracted these passages from the judgment of the Court of appeal to show that the case in Ireland v. Livingston, (1871) L. R. 5 H. L. 395 : 41 L. J. Q. B. 201, is not an authority for holding that the commission agent is in the position of a vendor when he was asked to buy goods on behalf of a foreign principal. Pollock and Mulla in their Commentaries on the Indian Contract Act, 7th Edn., at page 531, refer to Ireland v. Livingston, (1871) L. R. 5 H. L. 395: 41 L. J. Q. B. 201 and Cassaboglou v. Gibbs, (1883) 11 Q. B. D. 797 : 52 L. J. Q. B. 538, summarise the legal position as follows :
'The legal relation between a merchant in one country and a commission agent in another is that of principal and agent; and not seller and buyer, though this is consistent with the agent and principal when the agent consigns the goods to the principal, being in a relation like that of seller and buyer for some purposes. A merchant, therefore, in this country who orders out goods through a firm of commission agents in Europecannot hold the firm liable as if they were vendors forfailure to deliver the goods. And the result is the same if the goods are ordered out through a branch in this country of a firm of commission agents in another country. For the same reasons where a commission agent bays goods for a merchant at a price smaller than the limit specified in the indent, he cannot charge any price higher than that actually paid by him except in the case of a custom to the contrary.'
25. The contention therefore of the learned Advocate-General that the contract between the principal and the agent even if the principal is undisclosed is a contract of sale and purchase and that the agent is in the position of a vendor cannot be upheld. Reference was made by him in the course of the arguments to a decision of King's Bench Division in Caldwell v. Bethell, 1913 1 K. B. 119 : 82 L. J. K. B. 101 under the Licensing Act where the word 'Sale' occurring in Section 69, Sub-section (2), Licensing (Consolidation) Act, 1910, came up for consideration. That sub-section says:
'If any person sells or suffers any person under his control or in his employment to sell any intoxicating liquor so as to contravene this section he shall be liable to the penalties therein specified.'
A barman, who was employed by a licence holder sold a quantity of beer not less than half a pint in a jug without measuring the beer and received payment for it from the purchaser. At the time of the sale the licensee was not present and he had no knowledge that the barman contravened the provisions of the Act. The question was whether the barman could be punished for sale of the liquor in contravention of the law since ha had no property in the liquor. All that he did was the physical act of transferring the liquor to the purchaser. It was held that the word 'sale' in the Act was not used in the sense of and was not restricted to the transfer of property in the liquor by the person to whom it belonged and that even a servant who actually transfers the liquor might be punished. This decision is not an authority for the meaning of 'sale' under Sales-tax Act as there is a clear definition of the word in the Act itself.
26. The view that a Commission agent is not a dealer within the meaning of the Act was expressed by Chandrasekhara Aiyar J. in Public Prosecutor v. Narasimha Reddi : (1947)2MLJ220 . Referring to the definition the learned Judge pointed out that the expression ''business of buying or selling goods' in the Act (No. IX  of 1939) has reference only to one who buys or sells goods on his own behalf and that the Expln. 2 to Sub-clause (b) of Section 2 supports that interpretation. He also pointed out in that judgment that the word 'turnover' as defined in the Act could not be applied to the transaction of an agent who brings together a buyer and seller for brokerage and commission. There was nothing like a turnover so far as he was concerned. The contention that the enactment of Section 8 in the Act implies or indicates that he would otherwise be a dealer was also rejected. The learned Judge also points out that if the commission agent gets a licence to sell he would save himself the risk of being called upon to pay the tax and become liable for prosecution; but even if he does not take out a licence if he is able to establish that he is really an agent and not a dealer he would escape from the clutches of the Act. This decision, in my opinion, correctly lays down the law. The decision of Govinda Menon J., in In re Narasingamuthu Chettiar, : (1948)2MLJ93 contains an observation which to some extent seems to support the contention of the learned Advocate-General. He seems to confine the definition of an agent to a person who brings together the seller and the purchaser acting as a broker without having any dominion or right over the goods sold. He goes further and is inclined to hold that the word 'dealer' as defined in the Act was not confined to a person who buys or sells goods on his own account, for he says at page 98:
'The learned Special Public Prosecutor has rightly conceded that if by 'agency' is understood the action for bringing together the two parties and thereby getting some remuneration for the service rendered, a person who does that will not be a 'dealer' as defined in the Act. But where even though the ownership in the articles did not vest in such a person, he purported to have possession of the same and transferred such possession to the purchaser for consideration, which the purchaser pays only on the basis that the seller was the owner himself, in each cases the transaction will be the selling of goods and the person who effects the same is a dealer.'
