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C. Hajee Abdul Khalique Sahib and Company and anr. Vs. the State of Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 521 and 619 of 1978 and Appeal Nos. 35 and 42 of 1978
Judge
Reported in[1979]44STC261(Mad)
AppellantC. Hajee Abdul Khalique Sahib and Company and anr.
RespondentThe State of Tamil Nadu
Appellant AdvocateC. Natarajan, Adv.
Respondent AdvocateAdditional Government Pleader
DispositionAppeal dismissed
Cases ReferredMod. Serajuddin v. State of Orissa
Excerpt:
- - under these circumstances, we see no reason to disturb the conclusions of the board of revenue and, accordingly, these appeals fail and are dismissed......by the appellants, the appellate assistant commissioner (c.t.) iii, madras, held that the local exporting houses, who exported tanned skins, did so only on behalf of the appellants and that, therefore, the respective turnovers were eligible for exemption. it is these orders of the appellate assistant commissioner that were sought to be revised suo motu by the board of revenue after issuing notice to the appellants. the appellants contended that the exporting firms acted only as their agents and the transaction between them and the said agents cannot be termed as first sale, that the entire sale proceeds were credited by the said exporting houses to the appellants less the commission, that the relationship between the appellants and the exporters was only as principal and agent,.....
Judgment:

Ismail, J.

1. The former appeal comes up for final disposal and the latter appeal comes up for admission. Both these appeals arise out of a common order of the Board of Revenue. In the former appeal, the disputed turnover is Rs. 4,03,175.97 and, in the latter appeal, the disputed turnover is Rs. 8,74,074.00 and the appellants contended that the said two turnovers referred to above were turnovers of export sales and that, therefore, they are not liable to sales tax. The assessing officer declined to accept this contention relying upon the decision of the Supreme Court in Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras : [1970]3SCR147 , which itself was followed in Mod. Serajuddin v. State of Orissa : AIR1975SC1564 . However, on appeal preferred by the appellants, the Appellate Assistant Commissioner (C.T.) III, Madras, held that the local exporting houses, who exported tanned skins, did so only on behalf of the appellants and that, therefore, the respective turnovers were eligible for exemption. It is these orders of the Appellate Assistant Commissioner that were sought to be revised suo motu by the Board of Revenue after issuing notice to the appellants. The appellants contended that the exporting firms acted only as their agents and the transaction between them and the said agents cannot be termed as first sale, that the entire sale proceeds were credited by the said exporting houses to the appellants less the commission, that the relationship between the appellants and the exporters was only as principal and agent, that there was no sale by the appellants to the exporting houses, that the appellants themselves did not raise any invoice on the exporting houses and that, therefore, there could be no sale by the appellants to the exporters in order to enable the exporters to effect a second sale in favour of the foreign buyers. The Board of Revenue rejected this contention of the appellants and revised the orders of the Appellate Assistant Commissioner and added the disputed turnovers. Hence, the present appeals by the appellants under Section 37 of the Tamil Nadu General Sales Tax Act.

2. There are two matters which require immediate attention. The Board of Revenue in its order has pointed out that none of the correspondence showed that the local exporters acted as the agents of the appellants herein. The correctness of this statement is not specifically challenged in the grounds of appeal preferred to this Court. Apart from this, it is admitted by the Learned Counsel for the appellants themselves that, in the correspondence that passed between the local exporting houses and the foreign buyers, there is absolutely nothing to show that the local exporting houses were acting as the agents of somebody else and that they were not dealing with their own goods by way of selling them to the foreign buyers. We are of the opinion that, on this admission, the sales in question must be held to be liable to sales tax, because it must be deemed that there was a local sale by the appellants to the exporting houses in order to enable the exporting houses to effect a sale in their own right in favour of the foreign buyers. In fact, that is the view taken by a Bench of this Court, to which one of us was a party, in its order dated 16th February, 1976, in State of Tamil Nadu represented by the Deputy Commissioner (CT), Madras Division, Madras-1 v. A. Shafeeq Ahmed and Co. (Tax Cases Nos. 458 and 459 of 1971). In that case, it was observed by this Court as follows:

If the contention of the assessees is that they were the exporters in fact and any other person was acting only as their agent, the privity of contract between the assessees and the foreign exporter would be established and the assessees themselves could become an exporter. But, if the facts were to be that the contract was entered into by the agent on his own right and not as an agent of the assessees, there shall be deemed to be a sale by the assessees to the agent and there would be no privity of contract between the assessees and the foreign buyer and it would amount to a case of sale for export to a local agent.

3. Thus, these observations of the Bench directly apply to the facts of the present case and, therefore, it must be held that the appellants must be deemed to have sold the goods to the local exporting houses, who, in turn, effected the sale of the goods in favour of the foreign buyers. Under these circumstances, we see no reason to disturb the conclusions of the Board of Revenue and, accordingly, these appeals fail and are dismissed. There will be no order as to costs in the former appeal.

Appendix

[The judgment of the Division Bench of the Madras High Court consisting of V. Ramaswami and Sethuraman, JJ., in State of Tamil Nadu v. A. Shafeeq Ahmed and Co. and Anr. (Tax Cases Nos. 458 and 459 of 1971 [Revisions Nos. 326 and 327 of 1971]) delivered on 16th February, 1976, is printed below:-]

The State of Tamil Nadu v. A. Shafeeq Ahmed and Co.

Ramaswami, J.

1. Though the assessees in these two tax revision cases are different, the point involved is the same. In respect of the disputed turnover, the assessees claimed that the turnover related to sales in the course of export.

2. The assessees contended that the turnover related to sales effected through local exporting agents and that, in law, there was no sale to the local agent and that the assessees themselves should be deemed to be the exporters. Though the assessing officer rejected this contention, the Appellate Assistant Commissioner pointed out that the transaction could be either a sale to an agent or a sale through an agent and, only in the case of a sale to an agent, who then exported, that the transaction could be stated to be a local sale and not in the case where the sale was through an agent, in which case, the agent was acting on behalf of the assessee and the export shall be deemed to have been made by the assessee himself. Since the assessing officer had not kept the distinction between a local sale to an exporting agent and an export sale through an agent, he set aside the assessment order and remanded the matter for a fresh consideration on merits. But, on appeal, the Tribunal thought that there is no distinction between a sale to an agent and a sale through an agent and that, therefore, the entire turnover is exempt as sales in the course of export. The disposal by the Tribunal, in our opinion, is not satisfactory. If the contention of the assessees is that they were the exporters in fact and any other person was acting only as their agent, the privity of contract between the assessees and the foreign exporter would be established and the assessees themselves could become an exporter. But if the facts were to be that the contract was entered into by the agent on his own right and not as an agent of the assessees, there shall be deemed to be a sale by the assessees to the agent and there would be no privity of contract between the assessees and the foreign buyer and it would amount to a case of sale for export to a local agent. The Tribunal will have, therefore, to analyse each transaction and come to a conclusion whether the export sale was by the assessees or by the agent in his own right. The Tribunal did not also have the benefit of the decision of the Supreme Court in Mod. Serajuddin v. State of Orissa : AIR1975SC1564 , which came much later than its order. The Tribunal will now dispose of the cases on merits and in the light of the decision of the Supreme Court in Mod. Serajuddin v. State of Orissa : AIR1975SC1564 . The tax revision cases are accordingly allowed and the order of the Tribunal is set aside and the matter is remanded to the Tribunal for fresh disposal in the light of the observations made above. But there will be no order as to costs.


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