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Kandula Radhakrishna Rao and ors. Vs. the Province of Madras Represented by the Collector of West Godavari, Eluru and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberAppeal Nos. 365, 447, 468, 551 and 641 of 1947
Judge
Reported inAIR1952Mad718; (1952)IMLJ494
ActsMadras General Sales Tax, 1939 - Sections 2, 3 and 8
AppellantKandula Radhakrishna Rao and ors.
RespondentThe Province of Madras Represented by the Collector of West Godavari, Eluru and anr.
Appellant AdvocateP. Somasundaram, ;N.C.V. Ramanujachari and ;M. Nagaramayya, Advs.;Adv. General and ;Government Pleader
Respondent AdvocateC. Vasudeva Mannadiar, ;C.V. Dhikshitulu and ;K.N. Karunakaran, Advs.
Cases ReferredGovernment of Madras v. Veerabadrappa
Excerpt:
the madras general sales tax act (ix of 1939), section 2 (b)-- commission agent--if and when a 'dealer' and liable to tax; a 'broker' is an agent employed to make a bargain for another and receives a commission on the transaction which is usually called brokerage. he has usually neither the custody nor the possession of the goods. it is the borker's duty to establish privity of contract between the principal and the third party. the broker cannot sell in his own name nor can be sue on the contract. a 'commission agent', (to which class the plaintiffs in these cases belong) on the other hand, is not like a broker. he has, almost invariably, custody or possession of the goods, actually or constructively. he often sells in his own name and, in certain circumstances, can sue the buyer.....1. these appeals nave been posted before a full bench because of a conflict of opinion between division benches of this court ('province of madras v. firm of kani-golla sivalakshminarayana', ilr (1850) mad 421 and 'provincial government of madras v. veerabhadrafpa', ilr (1951) mad 257) on the interpretation of some of the provisions of the madras general sales tax act, madras act ix of 1939. all these appeals arise out of suits filed for the recovery of amounts of sales tax alleged to have been illegally levied from the respective plaintiffs. appeals nos. 365, 468 and 551 of 1947 arise out of three original suits nos. 12, 33 and 34 of 1946 which were disposed of by a common judgment by the learned district judge of west godavari at ellore. all these suits were dismissed and the plaintiffs.....
Judgment:
1. These appeals nave been posted before a Full Bench because of a conflict of opinion between Division Benches of this Court ('Province of Madras v. Firm of Kani-Golla Sivalakshminarayana', ILR (1850) Mad 421 and 'Provincial Government of Madras v. Veerabhadrafpa', ILR (1951) Mad 257) on the interpretation of some of the provisions of the Madras General Sales Tax Act, Madras Act IX of 1939. All these appeals arise out of suits filed for the recovery of amounts of sales tax alleged to have been illegally levied from the respective plaintiffs. Appeals Nos. 365, 468 and 551 of 1947 arise out of three original suits Nos. 12, 33 and 34 of 1946 which were disposed of by a common judgment by the learned District Judge of West Godavari at Ellore. All these suits were dismissed and the plaintiffs are the appellants before us. App. No. 447 of 1947 is from the decree dismissing O. S. No. 37 of 1945. This suit was disposed of by the same learned Judge who disposed of the three first mentioned suits. O. S. No. 93 of 1948 from which App. No. 641 of 1947 is the appeal was tried by another Judge, the learned Subordinate Judge of Ellore, who took a view different from that of the learned District Judge of West Godavari and decreed the suit. Hence the State of Madras is the appellant in this appeal. In all the appeals, common Questions of law arise. Before these points are discussed, it is necessary to set out in brief the salient facts in these cases which have a material bearing on the questions which fall for decision, But even before this it will be helpful to refer to the main provisions of the Madras General Sales Tax Act.

2. The object of the Act is to provide for the levy of a general tax on the sale of goods in the Province of Madras. The following definitions in Section 2 of the Act are important. Section 2(b) defines a dealer as meaning any person who carries on the-business of buying or selling goods. Sale is defined in Clause (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 or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge;

Explanation: 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 a sale."

