K. Veeraswami, C.J.
1. These petitions filed by the National Chamber of Commerce, Madras, impugned the validity of assessments of sales tax on transactions involving import by it of art silk, dyes and chemicals and distribution thereof to its members who held actual user's licence. The petitioner has registered itself as a dealer and would appear to have even collected sales tax from its members to whom distribution was made of the imported stuff. The department assessed the transactions not only on the basis of those facts but also on the view that the explanation to the definition of 'dealer' would apply, that is to say, a society or an association which, whether or not in the course of business, buys, sells, supplies or distributes goods from or to its members for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of the Act. Reliance was also apparently placed on explanation (1) to the definition of 'sale'. According to the explanation the transfer of the property involved by supply or distribution of goods by a society shall be deemed to be a sale for the purposes of the Act.
2. There is no dispute that the National Chamber of Commerce has been registered under the Societies Registration Act, 1860. If it imported goods from abroad and transferred the property therein to its constituent members for consideration, it might be said that there was a sale chargeable to tax. But, the facts, which we shall presently notice, do not seem to admit of the view that there was any such process amounting to a sale of goods. A letter of the Director of Handlooms dated 13th April, 1966, addressed to the Secretary, National Chamber of Commerce, shows the background for the import of dyes and chemicals. The first paragraph in the letter is this :
It has been proposed to grant a licence for Rs. 9,03,000.55 in favour of the Director of Handlooms, Madras, against the surrender of dyes incentives by the exporters of Bleeding Madras for the exports during July-December 1964 period. As per (1st batch) the revised distribution scheme Rs. 6,02,000.55 has been set apart for distribution to the actual users through the registered associations and Tamil Nadu Handloom Weavers Co-operative Society.
3. The letter goes on to say that it had been decided to distribute the available dyes and chemicals according to the proven consumption as certified by the Textile Control Officers concerned. Then comes the following :
The proven consumption of dyes and chemicals and other canned items as certified by the Textile Control Officer in respect of the members of your association is Rs. 4,23,200 and six percent, thereof works out to Rs. 25,302. The distribution should be made to your members in the above ratio.
You are requested to intimate the Tamil Nadu Handloom Weavers Co-operative Society Limited, Madras-8, the details of dyes and chemicals required by the members of your association within the entitlement indicated above under advice to this office.
4. Provision also has been made in this letter as to how the allotment was made, subject to certain conditions, one of which is that the petitioner should not sell or otherwise dispose of the dyes and chemicals which is allotted to the petitioner except to its members for their bona fide consumption and that such distribution to its members should only be made in the presence of the Textile Control Officer or his representative. The petitioner was also required to obtain acknowledgement of the members as a token of having received their shares. That clearly brings out the scheme of the distribution which obviously can involve no transfer of property. The petitioner was evidently acting as a kind of agent or trustee for its members. It certainly had no property in the goods it imported, for the import was only in respect of the import entitlement of the members of the petitioner. Further, when once the goods were imported under such entitlement, they should be distributed to the respective members in accordance with the quota entitlement and the members to whom the distribution had been made should themselves use them. That was the condition necessarily going with the actual user's licence. It should also be noted that, as observed eariler, the petitioner was not at liberty to sell or otherwise dispose of the dyes and chemicals except by way of distribution to its members.
5. So far as art silk yarn was concerned, here again, the process of import and distribution is almost similar. This appears from a letter of the Director of Handlooms, dated 19th November, 1963, addressed to the Secretary of the petitioner. The second paragraph is material :
The essentiality certificate has been issued for and on behalf of the members listed in the appended statement and you are hereby requested to send the same immediately to the Joint Chief Controller of Imports and Exports, Sudama House, Ballard Estate, Bombay-1.
6. Paragraph 3 reads :
The essentiality certificate is issued subject to the condition that the art silk yarn when imported should be distributed to the members as detailed in the list hereunto on the basis of their entitlement indicated in the licence or calculated as the rate at which licence issued for each category of looms. It should be that the members in their turn consume the imported art silk for the production of art silk fabrics on their own looms or looms under their control and not offer them for resale.
7. It may be seen, therefore, that the real purchaser is the relative licensee who had the quota and the petitioner acted as an intermediary to import and distribute without having any property in the goods. The process of import and export, therefore, in the case of art silk yarn, dyes and chemicals involved no transfer of property in the distribution, as above indicated.
8. It will be obvious, therefore, that the distribution so made involved no sale of goods. The explanation to the definition of a 'dealer' is subject to there being a sale. There is reference in the explanation to distribution, as distribution involves a transfer. That it is so is also clear from the first explanation to the definition of 'sale'. Distribution there contemplated is such as involves a transfer of property. If therefore the petitioner's transaction in the -import and distribution of art silk, dyes and chemicals involved no transfer of property, it cannot be held that as a dealer it effected sales in the course of business attracting sales tax.
9. We are not in these petitions concerned with local purchases made by the petitioner from mills of yarn and distribution. We do not decide whether those transactions would attract tax or not. Subject to this observation, the petitions are allowed and the orders of assessment involved in these petitions are quashed. The petitioner is entitled to costs, one set; counsel's fee Rs. 250.