It is difficult to see how a person who is not the owner of the goods and brings about a sale on behalf of the principal could be aptly described as having effected a transaction of sale within the meaning of the definition in the Act as the definition requires, to constitute a sale, transfer of property in the goods by one person to another. An agent who is merely in possession of the goods except in the case of mercantile agency under Section 27, Sale of Goods Act, is not entitled to transfer the property in the goods as he has none. Mere possession would not clothe him with the ownership and it is difficult to agree with the learned Judge when he says that the person who was not the owner and who transfers possession to the purchaser for consideration is a seller of goods. He must have sold his own goods so as to constitute such an agent a dealer. The same learned Judge sitting with Mack J., considered the Act particularly Section 8, in the Province of Madras v. Firm of Sivalakshmi Narayana : (1949)1MLJ530
27. The actual decision in the case may be supported on the ground that the commission agent in that case made secret profits out of the transaction by purchasing the goods for a less amount and Belling them at a higher price to the principal. He may, therefore, be deemed to have been constituted himself thereby a dealer. But there are some observations of the learned Judge in the course of his judgment with which I am unable to concur. Firstly, the learned Judge was of opinion that a strict grammatical and etymological definition of the word 'dealer' as defined under the Act would include 'persons like the plaintiff in the present action even it they had merely acted as commission agents because either as agent for buying goods on behalf of a known principal or as Belling agent on behalf of a known principal they should be deemed to be persons who carry on the business of buying or selling goods.'
If, by this, is meant that even if the commission agent is not the owner of the goods, by reason of the sale on behalf of the known principal or purchase on behalf of a known principal, he thereby constitutes himself a seller or buyer and the turnover will be his turnover, with great respect, I differ. As pointed out already, according to my reading of the definition of the word 'dealer' it does not include within its ambit and scope a commission agent who buys on behalf of a known principal or sells on behalf of a known principal because he had no property in the goods. Secondly the learned Judge seems to accept that the contract between a commission agent and his principal would be a contract of vendor and purchaser and not a contract of agency on the basis of the observations of Lord Blackburn in Ireland v. Livingston, (1871) L. R. 5 H. L. 395 : 41 L. J. Q. B 201 Having extracted from the judgment of Lord Blackburn passages, the learned Judge does not state his conclusion in any precise form. Nor does he consider the opinion expressed by the. Master of Rolls and by other Lord Justice in the decision of the Court of Appeal in Cassaboglou v. Gibbs, (1883) 11 Q. B. D. 797 : 52 L. J. Q B. 538 For the reasons which I have already adverted to the decision in Ireland v Livingston, (1871) L. R 5 H. L. 395 : 41 L. J. Q. B. 201 is not an authority for holding that a contract between a principal and a commission agent is a contract of vendor and purchaser. At p. 532 the learned Judge says :
'In any particular transaction, whether it be of buying or selling, the agent can act only on behalf of one principal and his name should be mentioned in the account as also the agreed commission. In cases where dealing with one and the same goods, at the time of purchase, he acts as the agent of the seller and then as the agent of the buyer in selling the goods it may be difficult to say whether the exemption under Section 8 can be availed of.'
With great respect to the learned Judge, I do not see any reason why a person who is a commission agent should be under a disability to act on behalf of a purchaser or seller in the same transaction relating to the sale of goods. Even in such a case he would not be a dealer and no question of availing himself of the exemption under Section 8 arises. Lower down, in. the same passage, it is observed: 'If they keep each of these transactions separate and specify in their accounts the known principal on whose behalf they act and the agreed commission thereof, then, there will be two transactions even though the goods dealt with are the same. In such a case the; can invoke the exemption under Section 8 but not where both the transactions are simultaneous as it were and the agent gets one commission for selling and another commission for purchasing.'
28. When the agent brings about the sale of the goods on behalf of a seller and at the same time arranges for the purchase of the same goods by a purchaser it would be difficult to see why the transactions should be split up and why any distinction should be made on the basis of the entry in the accounts, whether it is entered as two transactions or as one transaction. In either event, the agent is not the seller and is not the buyer. The turnover is not his turnover as goods did not belong to him at any moment. Assuming that the exemption under Section 8 is necessary in such a case, even then it is difficult to see why, even if the transactions are simultaneous, he should not escape under Section 8. In my opinion, the fact of the matter is not whether the transactions are simultaneous or different but whether the agent has constituted himself a dealer by purchasing the goods on his own account or selling the goods in his own account. It is open even to a commission agent to carry on a transaction of sale and purchase on his own account. In such an event, he will be a dealer. In the present case, it has been found that the commission agents besides carrying on the commission agency business had also dealings of their own; and in respect of the two kinds of business they kept separate and distinct accounts.