Clause (1) defines "turnover'' 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, tenant or otherwise, shall be excluded from his turnover: Explanation: Subject to such conditions and restrictions, if any, as may be prescribed in this behalf:

(i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof;

(ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and

(iii) 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."

Section 3 is the charging section. Section 3(1) says:

"Every dealer shall pay in each year' a tax in accordance with the scale specified...... 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."

The second proviso avoids the possibility of double taxation. It runs thus :

"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."

Section 8 is the next important Section and as one part of the argument relates entirely to a construction of this Section, it is useful to set it out to extenso. It runs :

"The Provincial Government, may on the application and on payment of such fee as may be prescribed in that behalf, license 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 out for an exemption provided under this Act."

Under Section 9 (1) every dealer whose turnover is ten thousand rupees or more in a year is bound to submit a return of his turnover. Section 9 (2) deals with the manner of assessment. Section 13 makes it incumbent on every dealer and every person licensed under Section 8 to keep and maintain a correct account showing the value of the goods sold and bought by them. Section 19 confers power on the Provincial Government to make rules. Rules have been framed by the Government in exercise of the powers conferred by this Section.

3. The plaintiffs in all the suits carry on independent business of their own and also commission business. Every one of them has obtained a licence under Section 8 of the Act. The licences granted to them are in the following form :

"Form No. 5

Licence under Section 8 under Madras General Sales Tax Act of 1939

(See Rule 6 (5) )

Whereas..........having their place of business in............ have paid to him a licence fee of Rs. 10 in words (ten rupees only) a licence is hereby granted under Section 8 of the Madras General Sales Tax Act of 1939 subject to the provisions of the said Act, subject to the rules made thereunder and subject to the following conditions :

1. The licence holder shall submit to the undersigned as before the last day of every month, a return in form No. 6 for the previous month.

2. The licence-holder shall be exempt from the tax payable under Section 3 (1) of the Madras General Sales Tax Act of 1939, only to the extent to which the goods bought or sold through him are included in the turnover of the principals or in the turnover of the dealers from whom purchases were made.

3. This licence shall not apply to the transactions of the license holder carried on otherwise than for an agreed commission or brokerage on behalf of known principals (including firms) in the province specified in his accounts, or to the transactions of the licence-holder on behalf of principals outside the province, x

No correction in this licence shall be valid unless it is ordered and attested by the undersigned.

Licensing Authority."

The Sales Tax Officers held that these plaintiffs had violated the conditions of the licence and so forfeited the exemption from the payment of the sales tax provided by Section 8 because the plaintiffs had made extra collections from the buyers in addition to the cost of the goods and appropriated these amounts for themselves without passing them on to their seller principals or including them in the turnover of their principals. The extra collections which appear to have been made by the plaintiffs are not all of them of the same nature. The amounts collected as Kolagram, Dharmam, Digumati and Cooly do not purport to be appropriated by the plaintiffs for their own use. Kolagram represents the amount paid as weighment or measurement charges. The dhar-mam amounts are set apart (or intended to be set apart) for charity. Digumati is a charge for unloading. The gumastha rusum indicates by its name that it is a more or less a levy for clerical expenses. The general evidence is that these charges are made by all the commission agents in the locality and have received the sanction of mercantile usage. Indeed, the learned Advocate General did not address any argument in respect of these collections. The Government appear to have recognised this fact as is evident from condition 5 contained in the form which was substituted for the original form by a Government Order dated 7th February 1948. It runs thus :

"(5) The agreed commission or brokerage specified in the accounts shall be the entire remuneration of the agent and each legitimate incidental charge actually incurred by him in respect of insurance, transport, loading and unloading, godown rent, interest, correspondence, telegrams, the use of the telephone and the like shall be specified in the accounts separately."

