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Satcowrie Dass and Co. Vs. Commissioner of Commercial Taxes - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberMatter No. 365 of 1976.
Judge
Reported in[1979]44STC337(Cal)
AppellantSatcowrie Dass and Co.
RespondentCommissioner of Commercial Taxes
Appellant AdvocateS.R. Sen, Adv.
Respondent AdvocateSanjay Bhattacharya and ;A.B. Chatterjee, Advs.
Cases ReferredG.A. Galiakotwala & Co. (P.) Ltd. v. State of Madras
Excerpt:
- .....for the four quarters ended on 27th april, 1960. the dispute concerns transaction in goods of the union carbide (india) ltd. the commercial tax officer concerned found that the union carbide (india) ltd. despatched its goods direct to customers outside west bengal. the bills drawn on such customers and the relevant railway receipts were forwarded to the dealer, who paid the amounts of the bills to the union carbide (india) ltd. the railway receipts were thereafter endorsed by the dealer and the copies of bills of the union carbide (india) ltd. with similar bills made out by the dealer were issued on the customers. payments were received by the dealer through bank. the relevant c forms, if any, were sent by such customers direct to the union carbide (india) ltd. the commercial tax.....
Judgment:

Dipak Kumar Sen, J.

1. This reference arises out of the assessment of Satcowrie Dass & Co., a dealer, to sales tax for the four quarters ended on 27th April, 1960. The dispute concerns transaction in goods of the Union Carbide (India) Ltd. The Commercial Tax Officer concerned found that the Union Carbide (India) Ltd. despatched its goods direct to customers outside West Bengal. The bills drawn on such customers and the relevant railway receipts were forwarded to the dealer, who paid the amounts of the bills to the Union Carbide (India) Ltd. The railway receipts were thereafter endorsed by the dealer and the copies of bills of the Union Carbide (India) Ltd. with similar bills made out by the dealer were issued on the customers. Payments were received by the dealer through bank. The relevant C forms, if any, were sent by such customers direct to the Union Carbide (India) Ltd. The Commercial Tax Officer also noted that the auditors of the dealer treated such transactions to be sales effected by the dealer, that they were shown as such in the dealer's accounts and that there was no written agreement between the Union Carbide (India) Ltd, and the dealer.

2. It was contended on behalf of the dealer that it acted only as a guarantor for payment of goods sold by the Union Carbide (India) Ltd. and in support thereof produced a letter of the Union Carbide (India) Ltd. The Commercial Tax Officer rejected such contention as he found that the payments were first made by the dealer for the goods and that, before effecting despatches to parties outside the State, the prior approval of the dealer was obtained by the Union Carbide (India) Ltd. Accordingly, he held that the dealer was not a mere guarantor. The Commercial Tax Officer came to the conclusion that the transactions represented inter-State sales within the meaning of Section 3(b) of the Central Sales Tax Act, 1956, and as such exigible to sales tax.

3. Being aggrieved, the dealer preferred an appeal against the said order under Section 9 of the said Act, read with Section 20(1) of the Bengal Finance (Sales Tax) Act, 1941.

4. In the appeal, it was contended on behalf of the dealer before the Assistant Commissioner of Commercial Taxes that, in the transactions involved, the Union Carbide (India) Ltd. issued invoices on the customers expressing clearly that the goods were sold by the Union Carbide (India) Ltd. to such customers, who, in all appropriate cases, duly issued C forms to the Union Carbide (India) Ltd., who duly accounted for the same in their sales tax returns and it was the Union Carbide (India) Ltd., who paid sales tax on these transactions. It was submitted further that the dealer billed the customers outside the State for amounts identical to those in the invoices of the Union Carbide (India) Ltd. only for reimbursement of the amounts advanced by it to the Union Carbide (India) Ltd. and no sales were effected by the dealer. If the goods despatched were rejected by the customers, the same would be returned to the Union Carbide (India) Ltd. and not to the dealer. The dealer as a del credere agent was not entitled to sell the goods of the Union Carbide (India) Ltd. and never received C forms from the outside customers. It was also submitted that the auditors of the dealer did not enquire into the nature of the transactions.