29. In my opinion, if a person is otherwise not a dealer and the turnover is not his turnover, he does not become a dealer merely because he applies for a licence under Section 8 of the Act; and even if he had violated the conditions of the licence the nature of the business is the determining factor. If the person carries on sales and purchases on his own account he will be a dealer and would be liable under the taxation section to pay tax on his turnover ; but if he merely acts on behalf of a known principal -- whether in the matter of sale or in the matter of purchase--he would not be liable at all to tax under the Act, irrespective of the question whether or not he had obtained a licence under Section 8. Section 8, in my opinion, is intended to cover transactions of accommodation contemplated by Explanation 4 to the definition of 'turnover' in the Act. In such a case, notwithstanding the fact that at some point of time the ownership of the goods had vested in him while the purchase was made only to accommodate a particular person, if he shows in his accounts the agreed commission or brokerage and acts on behalf of a known principal and not a fictitious and non-existing one and also makes it possible to levy the tax by including the turnover in the turnover of the seller's principal or purchaser's principal he would escape from the liability to pay the tax notwithstanding that the ownership had vested in him at some point of time. Similarly in some oases for the purpose of his principal he may himself buy goods but merely with a view to pass the title to the goods to his known principal. If the object of the purchase was not for his benefit but merely for the benefit of the principal or even if the sale was not for his benefit but for the benefit of a known principal in such cases, if he fulfils the requirements of Section 8 he would be exempt from taxation. Other cases in which the person really does not mean to buy or sell goods on his own account but the ownership vests in him for a moment may be within the purview of Section 8. For these reasons, I am of opinion that even apart from the licence the plaintiffs are not liable to tax under the Act as they are not 'dealers' within the meaning of the Act.
30. Before closing this judgment, I wish to observe that the learned District Munsif has written a very clear and able judgment both on the facts and on the complicated and novel questions of law unaided by any precedent.
31. The result is that the second appeals fail and are dismissed with costs.
32. Viswanatha Sastri J. -- The respondents in these second appeals sued the appellant, the Provincial Government of Madras represented by the Collector of Bellary, for a declaration that the assessment orders made by the Commercial Tax Officer levying sales tax upon them were illegal and void. The plaintiffs were merchants who carried on business on their own account and also acted as brokers or commission agents for buyers and sellers of groundnuts in Adoni and thereby earned a commission and sundry other perquisites in connection with such sales and purchases. The plaintiffs had obtained licences under Section 8, Madras General dales Tax Act, 1939, hereinafter called 'the Act', in respect of the commission agency carried on by them during the relevant period. The learned District Judge decreed the plaintiffs' suit confirming the decision of the District Munsif and held that the plaintiffs were not liable to be charged to sales tax in respect of the transactions of purchase and sale of groundnuts in which they acted as commission agents for buyers and sellers of the goods. We have heard both the Government Pleader and the Advocate. General on behalf of the Government, and Mr. T. V. Muthukrishna Aiyar on behalf of the tax payers. The broad contention urged on behalf of the appellant was that agents acting on behalf of principal in buying or selling goods were 'dealers' as defined in Section 2 (b) of the Act and were liable to pay sales tax on their turnover under Section 3 unless they had taken out a licence under Section 8 and conformed to the terms of that section and the licence issued thereunder. The questions that arise for decision are whether the respondents were 'dealers' and even if they were, whether they had broken the terms and conditions of their licence so as to attract the liability for the tax
33. The Act is not a model of good drafting and both the provisions of the Act and the rules framed thereunder have been the subject of frequent amendments. The few reported decisions have not served to clarify the exact meaning and scope of the charging provisions of the Act. In view of the contentions advanced by the learned counsel on both sides, it is necessary to state at the outset that the Act being a fiscal enactment, the Court is bound to give a fair and reasonable construction to its language without leaning to the one aide or the other, remembering at the same time, that no tax can be imposed on citizens without words in the Act clearly showing an intention to levy the burden on them. It is a sound and well recognised principle that a 'taxing statute must impose a charge in clear terms or fail, since it is to be construed contra proferentum' to quote the words of Lord Sum tier in Levene v. Ireland Revenue Commissioners, 1928 A. C. 217 : 97 L. J. K. B. 377. It is necessary that this principle should on occasion be reasserted and this is such an occasion. The argument of the learned Advocate-General was in effect an invitation to the Court to strain the language of the Act for the purpose of creating a liability to tax not imposed by plain terms. Taxation cannot be imposed by analogy or by implication or by resort to some kind of cy pres doctrine. If a lacuna or defect appears, the gap can be filled only by the Legislature and not by those responsible for the collection of revenue or by the Courts.