In addition to the levy of these amounts the plaintiffs, at least in most of the cases, appear to have also collected amounts under the heading of rusum. Initially, the rate of the rusum synchronised with that of the sales tax though there is evidence that the rate was increased in some cases. These amounts which were collected by the plaintiffs from the buyers were admittedly not passed on to their sellers though the rusums did find a place in the accounts of the plaintiffs and it is said that the plaintiffs had included these amounts in their turnover. It is common ground that there is no secrecy about this charge and the argument proceeded before us on the footing that this custom of commission agents collecting rusums from the buyers at a particular rate and appropriating them was well established and the sellers either actually knew or must be deemed to have known of this usage.

4. The case of the Government shortly is that the plaintiffs have been obtaining fn these transactions a further benefit than the agreed commission or brokerage. From another point of view also there has been a violation of the conditions of the licence because the amounts collected by the plaintiffs as rusums really must be deemed to be part of the price of the goods and these amounts were not included in the turnover of the seller principals as part of the price. The plaintiffs met these charges by pleading firstly that these amounts ought not to be added to the price of the goods and secondly that they should be deemed to be part of the agreed commission. Though there was an attempt to contend that in effect the plaintiffs were acting as (agents for both the sellers and the buyers and therefore were charging as they were entitled to charge commission from both the seller and the buyer, the attempt was not persisted in and the appeals were argued on the basis that the plaintiffs were only agents for the sellers. It was further contended on behalf of the plaintiffs that even assuming that they had committed a breach of any of the conditions of the licence granted to them under Section 8, they were not liable as commission agents to the sales tax because they could not in law be held to be dealers within the meaning of the definition of dealer in the Act.

5. The first question which -arises for decision is whether on the evidence it can be held that the plaintiffs had violated any of the conditions of the licence granted to the under Section 8 of the Act lay reason of the fact that they had collected the rusum from the buyers and had not passed it on to their seller, principals and also because the rusum amounts were not included in the price of the goods and included as such In the turnover of the principals. The two trial judges came to conflicting decisions on this point on practically the same kind of evidence. I am inclined to agree with the learned Subordinate Judge at Ellore who decided O.S. No. 93 of 1948. He held that the rusums collected by the plaintiffs were in pursuance of a trade usage and that they form part of the agreed commission contemplated under Section 8 of the Act. In coming to this conclusion he was largely influenced by the evidence of merchants who came and deposed that this practice of collection of rusum by the commission agents was well known to the merchants of the locality and was acquiesced in. The other learned Judge considered that the question of the knowledge of the seller principals was wholly irrelevant from a purely legal point of view. Though he was prepared to concede that certain of the seller principals knew about the collections of rusum by the commission agents from the buyer, he agreed with the view taken by the Board of Revenue that the rusum collections were in the nature of prices and should have been included in the turnover of the seller principals. We were taken through the evidence which related to this part of the case by counsel at the bar. On the whole the impression left on me as a result of the evidence is that these amounts were not considered by any party, either the seller or the buyer or the commission agent, as part of the price. In effect the evidence is that the commission agent obtained a remuneration both from the seller and the buyer and this was in accordance with the mercantile usage. It is as if the agreement between the parties was that the commission agent should get a particular amount from the seller and another amount from the buyer as his commission. There is nothing either in the decision in the 'Province of Madras v. Firm of Kanigoda Sivalakakshminarayana', ILR (1950) Mad. 421 or in the decision in the 'Government of Madras v. 'Veerabadrappa', I. L. R. (1951) Mad 257 to preclude us from holding that the rusums must be treated as part of the agreed commission. Govinda Menon J. was of the opinion that if the commission agent collected rusums openly and not clandestinely; then the rusums should be deemed to be part of the agreed commission. The learned Judge observed:

"It is therefore clear that in collecting an amount designated "rusums" the commission agents were really collecting a commission .. .. .."