5. The Assistant Commissioner of Commercial Taxes did not accept the above contentions of the dealer. He found that the bills drawn by the dealer on the purchasers outside the State were ordinary sale bills and not bills for the purpose of reimbursement and held that such bills were evidence of sales effected by the dealer. He held further that the issue of C forms by the purchasers to the Union Carbide (India) Ltd. by itself did not establish that the sales had been effected by the Union Carbide (India) Ltd. He came to the conclusion that, by reason of successive endorsements of the railway receipts, the property in the goods passed from the Union Carbide (India) Ltd. to the dealer and thereafter from the dealer to the purchasers outside the State and, as a result, in each case, there were two inter-State sales, one by the Union Carbide (India) Ltd. to the dealer and the other by the dealer to the purchaser outside the State, which was duly effected by a transfer of document of title to the goods during their movement from one State to another. The Assistant Commissioner, Commercial Taxes, accordingly, confirmed the order of assessment and rejected the appeal of the petitioner.

6. The assessee thereafter made a revision petition under Section 9(3) of the Central Sales Tax Act, 1956, read with Section 20(3) of the Bengal Finance (Sales Tax) Act, 1941, against the order of the Assistant Commissioner of Commercial Taxes. In the revision, the Additional Commissioner of Commercial Taxes noted further facts ascertained on further enquiry as follows:

(a) the orders in respect of the disputed transactions were secured by the salesmen of the Union Carbide (India) Ltd. as well as by the dealer;

(b) in the railway receipts, the Union Carbide (India) Ltd. was shown as both the consignor and the consignee and such receipts were never endorsed in favour of the outside customers nor were sent to such customers direct;

(c) the dealer made payments against such railway receipts, which were endorsed by the Union Carbide (India) Ltd. in their favour.

7. On consideration of the entire facts, the Additional Commissioner saw no reason to differ from the decision of the Assistant Commissioner of Commercial Taxes and accordingly rejected the revision petition of the dealer. The dealer applied for a final revision before the Board of Revenue, West Bengal, under Section 9(3) of the Central Sales Tax Act, 1956, read with Section 20(3) of the Bengal Finance (Sales Tax) Act, 1941, of the order of the Additional Commissioner, Commercial Taxes, West Bengal. Before the Additional Member, Board of Revenue, it was contended on behalf of the dealer that they were mere agents for the Union Carbide (India) Ltd. as was established by the evidence. It was contended on behalf of the sales tax authorities, on the other hand, that the auditors of the dealer had themselves characterised the transactions as sales and, therefore, the case of the dealers that they were mere agents could not be sustained.

8. The Additional Member came to the conclusion that, the controversy being one of facts, he was not inclined to differ from the findings of the Additional Commissioner, Commercial Taxes. In this revision, the dealer had further claimed that he was entitled to deduct from the aggregate of the sale prices certain amounts as provided for under the new amended Section 8A of the Central Sales Tax Act, 1956, which came into force on August, 1969, with retrospective effect. The Additional Member held that, inasmuch as the assessment had been finalised long prior to the amendment in question, the taxing authority was not bound to allow such deduction. Except allowing a reduction in the penalty imposed, the Additional Member rejected the revision petition of the dealer.

9. On an application by the dealer under Section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, read with Section 9(2) of the Central Sales Tax Act, 1956, the West Bengal Commercial Taxes Tribunal has drawn up a statement and referred the following questions of law for the opinion of this Court:

(1) Whether, in the facts and circumstances of the case, the consignment valued at Rs. 3,98,933 to other States constituted sales effected by the applicant to dealers in other States ?

(2) Whether, in the facts and circumstances of the case, the relationship between the Union Carbide (India) Ltd. and the applicant was one of vendor and vendee or the relationship was one of principal and agent and

(3) If upon a correct and proper interpretation of the provision relating to retroactivity contained in Section 8A, deduction in accordance with the statutory formula could be allowed for any period, the assessment whereof was finalised, but the connected appeal or revision was pending