34. The main question argued related to the liability of agents to pay sales tax on sales or purchases of goods effected by them on behalf of principals for a commission or remuneration paid or promised. Section 3 of the Act is the charging section which imposes a tax on 'dealers' on their turnover. A 'dealer' is defined in Section 2 (b) as meaning any person who carries on the business of buying or selling goods. The contention of the appellant is that the definition is wide enough to include agents who buy or sell goods on behalf of their principals. I cannot agree. The business of buying and selling the goods is the business of the principal, the owner of the goods, who may buy or sell them directly or through agents. The agents may be in receipt of commission or a fixed remuneration but they have no interest in the business or its profit and loss. The business is that of the principal and not of the agent. The definition of 'dealer' contemplates a person buying or selling goods on his own account, and this might be done by him directly and personally or through an agent. If a person employs an agent for the purchase or sell of goods, is it to be said that the agent is the dealer and not the principal or are both of them dealers, each being chargeable to sales tax on the same turnover If in such case the agent is to be considered as dealer and not the principal, it would lead to anomalous results. The man who buys and sells goods on a large scale may make his purchases and sales through several agents, so as to result in a turnover of less than Rs. 10,000 for each of the agents, though the turnover of the principal may be several lakhs of rupees. If the agents are to be considered the 'dealers' their turnover would be less than Rs. 10,000 each and neither the principal nor any of the agents would be liable to pay sales tax on the turnover in such a case. The Legislature could not have intended such a strange result. The turnover contemplated is the turnover of the principal. In the case of brokers or commission agents there is no reason for treating them as 'dealers' or the purchases and sales of goods effected by them as their turnover. Where a broker, who is in law an agent, is promised a commission if he brings about a sale or purchase of goods which the principal is trying to effect, the principal may buy or sell the goods himself or through other channels. It can hardly be said that the principal is not, and the broker or the commission agent is, the 'dealer' in respect of the goods bought or sold.
35. The other provisions of the Act also throw light on the meaning of 'dealer' as defined in Section 2 (b). The explanation to Section 2 (b) brings within the definition of a 'dealer' a cooperative society, a club, a firm or any association which sells goods to its members, evidently with a view to repel a possible contention that a person cannot buy from or sell goods to a body consisting of himself and others. But the explanation contemplates the society, club, firm or association as a seller or buyer of goods and therefore coming within the definition of 'dealer'. Explanation (2) to Section 2 (b) which was in force in 1946 but which has since been replaced by Section 14-A of the Act, provided that the agent of a person resident outside the Province who carried on the business of buying and selling goods in the Province 'should be deemed to be a dealer.' When a person is deemed to be something, the only meaning possible is that whereas he is not in reality that something, the Act requires him to be treated as if he were: See Commissioner of Income-tax v. Bombay Trust Corporation . If the argument of the learned Advocate-General is correct, this provision would have been quite unnecessary, and its language wholly inappropriate. The definition of 'sale' in Section 2 (h) of the Act refers to transfer of property in the goods by one person to another in the course of trade or business for cash or other consideration. The broker or commission agent who merely brings together the buyer and seller does not transfer the property in the goods. An agent for sale of goods has himself no property in the goods though he might effect a transfer of the property in the goods to the buyer if he had been authorised to sell by the owner of the goods. It is however the owner's title to the property in the goods that is transferred by the agent. Explanation (i) to Section 2 (h) also shows that the person having the property in the goods and not his agent who conducts or concludes the sale, is treated as the seller. The 'turnover' on the basis of which sales tax is levied is defined in Section 2 (1) of the Act as the aggregate amount for which goods are either bought or sold by a dealer for cash or other consideration the goods contemplates being those of the person buying or selling on his own account. A proviso to Section 2 (i) exempting the sale proceeds of agricultural produce grown by a person on land in which he has an interest as owner or lessee is an exception to the main part of Section 2 (i) and implies that the 'turnover' in the main part of the sub-section refers to the sale or purchase of goods belonging to a merchant. Explanation (i) to Section 2 (i) assumes that the person primarily responsible for implementing the contract is the dealer whose turnover has to be taken into account. Explanation (ii) to Section 2 (i) requires the seller of goods to include the cost of processing them before delivery to customers as part of his turnover. Here again the assumption is that the 'dealer' is the owner of the goods sold. Under Expln. (iii) to Section 2 (i) cash, rebate or discount allowed to purchasers and refunds granted to customers, are excluded from the turnover evidently because the price realised by the owner of the goods is reduced by the amount of discount, rebate or refund given to customers. The agent has no interest in the sale proceeds or in the rebites or refunds to customers and he has no turnover of his own. Explanation (iv) to Section 2 (1) exempts from the turnover of the seller but not from the turnover of the buyer, goods which one merchant obtains from another by way of temporary accommodation to oblige his customers when he is out of stock. According to strict law, the merchant who accommodates, sells his goods and the merchant who is accommodated, buys the goods from the former and sells them to his own customers. Therefore the original transaction as between the merchants themselves is one of sale and purchase and would have to be included in their turnover. The Act exempts the accommodation sale from the turnover, with a view to avoid hardship to traders and merchants. Under Rule 4 of the Turnover Rules framed under the Act either the cost price as in the case of groundnuts or the selling price as in the case of other goods, is taken as the turnover of the dealer. The statutory indications are to the effect that an agent is not a 'dealer' and the 'turnover' on which tax is levied is the turnover of the owner of the goods. The agent or servant who acts for another person is not treated as having a turnover on which he would be chargeable. This is in accordance with the ordinary principle of law embodied in Section 230, Contract Act, that in the absence of a contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal nor is he personally bound by them.