Mack J. accepted the finding of the lower Court that they charged rusum as a little additional commission and said :

"There can be no doubt, nor is it disputed, that this charge of rusum was a new practice which arose out of the Sales Tax Act, 1939. It appears to have originated from prudent sellers making this charge and ensuring against a sales tax levy being made on their total turnover .... We are therefore unable to accept the learned Advocate General's contention that rusum is in the circumstances something charged by the commission agent in addition to the agreed or customary commission of one per cent".

The learned Judge, was apparently of the view that if there is no evidence or material to show that the sellers principals agreed to the rusum being collected from the buyers by the commission agents and being appropriated by them, the charge of rusum could not be held to be either an addition to the agreed commission or an item of expenditure legitimately incurred by the commission agent on behalf of the principal. In the cases before us, I think on the evidence it should be held that the seller principals must be deemed to have agreed to the collection of the rusums by the plaintiffs. In the latter case I. L. R. (1951) Mad 257 Viswanatna Sastri J. observed as follows:

"It is true that the respondents have taken out licences under Section 8 in respect of their commission agency business. In accordance with the customs 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 heads. 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 principals 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 practice is deeply rooted in many places and several trades. The licence issued to the plaintiffs in these cases, which we have perused, does not prevent such a mode of earning brokerage or commission".

6. It must therefore be held that the plaintiffs in these cases have not violated the conditions of the licences granted to them under Section 8 of the Act.

7. The next question and by far the more important one is assuming that the plaintiffs have violated the conditions of the licences and there- -fore were not entitled to exemption under Section 8 of the Act whether they would be liable to the tax as dealers. This question appears to us to be a mixed question of fact and of law and not a mere question of law. It is therefore necessary to ascertain the nature of the business transacted by the plaintiffs as commission agents. It was indeed common ground and amply supported by the evidence that the plaintiffs were acting as agents for several seller principals who entrusted them with goods for sale at specified prices. Though these principals were known to the plaintiffs, they rarely if ever disclosed their names to the several buyers. So far as the buyers were concerned, the transactions were between them and the plaintiffs. The seller and the buyer as a rule were not brought into contact with each other. The plaintiffs, as commission agents, are given full authority to pass the property and the title in the goods to the buyers. P. W. 1 in O. S. No. 93 of 1946, a partner of the firm of the plaintiffs in that case, deposed that the firm had 100 to 200 principals. 90 per cent of whom resided outside the place of business. The principals send the goods to the firms for sale. On these facts must be determined the question whether the plaintiffs can fall within the definition of "dealer" in the Act. I have referred to these facts because during the course of the argument, it became evident to me that the actual decision in 'Government of Madras v. Veerabadrappa', I. L. R. (1951) Mad 257 on the facts found in that case was unassailable. I shall briefly show what divergence there is between the facts in the present cases and the facts in the case before the learned Judges in 'Government of Madras v. 'Veerabhadrappa', L.L.R. (1951) Mad 257. Satyanarayana Rao J. extracted in His judgment the summary of the evidence made by the learned District Munsif as regards the nature of the business carried on lay the plaintiffs in that case. That summary clearly demonstrates the fact that the plaintiffs were acting merely as brokers and were bringing the sellers and the buyers together. The sellers brought their goods to the plaintiffs' shop and the plaintiffs sent for prospective purchasers who came in person or sent their representatives. The purchasers themselves inspected the goods and the prices were fixed after discussion between the sellers and the buyers and the commission agents. Thereafter, there was delivery made to the buyers. The plaintiffs were paid commission and the other amounts which were called gumastha, dharma, rusum etc. The payment of these sums was consent-ed to by the sellers. Viswanatha Sastri J. alludes to the nature of the business in the following passage in His judgment:

"Here the plaintiffs are mere commercial agents who brought buyers and sellers of groundnuts 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 in 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 facts in the 'Public Prosecutor v. Narasimha Reddy', (1947) 2 Mad L. J. 220 were also similar to the facts in 'Government of Madras v. Veerabadrappa', I. L. R. (1951) Mad 257. Chandrasekhara Aiyar J. referred to the accused in the case as having acted as a broker or commission agent who brought the seller and the buyer together. He pointed out that the word 'turnover" as defined was not appropriate to what is done by an agent

"in the way of bringing together a buyer and a seller for brokerage or a commission."

