P. Govindan Nair, C.J. - These revisions are taken by the Revenue against the order of the Tribunal holding that the turnover of Rs. 2,07,878.77P. representing the alleged sales affected by the Madras Motor Parts Dealers Association to its members are not taxable and they are really and in law sales in the course of import. The short question is whether the said turnover for the year 1971-72 is taxable under the Tamil Nadu General Sales Tax Act. While the Revenue contends that the turnover represented local sales coming under that head, on behalf of the assessee, it was contended on behalf of the assessee that those sales were in the course of import and that if that contention is not accepted, it is clear from the facts that there were really no sales by the assessee to its members. We shall consider these aspects. Before doing so, we have to refer to certain facts and certain agreements.
2. The Madras Motor Parts Dealers Association is an Association of its constituents who are all dealers in motor parts. The members wanted to import certain parts which were in demand and which were improtable pursuant to agreements entered into between India and other countries on making payments in rupees. They, therefore, approached the Association and paid amounts to the Association after specifying the nature of the motor parts required by them and the extant of the quantity wanted. The terms of the agreement have been embodied in writing and a copy of the agreement has been made available to us. It is clear from this agreement that the members wanted the Association to act as interveners, in fact as the agents of the members, and get the goods imported on behalf on the members and then disburse them to the members for sale. We shall extract only one paragraph (paragraph 8) from this agreement, the relevant part of which is as follows :-
'It is agreed that although the Import Contract shall be made in the name of the Association as required by the State Trading Corporation of India Ltd., the Association shall enter into such import contract on behalf of and at the sole risk of the members for whom the goods are imported or to whom the goods are to be allotted or distributed for sale by the Association ......'
Though the Articles of agreement dated 24-9-1964 between the Association and its members contained terms which seem to indicate that the Association has been authorised by the members to import on their behalf, it is not possible for the Association to do so because the licence for import had been given only to State Trading Corporation. We have been furnished with a copy of the licence, the conditions attached to it as well as the letter of authority that has been given to the State Trading Corporation authorising the State Trading Corporation to permit the Association to import. It was made very clear that the permission import on their behalf i.e. on behalf of the State Trading Corporation. The letter of authority itself. These condition are the following :
'1 The person or concern in whose favour it has been issued will act purely as an agent of the licence and the goods imported will be the property of the licence holder both at the time of clearance through the Customs and subsequent thereto. The licence holder will be delivered to him and shall not be disposed of otherwise. The licensee shall not cause or permit the holder of letter of authority to dispose of the goods.
the holder of the letter of authority shall clearly indicate on all the relevant customs documents including the triplicate copy of the Customs Bill of Entry that the goods have been imported by him on behalf of the licensee. This endorsement will be duly attested by the Customs authority.
3. The holder of the Letter of Authority shall not nuder any circumstances be entitled to any quote licence of the basis of these imports.
4. The licence issue to the State Trading Corporation also had conditions attached to it and these conditions were the following :
'....1. The Goods for the Import of which this licence is granted shall be the property of the licensee at the time of import and thereafter upon the time of clearance through Customs.
2. The Goods Imported on this Licence by M/s. Madras Motor Parts Dealers Association, Madras, will be supplied to the Actual users at prices within the Ceiling of Selling margins fixed by the STC and in accordance with terms and conditions of the licence and the Agreement entered into them with the STC' .....'
Apart from the terms of the latter of authority and the conditions subjects to which the letter of authority was issued to the State Trading Corporation which in their turn charged in the conditions if the licence itself, an agreement was entered into between the State Trading Corporation and the Association. A copy of this was also made available to us and this agreement well as the agreement between the Association and its members, the letter of authority and even the licence granted to the State Trading Corporation were parts of the records in the case on the basis of which the question had to be decided. The agreement between the State Trading Corporation and the Association is a long one and it is generally in consonance with the letter of authority and the conditions attached to it though it contains many other details regarding the obligations of the State Trading Corporation and the Association, it is unnecessary to refer to these details, but we would like to emphasise that one of the obligations imposed on the Association by the agreement was that the Association must sell only to actual users and those actual users could be specified by the State Trading Corporation; in other words, the State Trading Corporation has a right to specify to whom the sales should be made. We would like to repeat and emphasise that no sale could be made to any person or authority or Company who were not actual users of the goods.
5. We would like to refer to only one paragraph, namely, paragraph-11 of the agreement which seems to strike a discordant note to what is stated in the letter of authority. That paragraph reads as follows :
'This agreement shall not be construed as one of agency as between STC and your self and consequently STC shall not be liable to you or to other person claiming through you in any manner except as expressly provided in this agreement'.