36. It is argued for the appellant that there are other provisions in the Act and the Rules made thereunder having statutory force which bring agents within the net of taxation. At one stage of the argument it was stated by the Advocate-General that brokers who acted as 'mere conduit pipes' without any further activity were outside the definition of 'dealer' in Section 2 (b). At another stage of the argument he conceded that persons acting as mere agents of named and existing principals resident in the province and buying and selling goods as agents without incurring any personal liability, would be outside the purview of Section 3, the charging section. But these concessions were of a fluctuating character and were often whittled down in order to meet particular situations with which he was confronted during the course of the arguments. I therefore do not rest my judgment on any admission or concession of the Advocate-General on a matter which is beset with difficulties of interpretation. Reliance was placed by him on Section 8 and Rule 5 (1) (f), General Sales Tax Rules, providing for the issue of license to persons who, for an agreed commission or brokerage, buy and/or sell goods of any description on behalf of known principals specified in their accounts and for their exemption from sales tax in respect of such transactions as were carried out in accordance with the terms and conditions of their licence. The marginal note to Section 8 is 'licensing and exemption of agents' and it is argued that the exemption granted in Section 8 would be meaningless if agents were not included in the category of 'dealers' as defined in Section 2 (b) and made chargeable under Section 3. Prom the exemption provided for by Section 8 a positive provision levying a charge is, in effect, sought to be inferred or implied. In construing a taxing enactment very little weight attaches to the argument that because a specific exemption from tax is found in it, other cases not specifically exempted must be deemed to have been charged to tax. Such exemptions are often introduced under the influence of excessive caution to quiet the fears of the timid and the unduly apprehensive. Ex pressio unius will not be exclusio alteria, in such cases.
37. Here the plaintiffs are mere commercial agents who brought buyers and sellers of ground nuts together, arranged the sale or purchase and earned a small commission or brokerage from both of them. The learned District Judge described the situation thus :
'An agent who merely brings a buyer and seller together cannot be said to buy or sell his goods on his own behalf, any more than a marriage broker who brings the parties together can be said to be a party to the marriage.'
The argument on both sides, however, ranged over a wide ground and the liability of agent in general was canvassed. It is difficult to accept the contention of the Advocate-General that agents buying and selling goods on behalf of their principals resident within the province are 'dealers' who are chargeable to sales tax unless they take out a licence under Section 8 and conform to the terms both of that section and of the licence issued thereunder. In my opinion neither the definitions in the Act nor the terms of the charging section justify such a conclusion.
38. A broker is an agent who, in the ordinary course of his business, is employed to make contracts for the purchase or sale of goods of which he is not entrusted with the possession or control. Usually he contracts in the name of the principal and arranges contracts of sale or purchase in such a way as to bind both the buyer and the seller. There may be other kinds of agents for the sale or purchase of goods on behalf of and employed by, a principal. It is elementary that goods can be sold so as to transfer title to the buyer only by the owner of the goods or by a person acting under his authority or with his consent. In order to facilitate trade and commerce, a proviso to Section 27, Sale of Goods Act, enacts an exception to this rule by providing that a mercantile agent who is entrusted by the owner with the possession of the goods or the documents of title has, when acting in the ordinary course of business, power in transfer a good title to the goods to a bona fide purchaser without notice of the cessation of the agent's authority. Even in such a case the title to the goods that is transferred is the title of the principal or the owner of the goods, the agent himself having no property of his own in the goods sold. The basis of the rule is a kind of estoppel. Ordinarily no agent can maintain an action in his own name to enforce a contract made by him merely in his capacity of an agent, nor is he personally liable on such a contract. But there is nothing to prevent the agent from entering into a contract on the basis that he is himself to be personally liable to perform it or entitled to enforce its performance, as well as his principal. Such a contract is presumed to exist in three cases specified in Section 230, Contract Act: (1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (a) where the agent does not disclose the name of his principal; and (3) where the principal, though disclosed, cannot be sued.