8. On the facts found in the 'Public Prosecutor v. Narasimha Reddy', 1947-2 Mad LJ 220 and the 'Government of Madras v. Veerabhadrappa', I. L. R. (1951) Mad 257, there can be no doubt whatever that the merchants in those cases do not fall within the definition of "dealer". They themselves neither sold nor bought the goods. They simply brought the seller and the buyer together and received a brokerage or commission by way of remuneration for their trouble. It does not appear that the plaintiffs in those cases were entrusted with the possession or control of the goods or that they had authority to transfer the property or the title, in the goods. They could not therefore have effected a sale as defined in Section 2 (h) of the Act.

9. It appears to me that the learned Judges in the ' Government of Madras v. Veerabhadrappa', I. L. R. (1951) Mad 257 were not really concerned with ascertaining the nature of the business transacted by the commission agents who were not mere brokers bringing together the sellers and the buyers but who were entrusted with the goods by their seller principals with authority to transfer the property and title in the goods to the buyers who obtained delivery from the commission agents themselves without even being aware of the identity of the seller principals. The position in law of a commission agent to Which category the plaintiffs in the cases now before us belong, must, I think, be properly appreciated before we can decide the question, whether they would be dealers within the meaning of Section 2 (b) of the Act.

10. A broker is an agent employed to make at bargain for another and receives a commission on the transaction which is usually called brokerage. He has usually neither the custody nor the possession of the goods. It is the broker's duty to establish privity of contract between the principal and the third party. The broker cannot sell in his own name nor can he sue on the contract. A commission agent, on the other hand, of the class to which the plaintiffs belong, is not like a broker. He has almost invariably, custody or possession of the goods, actually or constructively. He often sells in his own name and in certain circumstances can sue the buyer himself. As pointed out by Jessel M. R. in 'Kirkham v. Peel', (1881) 43 L. T. 171 commission agents receive goods from anybody who sends goods to them and no person In their position ever dreams of keeping separate accounts at their bankers, in respect of each of the transaction of each of their members. He observed :--

"The course of trade always was, and it is shown in this case by the accounts current, that a Commission agent is liable to the consignor of the goods for the amounts received, and is in the habit of making advances to the consignor. He charges interest, and debits himself with the amounts received when they are received, and credits himself with interest on the other side of the account so that the real transaction between the parties is for the consignor to treat such a consignee as creditor for his advances and interest and to regard him as a debtor for the amounts received and interest".

11. In Blackwood Wright's Law of Principal and Agent, this case is cited as authority for the position that a commission agent is not bound to keep separate accounts at his bankers, for he is not a fiduciary agent and the monies he receives are his own; and by the customs of trade he is only liable as debtor to his employer for the amounts received (See 2nd Edn. p. 189). That in spite of the parties supposing their relationship to be that of principal and agent, in point of law it may be different as well illustrated fay the case of 'Ex Parte White, In Re Nevill', (1871) 6 Ch 397. In 'Kalyanji v. Tikaram', AIR 1938 Nag. 254 the legal position of a commission agent is very fully discussed by Vivian Bose J. (as he then was). The course of business found in that case was as follows. The plaintiff was a merchant who dealt in the purchase and sale of grain and cotton seed. The defendants were also merchants who acted as commission agents in respect of those commodities. The arrangement between them was this: The plaintiff was to send the defendants consignments of these goods from time to time; the defendants were to keep these goods with them and await instructions from the plaintiff about the sale; then as soon as the plaintiff gave them the word they were to sell and in due course hand over the sale proceeds to the plaintiff less their commission charges. At first sight it would appear that the defendants would come within the definition of agent given in Section 182 of the Contract Act. But the learned Judge held that the Contract Act does not draw a fine distinction between different classes of agents nor is the Act exhaustive so far as this part of the law was concerned. The learned Judge held that so far as the sales in the cases were concerned, the defendants were not acting on behalf of the plaintiff as his agent but on behalf of themselves. The intention was that the plaintiff would sell to the commission agents and the commission agents to the persons to whom they sold. No privity of contract was Intended to be established between the plaintiff and the purchasers as would have been the case in a case of agency pure and simple. The learned Judge then made the following observation with which I respectfully agree :

