1. T.C. No. 84 of 1976 has been filed by the assessee against the order of the Board of Revenue (Commercial Taxes) dated 29th November. 1975. The assessee had registered itself as a dealer under the Tamil Nadu General Sales Tax Act, 1959, and the Central Sales Tax Act, 1956. For the year 1969-70 the assessee reported a total turnover of Rs. 4,34,283.92 and claimed exemption on the entire turnover on the ground that it acted only as an agent in dealing with the goods. The assessing officer did not accept this plea and finally determined the total and taxable turnovers at Rs. 4,34,283.92 and Rs. 1,28,767.53 respectively. The assessee appealed to the Appellate Assistant Commissioner and contended that it acted only as an agent of its members collectively, procuring their respective quota of allotment of dyes and art silk yarn required by them and that its transactions are not liable to tax. In this connection, it relied on a decision of this Court in National Chamber of Commerce v. State of Madras  25 S.T.C. 185. The Appellate Assistant Commissioner accepted these contentions and allowed the appeal. The Board considered that the order of the Appellate Assistant Commissioner was erroneous and that the assessment should be restored. The assessee's objections were called for and, after hearing the assessee, it was held that the assessee's contentions had no force and that the sales were liable to tax under the Act. It set aside the order of the Appellate Assistant Commissioner and restored the order of the assessing authority. It is this order of the Board that has given rise to the present appeal.
2. It is necessary, to appreciate the contentions, to set out a few more facts based on a sample set of transactions. In May, 1969, the Textile Control Officer, Madurai, sent out a letter to the assessee regarding the intimation of the requirements of hydrosulphite of soda by the assessee's members. The Director of Handlooms had decided to reassess the requirements of the said chemical by handloom associations in each district. The Textile Control Officer was ordered to verify the accounts of the members of the association and find out the actual consumption of this chemical for the year 1968. The secretary of the association was requested to furnish the particulars in pro forma No. I enclosed in duplicate in respect of the members of the association who were actually in need of hydros for their bona fide consumption. The secretary was to send the particulars called for in regard to the members of the association alone within a week so that the consolidated report to the Director of Handlooms could be submitted urgently. On 27th May, 1969, the assessee sent a list of the members and their requirements on the basis of actual consumption. 30.8 metric tonnes of hydros was released in or about September, 1969, for distribution to the handloom industry in Tamil Nadu. Out of the said quantity the assessee-association was allotted 350 kg. of hydros packed in 50 kg. drums. The value was Rs. 12 per kilogram plus 3 per cent Central sales tax with C form ex godown, Bombay. The State Trading Corporation was to intimate the amounts to be paid by the association towards the allotment. The allotment was made subject to the condition that it Should be distributed only to the members in the presence of the Textile Control Officer concerned, in accordance with his instructions. Any violation of the condition was to be viewed very seriously and action taken.
3. On 24th September, 1969, the assessee wrote to the Deputy Marketing Manager of the State Trading Corporation, Bombay, accepting the allotment of 350 kg. of hydros. The goods were requested to be despatched through lorry and the documents were to be presented through bank. The State Trading Corporation wanted the price to be paid only by demand draft and wanted also an undertaking from the allottees that the goods delivered to them would be used for manufacture in their own units and that no portion of the goods allotted to them would be sold or diverted to other parties. It may be seen that in this communication the State Trading Corporation proceeds as if the consumers are the allottees and the assurance is to be procured from them.
4. The assessee sent a demand draft on 21st October, 1969, and asked for the despatch of the goods in proper condition through lorry. The undertaking required was also furnished. The assessee thereafter distributed the quantity obtained among the members in accordance with their requirements and collected the amounts due from them. It appears that vouchers were alone given and that no invoices were made in favour of the members by the association. There was also an inspection of the assessee-association by the Textile Control Officer, Madurai, and he was satisfied about the assessee having complied with all the requirements in the matter of the allotment of the chemical mentioned above. It is on the basis of these facts that we have to consider the liability of the assessee to sales tax.
