1. The common petitioner which is the Indian Insurance Companies' Association Pool, Madras, seeks prohibition forbidding the respondents from proceeding further to the notice of the first of them, with a view to assess sales of salvage to tax. The petitions cover 1961-62, 1962-63 and 1963-64. The pool was brought about by an agreement to which several registered companies doing general insurance business were parties. In the assessment years, the petitioner is stated to have effected through Murray & Company, Public Auctioneers, sales of goods coming into their hands by way of salvage, in the course of carrying on their business in general insurance and it is said that Murray & Company also collected sales tax which had been remitted to the revenue. But being called upon to produce the accounts and to register itself as a dealer by the revenue, the petitioner has moved this Court, for the relief we mentioned on the ground that the petitioner is not a dealer and the sales of salvage made by it through an agency did not attract sales tax. On that basis, it is claimed that the petitioner is not liable to be called upon to register itself as a dealer and submit to the jurisdiction of the Sales Tax Authorities.
2. A copy of the agreement containing the terms of the Indian Insurance Companies' Association Pool has been produced before us. The agreement is dated 3rd March, 1960, and purports to be between 19 Indian Insurance Companies named in the Schedule to the agreement and one other Indian Insurance Company, all of which transacted business in fire, marine and miscellaneous insurance, directly or indirectly, under the control of Government, Municipalities, Local Bodies and Housing Societies, Co-operative or otherwise, aided by Government, upon certain terms and conditions contained in an agreement dated 2nd January, 1959. The pool seems to have functioned as a kind of super insurance company operating in particular kinds of insurance business and also acting as a sort of clearing house in various matters touching the several companies being parties to the agreement. In the course of its business, as it is said, it had collected salvage of goods in respect of which contract or contracts of indemnity had been enforced or had come in for payment of compensation. As far as we have been able to see, it does not appear, either from the agreement under which the pool was brought into being or the scope and character of the business carried on by the constituent insurance companies, that the pool was to engage itself in sales of salvage as a regular business proposition. That being the case, the matter should be looked at from the point of the nature and effect of contract of insurance, which is essentially one of indemnity. When the contingency for enforcement of indemnity arises and indemnity is paid under the terms of insurance, normally, the subject of accident becomes vested as the property of the relative insurance company or the pool. Often, such salvage is sold out in order to minimise the loss incurred by the undertaking. That process is incidental to the insurance business. It should follow, therefore, that, if there was nothing more and the pool only had the salvage collected by it sold through the agency, that cannot be regarded as in the course of business in purchase and sale of goods, and the pool would not, therefore, be a dealer within the meaning of the Act. That is the stand taken by the petitioner, and it would be perfectly justified, if the circumstances are as we have just now detailed. In that case, the petitioner would not be liable to be called upon to be registered as a dealer, and the sale of salvage will not attract sales tax.
3. We are, however, not in a position, at the moment, to forbid the revenue from proceeding with the matter. Initially, it has jurisdiction to examine the position, in order to see whether the circumstances we have mentioned are present. We, therefore, refrain from issuing a rule but in the expectation that the revenue will carefully look into the matter, and, if the facts are as set out by the petitioner and noticed by us, it will proceed on the footing that there is no liability to sales tax, and the petitioner will not be liable to be registered as a dealer. We consider that the revenue should have that opportunity. It means that the pool, or those who represent it, should co-operate with it and give such assistance as the revenue may require.
4. Subject to the observations we have made, the petitions are dismissed. There will be no order as to costs.