"Commission agents are of course agents up to a point and to that extent they stand in a position of active confidence towards their principals, but beyond that they are not agents in the real sense of the terms and the relationship between the parties from then on is one of debtor and creditor". (255) .. ..

"The test to my mind is this; does the commission agent when he sells have authority to sell in his own name? Has he authority in his own right to pass a valid title? If he has then he is acting as a principal vis a vis the purchasers and not merely as an agent and therefore from that point on he is a debtor of his erstwhile principal and not merely an agent". (256)

The following description in the learned Judge's Judgment of the course of business of a commission agent in general is very illuminating and appears to me to be apposite to the present cases:

"We also know that commission agents in general deal with a large number of what I may call principals scattered throughout India and sometimes abroad, it can hardly be supposed that the customers who come to their shops for purchasing a given quantity of cotton seed or grain look beyond them to these other persons resident elsewhere or deal with them otherwise than as principals in their own behalf. The customer in such circumstances can scarcely be expected to ask or know or even care who is the owner of each handful of grain he purchases; in fact, it may well be that the commission agents themselves do not know once they have bought the grain from their godowns and mixed it with other stock which is being retailed in their shops; nor would the principals care who these purchasers are. Their contracts are with the commission agents and ordinarily no privity is established between the principals and ultimate purchasers. In general there is nothing to prevent these commission agents from purchasing the commodities themselves and then selling thereafter at a profit to themselves. This profit they win be entitled to retain. A mere agent could not do that. Looking then to the general dealing between the parties in this case, looking to the fact that these conditions are the usual conditions upon which commission agents operate & to the fact that the defendants were themselves grain and seed merchants actually running a shop, I am clear that the understanding between the parties was that the defendants were to sell the grain and cotton seed in their own right and be responsible for the plaintiff as debtors for the sale proceeds less their agency charges."

12. Bearing in mind the peculiar nature of a commission agent's business, let me examine the definitions in the Madras General Sales Tax Act. Dealer is defined as any person who carries on the business of buying or selling goods. "Sale" is defined as a transfer of the property iri goods by one person to another in the course of trade or business for consideration. The general law relating to sale of goods is contained in the Indian Sale of Goods Act. Under Section 4(1) of that Act, a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Ss. 18 to 26 of the Act embody the general and special rules relating to the transfer of property as between seller and buyer. Sections 27 to 30 embody the rules relating to the transfer of title and this distinction made between property In the goods and title to the goods is not, without significance. In law there can be a transfer of property in goods without a transfer of title to them. A sale of goods refers to the transfer of property irrespective of the fact whether the title also is transferred or not. The language of Section 27 clearly contemplates a sale by a person who is not the owner of the goods; for it says :

"Subject to the provisions of this Act and of any other law for the time being in force 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 consent precluded from denying the seller's authority to sell."

As no written conveyance, still less a registered deed, is necessary for the sale of goods, unlike in the case of sale of immovable property, the contract of sale is performed when the goods are actually delivered. It is because that there can be a sale by. a person who has no title to the goods that Section 27 enunciates the rule that the buyer acquires no better title to the goods than the seller had. In the case of a commission agent, the accepted mercantile practice is that he has control over or possession of the goods and he has the authority from the owner of the goods to pass the property in and title to the goods. If this is so, undoubtedly when a commission agent sells goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner, there is certainly a transfer of property in the goods from the commission agent to the buyer. A business which consists in such transactions can properly be described as a business of selling goods. A similar position would arise even in the case of a commission agent buying for an undisclosed principal. A commission agent doing this kind of business would, in my opinion, fall within the definition of dealer in the Sales Tax Act. Neither the definition of dealer nor of sale contemplates as a necessary condition, that the goods sold should belong to the person selling or buying. There can be a sale or purchase on behalf of another.