39. The presumption may be rebutted in all these cases by the terms of the contract and in the second of these cases above enumerated, by proof that there was actual knowledge about the principal whose name was not disclosed but for whom a contract was entered into. These exceptions to Section 230 do not have the effect of converting the agent as a vendor or purchaser of goods quoad his principal. With reference to principals residing outside the province and buying or selling goods in the province through agents, Section 14A (1) treats such agents as 'dealers' chargeable under Section 3 of the Act. There is no similar provision with reference to agents of disclosed or undisclosed principals resident in the province, on whose account the agent buys or sells goods. Nor is there any provision making an agent who makes himself liable along with his principal to implement a contract for the sale or purchase of goods a 'dealer' within the Act. The mere fact that an agent, who is entrusted with goods for sale, sells them without disclosing who the principal is, does not make the transaction a sale of the agent's goods nor does it convert the relationship between him and his principal into one of vendor and purchaser. The fact that the customer does not know who the principal is, does not affect this question. Where the agent is authorised to buy and/or sell goods on behalf of a principal, disclosed or undisclosed the goods bought and sold are those of the principal. A personal right of the agent to enforce a contract for the sale of goods or his personal liability under such a contract affects only the right of the agent to sue or his liability to be sued under the contract, but not the real nature of the transaction as a sale or purchase on behalf of the principal. Even a del credere agent who undertakes to indemnify his employer against loss arising from the failure of persons with whom he contracts, to carry out their contracts for sale or purchase of goods, is still an agent and does not become a seller or buyer himself.
40. The learned Advocate General sought to differentiate between different types of agents according as they were brokers or commission agents, agents of principal for whom they acted statedly as agents excluding any personal right or liability, agents who in addition to the liability of their principals came under a personal obligation to implement the contracts of sale or purchase entered into on behalf of their principals, agents in possession and control of the principals' goods for sale, agents who had no such control or possession of the goods, agents who acted for known and specified principals and agents who acted for undisclosed principals.
His argument was that the Legislature did not want the revenue authority or the Court to embark upon the type of agency in each case before imposing the liability for sales tax on the agent as a 'dealer' and regarded all agents engaged in the buying or selling of goods as 'dealers' chargeable to tax, unless they obtained a licence under Section 8 and conformed both to the terms of the section and the licence issued thereunder. I am unable to accept this argument. It may be that an agent may avoid the attentions of sales tax officers and prosecutions for alleged violations of the Act and the Rules framed thereunder, by arming himself with a licence under Section 8 of the Act but it is not the law that every unlicenced agent is a 'dealer' chargeable to sales tax on the turnover represented by the value of the goods bought and sold for or on account of his principal. The words of the charging section have not reached the subject sought to be charged, namely, the agent and Section 8 which provides exemption from liability to tax, cannot be construed as imposing by implication a tax which is not imposed by the charging section itself.
41. Strong reliance was placed for the appellant on the judgments of Govinda Menon J. in the Province of Madras v. The Firm of Sivalakshmi Narayana : (1949)1MLJ530 and in In re Narasingamuthu Chettiar : (1948)2MLJ93 and on the well known decision in Ireland v. Livingston, (1871) L. R. 5 H. L. 395 : 41 L. J Q B. 201 in support of his contention that, in many cases, an agent may have a right of property in or dominion over the goods, the title to which is transferred by a sale effected by him. The argument is that in all such cases the agent should be regarded as a dealer. In Ireland v. Livingston, (1871) L. R. & H. L. 395 ; 41 L J. Q. B. 201 a case of consignment of goods to a foreign principal by a commission agent, Blackburn J. observed at page 408 :
'It is quite true that the agent who in thus executing an order, ships goods to his principal, is in the 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.'
42. The learned Judge held that the property in the goods first passed from the country producer to the commission merchant and then when the goods were shipped, from the commission merchant to the consignee. The legal effect of the transaction between the commission merchant and the consignee who had given the order was held to be a contract of sale passing the property from the one to the other. These observations were made in connection with the commission merchant's right of stoppage in transit and must be understood subject to the qualifications laid down by the Court of Appeal in Cassaboglou v. Gibbs, (1883) 11 Q. B. D. 797 : 52 L. J. Q. B. 538. Dealing with the position of a commission agent in relation to his foreign consignee, the Court of Appeal definitely held that the relation between them was not that of a vendor and purchaser but mostly that of principal and agent. The commission agent was treated as a sort of quasi vendor. By shipping the goods to his principal, the foreign consignee, he appropriated the goods to the contract and the property in the goods passed from the commission agent to the principal as if he were a vendor. The commission agent was also held entitled to exercise the right of stoppage in transit as if he were a vendor, in case the foreign consignee, his principal, became bankrupt. In the opinion of the three learned Judges of the Court of Appeal (Brett M R, Lindley and Fry L. JJ) the relation between the commission agent and the foreign consignee remained only that of a principal and agent, though it had two of the attributes of the relationship of vendor and vendee. The principles enunciated with reference to a commission agent and his foreign consignee cannot be extended to ordinary cases of purchases and sales effected through commission agents within the province.