5. There are three aspects to be examined in this connection. The first is that the assessee has been incorporated as a limited company. The question is whether, as a consequence of incorporation, it is a separate entity independent of its members, so that it could be taxed on its dealings with the members. It has been held in cases arising under the parallel legislation, namely, the Income-tax Act, that, as a general rule, the fact that a mutual association is incorporated as a company would not affect its mutual character or does not destroy the complete identity between the association and its participants: see Kanga & Palkhivala's Income Tax, 7th Edn., page 87, and also Commissioner of Income-tax v. Madras Race Club : 105ITR433(Mad) . In the present case, having regard to the correspondence that has gone on between the Textile Control Officer and the assessee and also between the State Trading Corporation and the assessee, it would be clear that the assessee was acting as a kind of a mutual concern rendering some kind of help to its members. It is in the nature of an association for self-help. Its role in the scheme of the distribution of the dyes and other substances obtained from the State Trading Corporation was only that of an intermediary or, to use a less elegant, but perhaps a more telling description, a go-between, between the handloom textile manufacturers on the one hand and the textile control authorities and the State Trading Corporation on the other. The State Trading Corporation actually imported the goods, but those goods had to reach the actual consumers. The State Trading Corporation or the Directorate of Textiles would have to deal with a large number of individual consumers if the distribution had to be directly taken up with them. It was, therefore, apparently, considered necessary to have in each district an association of this kind, and for the sake of convenience, and to avoid dealing with a large number of individual consumers, the matter was dealt with through such associations. The assessee-association was only acting as a go-between for its members in the sense it was concerned only with the distribution of the goods allotted to the members. It did not have, in the real sense, any property in the goods which it transferred in favour of the members.
6. Before the Board, the assessee placed reliance on a decision of this Court in National Chamber of Commerce v. State of Madras  25 S.T.C. 185. In that case, the assessee was registered under the Societies Registration Act and it was also a dealer under the Madras General Sales Tax Act. It impored art silk, dyes and chemicals from abroad on the strength of the actual users' licences held by its members, and distributed them to the respective members and collected the sales tax thereon. The department assessed these transactions to sales tax, not only on the basis of the above facts, but also on the view that the explanation to the definition of 'dealer' in Section 2(g) as also explanation (1) to the defintion of 'sale' in Section 2(n) would apply. The petitioner filed writ petitions in the High Court to quash the assessments. It was held that the real purchaser was the relative licensee who had the quota and the petitioner acted only as an intermediary to import and distribute, without having any property in the goods. As the transaction of import and distribution involved no transfer of property, it was held that it could not be said that the petitioner effected sales in the course of business attracting sales tax. This decision was distinguished by the Board on the ground that in that case all the members held actual users' licences. Though this circumstance is referred to in one portion of the judgment, still the ratio of the judgment is not dependent upon the existence of the actual users' licences among all the members. The facts of the said case and the case before us are so similar that we think that the principle laid down therein applies in full force here. We hold that the assessee-association is not a dealer and is not, therefore, liable to sales tax.
7. Another aspect on which the Board did not think it proper to apply the above decision to the facts here was that the assessee here had furnished C forms. This Court has ruled in K.P. Sitaram & Co. v. State of Madras  16 S.T.C. 436, that C forms could be given even in respect of agency transactions. Therefore, the fact that the assessee gave the C forms would not stand in the way of its being a mere intermediary or a go-between so as not to be a dealer.
8. On the facts here, we are satisfied that the assessee's claim was rightly accepted by the Appellate Assistant Commissioner and the order of the Board is erroneous. The appeal is accordingly allowed with costs. Counsel's fee Rs. 250.
9. In T.C. No. 324 of 1976, the facts are identical with those discussed in T.C. No. 84 of 1976. We do not think it necessary to discuss the facts over again here. For the reasons given in T.C. No. 84 of 1976, this appeal is also allowed with costs. Counsel's fee Rs. 250.