13. Now I shall briefly deal with the two decisions which are alleged to contain conflicting opinions. In 'Province of Madras v. firm of Kanigolla Sivalakshminarayana', L L. B. (1950) Mad 421 the point did not arise directly. One of the learned Judges, Mack J. does not consider how far a commission agent would be a dealer. Govinda Menon J. however, in passing observed that a commission agent should be deemed to be a person who carries on the business of buying or selling goods and said :

"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."

14. In 'Government of Madras v. Veerabadrappa', ILR (1951) Mad 257 on the facts found by the District Munsif from whose judgment an extract is to be found in the judgment of Satyanarayana Rao J. it is clear that the question which has come up before us for decision could not have arisen. In that case there was obviously no sale by the plaintiffs because all that the plaintiffs did was to bring the seller and the purchaser together and to earn a commission for themselves. They would not obviously be dealers within the meaning of the definition because they never transferred the property in the goods to the buyer. But the learned Judges did go into the question in a general way whether a commission agent would be a dealer within the meaning of the definition in the Act. In so far as the learned Judges held that the pitffs. in the case before them were not dealers within the meaning of the Act, no possible exception could be taken. But if they meant to lay down that a commission agent would never fall within the definition of a dealer, with due deference to them, I cannot agree. In view of the great regard I have for the two leame'd Judges, I shall deal with the judgments separately in some detail.

15. Satyanarayana Rao J. prefaces the discussion of the point with the assumption that when a "dealer" is denned as a person who carries on the business of buying or selling goods, that means that he buys or sells the goods on his own account. That, in his opinion, is the primary meaning of the definition. While I agree that ordinarily buying arid selling by a person may be on his own account, there is nothing in the language of the definition to exclude from its ambit persons buying and selling goods on account of others. When a person buys or sells goods on behalf of some one else, even then it will not be inaccurate to say that he buys and sells goods. The learned Judge seeks to receive support for his view from explanation 2 which includes within the definition the agent of a person resident outside the Province who carries on the business of buying and selling goods in the Province. I do not think that the explanation throws any light on the point in issue. The reference in the explanation is presumably to an agent of a person who carries on business 'qua' agent of that person who however is residing outside the Province. Now it is well known and it was admitted by counsel before us that the plaintiffs in the cases before us though they describe themselves as commission agents, do not purport to be agents of any particular person or persons. Some of them admittedly get goods from as many as 100 principals. It will be opposed to facts to say that they are carrying on business as the agent of these persons. In the case of an agent who carries on business professedly as an agent of another then it is really the principal who can be deemed to be carrying on the business and the explanation (2) refers to such a case. The learned Judge then refers to the definition of turnover and again makes the assumption that to constitute the turnover of the agent he must buy or sell the goods for himself. Dealing with the definition of "sale" as a transfer of property in goods the learned Judge draws the implication 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. If the learned Judge meant "title" by the term "property" then undoubtedly property does not vest in the commission agent; but I think it would be correct to say that a commission agent who has custody and possession of the goods is vested with the property in the goods and He does have the authority to transfer the property in the goods to the buyer. Personally I am inclined to think that Section 27 of the Sale of Goods Act to which I have already adverted earlier supports my view. The learned Judge says:....except in the limited classes of cases contemplated by Section 27 of the 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."

But a commission agent does sell goods with the authority arid-consent of the owner of the goods. After a brief reference to the definition of agent in Section 182 of the Indian Contract Act, the learned Judge concludes that a commission agent who sells or buys on behalf of the principal is not a dealer.