43. I am unable, with great respect to follow the opinion of Govinda Menon J. in the Province of Madras v. Firm of Sivalakshminarayana : (1949)1MLJ530 . Says the learned Judge:
'A strict grammatical and etymological interpretation of the word 'dealer' as defined in Section 2 (b) of the Act would include persons like the plaintiffs even if they had merely acted as commission agents, because either as agents for buying goods on behalf of a known principal or as a selling agent on behalf of a known principal, they should be deemed to be persons who carry on the business of buying or selling goods. If such a person is a 'dealer' then Section 3 of the Act says that subject to the provisions of the Act every dealer shall pay, in each year, a tax in accordance with the scale specified ..... It is only by a later section, viz., Section 8 that an agent is excluded. Had it not been for the incorporation of Section 8, even a person who, for an agreed commission or brokerage, buys or sells goods on behalf of known principals, specified in his accounts in respect of each transaction, will be a 'dealer' within the meaning of the Act and hence liable to be taxed.'
44. The expression 'dealer' has many shades of meaning varying with the context. The player who deals the cards at a cardtable and the trader who buys and sells merchandise are both dealers in the etymological sense. The word 'dealer' is used in combination with other words, e.g., watch dealer, horse dealer, corn dealer, cloth dealer, etc. In common parlance, 'dealer' means a trader who buys and sells goods. We are not concerned with the etymological sense but with the statutory definition of ''dealer' in Section 2 (b) of the Act which contains no reference to agents, either of known or unknown principals, but merely defines 'dealer' as a person who carries on the business of buying or selling goods. The definition does not point to the person who physically handles or delivers the goods in the course of the buying and selling operations as the 'dealer'. The business contemplated is the business of the person who buys goods or whose goods are sold and he may conduct the business personally or through an agent. If he employs an agent the business is still the business of the principal and not of the agent. The learned Judge, if I may say so with respect, has paraphrased the definition of 'dealer' in Section 2 (b) of the Act by importing into it the phraseology employed in Section 8. I am of the opinion that a commission agent or any other agent who buys and sells goods on behalf of his principal as a mere agent, was never caught in the net of taxation by Section 3 and therefore did not require to be set free by Section 8. Section 8 is not a charging section but an exempting section and it is not permissible to infer or imply a liability to tax from Section 8 when Section 3, the charging section, does not impose the burden. I am also unable with great respect, to understand why a broker or commission agent who gets a commission or brokerage both from the buyer and the seller of the goods at the same time and in respect of the same transaction should lose the benefit of Section 8, as suggested by the learned Judge, even if such a broker or commission agent were liable to be treated as a 'dealer' which, I have held he is not, a brokerage or commission taken from the seller and buyer of goods with the knowledge of both is nonetheless an 'agreed commission.' Mack J. who was also a party to the above decision with Govinda Menon J. rested his conclusion entirely on an interpretation of Section 8 of the Act, the implication being that commission agents would be chargeable to sales tax but for the exemption in Section 8. The learned Judge observed :
'The language of Section 8 appears to us plain and to present no difficulty. Nor is any nice question of breach of contract or agency involved, the point for determination being merely whether within the scope of Section 8 there is a liability to pay sales tax. The section clearly exempts from sales tax in the first place a commission agent who buys for a known principal specified in his accounts for an agreed commission or brokerage.'
The learned Judge apparently assumed that Section 8 was both a charging and exempting provision, while in fact Section 3 is the only charging section and Section 8 is merely an exempting provision. In In re Narasingamuthu Chettiar, : (1948)2MLJ93 Govinda Menon J. sitting as a single Judge observed that where 'even though the ownership in the articles did not vest in such a person (the agent) he purported to have possession of the same and transferred such possession to the purchaser for consideration which the purchaser pays only on the business that the seller was the owner himself, in such cases the transaction will be the selling of the goods and the person who effects the same is a dealer.' Evidently the learned Judge had in his mind the common case of a mercantile agent in possession of the principal's goods selling them and realising the price. This passage in the judgment was relied upon by the appellant to support his contention that an agent for sale would be a 'dealer' within Section 2 (b) chargeable under Section 3 of the Act. If I enter a cloth shop and purchase dhoties and pay for them, I may deal only with the shop boy. He takes the price in cash and delivers the goods. I may not know who the owner of the goods is or the owner may never attend the shop. But I do know that the shop boy is not the owner of the goods though he has the owner's authority to sell and deliver the goods and collect the price. The goods are in the custody of the shop boy, he has authority to sell the goods, he sells and delivers the goods, and he takes the price. He is not in my opinion a 'dealer' as defined in Section 2 (b) but is merely an agent of the dealer. The business is not that of the shop boy but of the owner of the goods which are sold by the shop boy. I fail to see what the belief of the purchaser as regards the position of the person actually selling and delivering the goods, whether he is the owner or an agent, has got to do with the determination of the question as to who is the 'dealer' within the Act. With due deference to the learned Judge, I am unable to accept his observations as an authority for the position that an agent who is merely in possession of the goods or who is entrusted by the owner with goods for sale and who sells them, is a 'dealer' who would be chargeable to tax under Section 3, unless he gets himself exempted by taking out a licence and conforming to the conditions imposed in Section 8 of the Act. If in a case like this you treat the agent as a dealer, is it to be said that the principal is not a dealer? Or is it to be said there are two dealers or two different sellers in respect of a single sale Such a result could not have been contemplated by the Legislature. Chandrasekhara Aiyar J. in the Public Prosecutor v. Narasimha Reddi : (1947)2MLJ220 held in a brief judgment that a broker or commission agent who did not buy or sell goods on his own account was not a 'dealer' within Section 2 (b) of the Act. I am in respectful agreement with this conclusion.