The case of the assessee was that there was really no sale by the Association to its members and the was really by the foreign sellers to the members of Association and that such a sale was in the course of import and, therefore, not liable to be taxed under the Tamil Nadu General Sales Tax Act. After hearing the matter fully, it was realised that such a stand could not be taken because the import had to be by the State authority clearly state that the import is to be made by the Association on behalf of the State Trading Corporation. It is repeatedly stated in the conditions attached to the licence as well as in the agreement between the Association and the State Trading Corporation that the goods will remain the goods of the State Trading Corporation at the time of the import, at the time of he clearance and even after the goods were cleared by the Association. It is, therefore evident from the facts of this case that the import sale was in favour of the state Trading Corporation, the Association acting as the agent of the State Trading Corporation. This position cannot be adversely affected by paragraph 11 of the agreement between the State Trading Corporation and the Association, for by virtue of statutory provisions, the import can only be by the State Trading Corporation and the terms of the letter of authority very clearly indicated that the Association was acting on behalf of the State Trading Corporation and the import was, therefore, clearly by the State Trading Corporation. We do not wish to say anything more on the sales by the foreign seller because we are not concerned with those transaction at all. We merely wish to add that the sale being in favour of the State Trading Corporation, it is not possible for the Association or its members so contend that the import sale was in favour to the Association or its members.
6. However, counsel for the assessee contended that proceeding on the above lines, it is clear that the sales subsequently made by the Association on permission being granted by the State Trading Corporation were mainly to actual users and in fact, there was no sale whatsoever by the Association in favour of its members. He emphasised this aspect by reference to the terms of the agreement between the Association and its members and referred to the various details contained in that agreement and pointed out that the Association, though it was a separate entity, was merely called upon to make the goods available and they had specifically to act on behalf of the members in the matter of import. The money expended for the purpose of import was supplied by its members to the extent required to get the parts they wanted and the clause in the agreement which we have already read, spoke of the goods imported being distributed or allotted for sale to the members. There can be little doubt that it was so urged, going by the terms of this agreement at no time was it in the contemplation of the parties, namely, the Association and its members that there should be any agreement for sale between them or that the goods imported must be sold to its members. It was intended only that the Association should act in the matter of procuring the goods required by the members for the purpose of their business of dealing in and in selling motor parts. Though no doubt counsel for the Revenue is right in contending that any agreement between the Association and its members cannot override the effect of the provision of law, in order to enable the Association to contend that there were no sales, if in fact there were sales by the Association to its members we are unable to see that there could be any sale effected by the Association in favour or its members. In fact, we have already pointed out that the Association had been strictly prohibited from effecting any such sales. It is no bodys case and it was not even suggested that the members of the Association were actual users of the goods. The sales to them were, therefore, not possible by the Association. There is nothing to indicate that the Association violated the terms of the letter of authority and the agreement that had been entered into by the Association with the State Trading Corporation. In these circumstances, we have to correlate the arrangement that have been reached between the Association and the State Trading Corporation and the agreement between the Association and its members and view these separate agreements as being governed by the terms of the letter of authority and the licence issued to the State Trading Corporation when those are read with the conditions attached to them. So read, we have no doubt what ever that what has been done by the Association in making available the goods that they had imported under the letter of authority to its members was merely an act of distribution or allotment without any intention to sell and without any agreement to sell by the Association to its members. Any sale will have to be by the members and they too will have to act in accordance with terms of the agreement between the Association and the State Trading Corporation that the sales were only to actual users and if insisted by the State Trading Corporation, only to actual users pointed out by the State Trading Corporation. Such sales and the turnover relating to them are not before us. We expect that those sales would have been taxed at the hands of the members of the Association.
7. The ruling in Serajuddins case has dealt with a different set of circumstances. There, it was possible for the court not only to postulate that there were two sales but also to come to the conclusion that those two sales were not so linked as to form an integral part of the sale transaction so as to accept the argument of the assessee that the two transactions, which apparently appeared to be distint and separate, merely formed part of the single transaction of export. That decision does not touch the questions with which we are concerned in this case. It is not mentioned anywhere in the decision that a person who actually entered into a contract with the foreign buyer as seller could not act as the agent of an undisclosed principal. The judgment proceeds on the assumption that such an agency can exist, for, one of the point mentioned in the judgment is that it was not concerned that the State Trading Corporation acted as the agent of the local seller in the matter of exporting goods.
8. In the light of the above, we have to uphold the view taken by the Tribunal that the turnover is not taxable, but for reasons entirely different from those that have been relied on by the Tribunal. We hold that there have been no sales by the Association to its members and therefore, there was no taxable turnover and no tax can be imposed. Accordingly, we dismiss T.C. 264 of 1976. T.C. No. 265 of 1976 will also have to be dismissed because the assessment relates to the surcharge imposed on the Association on the basis of the tax that has been imposed which is the subject matter of T.C. No. 264 of 1966. We therefore, dismiss T.C. 265 of 1976 as well. The matter had not been clear till it was discussed at length at the Bar. We, therefore, direct the parties to bear heir respective costs.