16. The learned Judge was apparently confronted with Section 8 which to my mind in the clearest pos-sible way assumes that but' for the exemption the persons described therein would be liable to the tax under Section 3 of the Act as dealers. These are the persons who for an agreed commission or brokerage buy or sell on behalf of known principals specified in their accounts in respect of each transaction, persons like the plaintiffs in the cases before us. The only way in which the learned Judge gets over the implication of Section 8 is by holding that the section was enacted "by way of abundant caution in order to make the machinery of taxation move smoothly and with speed." He says:

"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."

In another place, he opines that Section 8 was intended to cover transactions of accommodation contemplated by explanation (4) to the definition of turnover in the Act. In my opinion, though it is true that Section 8 is not a taxing section, yet occurring as it does in the same enactment, it must be read as throwing some light on the other related provisions and in view of the fact that there is nothing in the definition of dealer to indicate that the buying or selling must be on the person's own account, the obvious inference from Section 8 is that the definition would cover also the case of persons mentioned in Section 8 who would, but for that section, be liable to taxation under Section 3.

17. The other learned Judge also came to the conclusion that an agent can in no event be included in the definition of a dealer. But there are observations in his judgment which appear to me to be not inconsistent with the view I am taking. I do not for a moment differ from him when he says

"a broker or commission agent who merely brings together the buyer and seller does not transfer the property in the goods."

But with respect I am unable to follow how an agent who might effect transfer of the property in the goods to the buyer if he had been authorised to sell by the owner of the goods cannot be said to have sold the goods in view of the definition of sale in the Act. Again I do not disagree with him in the following statement of the law:

"A broker is an agent who, in the ordinary course of his business, is employed to make contracts for the purchase of sale of goods of which he is not entrusted with the possession or control. Usually he contracts in the name of the principal & 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."

18. It is true that ordinarily no agent can main tain an action in his own name to enforce a contract made by him merely in his capacity as agent. But a commission agent selling the goods of an undisclosed principal can certainly maintain an action in his own name. Once more I find myself in agreement with the learned Judge when he says:

"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."

That may be so, but when the commission agent entrusted with the possession of the goods and authorised to sell them on behalf of his principal enters into a contract of sale with a third party i.e., the buyer and transfers the property in the goods to the buyer, I fail to see why the transaction between the commission-agent and the buyer would not be a sale within the meaning of the definition of that term in the Act. The learned Judge is unable to get over Section 8 though he sets out what according to him that section was intended to cover.

19. Both the learned Judges discuss the well-known decision in 'Ireland v. Livingston', (1872) LB 5 HL 395. We are not concerned as to how far Lord Blackburn's dictum about the relationship between a commission agent and a foreign consignee as-being that of vendor and purchaser is correct law. All that we are concerned with in this case is to determine whether the plaintiffs in these cases would be dealers i.e. persons engaged in the business of buying or selling goods. I do not therefore propose to deal at any length with either the decision in 'Ireland v. Livingston', (1872) L. R. 5 H. L. 395 or 'Cassabgolou v. Glbb', (1883) 11 Q. B. D. 797.

20. In my opinion, the learned Judges in 'Government of Madras v. Veerabadrappa', I. L. R. (1951) Mad 257 went too far in holding that in no event and under no circumstances can a commission agent be deemed to be a person carrying on the business of buying or selling goods and I must express my respectful dissent from them. In my opinion, the plaintiffs in these cases would be dealers within the meaning of that expression in the Act and liable to tax under Section 3 but for the exemption given by Section 8. As I have held that the conditions of the licence granted under Section 8 have not been infringed, the plaintiffs will be entitled to the exemption. All the suits will therefore be decreed.

21. In the result, App. Nos. 365, 468, 551 and 447 of 1947 will be allowed and App No. 641 of 1947 will be dismissed. There will be decrees as prayed for. The plaintiffs will have their costs here and in the Court below.


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