45. Section 8 and Rule 5, General Sales Tax Rules on which the appellant relies have, no doubt, to be read together. There may be cases where an agent buys goods himself and immediately thereafter sells the same goods to his principal for the cost price plus an agreed amount for commission. Conversely he may buy his principal's goods himself and then sell them to strangers for the cost price plus an additional sum representing his commission. In such cases an agent is, in law, a buyer or seller of goods as the case may be, and would be a 'dealer' within the definition in Section 2 (b) of the Act. But in truth and in fact he is really buying and selling for the benefit of his principal charging a commission for himself as his remuneration. In such cases Section 8 might well come into play and an agent of this description who takes out a licence under Section 8 would be exempt from sales tax in respect of such of his transactions as are carried out in accordance with the terms of Section 8 and the licence issued thereunder. The condition in Section 8 that the principal for whom an agent buys or sells must be a known principal specified in the agent's accounts in respect of each transaction of sale and purchase, has been imposed in order to enable the revenue authority to get at the principals concerned in such sales or purchases and levy sales tax upon them. It may be that Section 8 was also intended to cover cases of accommodation sales falling within the purview of explanation 3 to the definition of 'turnover' in Section 2 (1) of the Act. Whatever might have been the intention of the framers of the Act, there are no express words in the Act making agents who merely buy and sell goods, on behalf of their principals resident within the province, 'dealers'. Such agents are, therefore, not chargeable to the tax under Section 3 of the Act. There is no need to invoke the provisions of Section 8 of the Act to exempt such agents from liability to sales taxes. The reference to 'known principal' in Section 8 may mean an actually existing and identifiable principal as contrasted with a fictitious principal in whose name the business of buying and selling is carried on. Section 8 does not have the effect of making sales and purchases effected by an agent on behalf of undisclosed but real and existing principals, chargeable to tax on the footing that the agent is a 'dealer' with a 'turnover' of his own. In this view the respondents who acted as commission agents are not liable to pay sales tax in respect of the turnover of groundnuts, the sales and purchases whereof were brought about by them on behalf of the owners of the goods.
46. It is true that the respondents have taken out licences under Section 8 in respect of their commission agency business. In accordance with the custom of the groundnut trade at Adoni they charged a small brokerage from buyers as well as sellers of groundnuts for whom they acted as commission agents. It is also true that they charged a small sum as rusum or mahimai for charity and establishment expenses in addition to the commission proper of a quarter-anna in the rupee. Those amounts are also shown in their accounts and in my opinion, they really form part of the commission they collected though distributed under separate beads. There is no provision in the Act or the rules fixing the maximum brokerage permissible and it is left to be settled by contract between the broker or commission agent and his principal or by the usage of the trade. It may be that it is a vicious practice for brokers to charge brokerage both from the buyer and the seller of goods in respect of one and the same transaction. But it is a matter of notoriety that the practice is deeply rooted in many places and in several trades. The licence issued to the plaintiffs in this case, which we have perused, does not prevent such a mode of earning brokerage or commission. Apparently, under the impression that the licences prevented such levy of double commission, the plaintiffs alleged in the plaint that they were commission, agents for the sellers though, in fact, they collected a commission both from the buyer and the seller of groundnuts. Indeed the Government did not dispute the right of the plaintiffs to collect this double commission in the written statement filed in the case. There is no transgression of the terms of the licence issued to the plaintiffs, and even if there was any, it would not have the effect of reducing the commission agents to the position of 'dealers' as defined in the Act and making them chargeable under Section 3 (1) of the Act.
47. For these reasons I am of the opinion that the decision of the Courts below is correct and these appeals should be dismissed with costs.