10. At the hearing, Mr. S.R. Sen, the learned Advocate for the dealer, has contended before us that, in the facts and circumstances as found by the authorities below, which were not in dispute, it could not be held that there was any sale by the dealer to the customers outside the State. He submitted that before there could be any sale, there must be an agreement for sale and none of the authorities below have found that there was such an agreement between the dealer and the customers outside the State. There was no evidence on record to establish any such agreement for sale. He submitted further that it was the common case that the transactions originated from the Union Carbide (India) Ltd., parties whereto were only the Union Carbide (India) Ltd. and the customers outside the State. The goods were despatched by the Union Carbide (India) Ltd. to such customers and the invoices were issued by the Union Carbide (India) Ltd. to such customers. Thereafter, the dealer came into the picture as a guarantor and/or agent and assumed the responsibility of payment of the price of the goods. It is only after the dealer advanced the price to the Union Carbide (India) Ltd., it acquired the right to reimburse itself from the customers outside the State. It was for this purpose the railway receipts were endorsed by the Union Carbide (India) Ltd. to the dealer and thereafter by the dealer to the bank.

11. Mr. Sen also contended that the dealer in any event was entitled to claim relief under Section 8A of the Central Sales Tax Act, 1956, which had come into force with retrospective effect. This was a right granted by the statute and, till the assessment was finalised, the dealer was entitled to claim such relief as of right in law.

12. In support of his contentions, Mr. Sen cited the following decisions:

(a) State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 S.T.C. 353 (S.C.): The facts in this case were, inter alia, that the dealer concerned was a limited company which carried on business in construction of buildings, roads and other works and also in sale of sanitary wares and other sundry goods. Sales tax was sought to be imposed on the value of materials used by the dealer in the execution of their works contracts under an amendment to Section 2(i) of the Madras General Sales Tax Act, 1939, which added an explanation to the definition of 'turnover' in the said section for calculation of the amount of goods sold in relation to a works contract. It was contended on behalf of the dealer that under the Government of India Act, 1935, in force at the relevant time, the Provincial Legislature of Madras was not entitled to impose a tax on the value of the materials used in works as there was no transaction of sale in respect of the goods used in such works and that the provisions of the amended section including the aforesaid definitions and the explanations were ultra vires. This contention was rejected by the Sales Tax Appellate Tribunal. In a civil revision petition, a Division Bench of the High Court of Madras decided the question in favour of the dealer. The State of Madras preferred a further appeal to the Supreme Court, which was unsuccessful. The Supreme Court in its judgment observed, inter alia, as follows:

Now, in its popular sense, a sale is said to take place when the bargain is settled between the parties, though property in the goods may not pass at that stage, as where the contract relates to future or unascertained goods, and it is that sense that the learned Judge would appear to have had in his mind when he spoke of a commercial or business sense. But apart from the fact that these observations were obiter, this Court has consistently held that though the word 'sale' in its popular sense is not restricted to passing of title, and has a wider connotation as meaning the transaction of sale, and that in that sense an agreement to sell would, as one of the essential ingredients of sale, furnish sufficient nexus for a State to impose a tax, such levy could, nevertheless, be made only when the transaction is one of sale, and it would be a sale only when it has resulted in the passing of property in the goods to the purchaser....

Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. Thus, if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale. So also if the consideration for the transfer was not money but other valuable consideration, it may then be exchange or barter but not a sale. And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale....

To sum up, the expression 'sale of goods' in entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building contract which is, as in the present case, one, entire and indivisible--and that is its norm, there is no sale of goods, and it is not within the competence of the Provincial Legislature under entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale.

13. Mr. Sanjay Bhattacharya, the learned Advocate appearing for the sales tax authorities, contended, on the other hand, that it has been found as a fact that the Union Carbide (India) Ltd., after obtaining the railway receipts, endorsed the same in favour of the dealer and forwarded them to the dealer against payment along with its bills. As a result of such endorsement, the dealer became the owner of the goods. It has further been found that, before consignment of the goods, the approval of the dealer was obtained by the Union Carbide (India) Ltd. and that it was the dealer who ultimately realised the payments from the customers outside the State. The dealer endorsed the railway receipts in favour of the bank and the purchasers outside the State received the railway receipts on payment to the bank which were received by the dealer. Mr. Bhattacharya submitted that such facts which were unchallenged led to an inescapable conclusion that there were implied contracts between the dealer and the purchasers outside the State and that the transactions pursuant to such implied contracts were transactions of sale.

14. Mr. Bhattacharya contended further that the case of the dealer that it was merely a guarantor and not a purchaser could not be accepted inasmuch as it was the dealer who effected payments to the Union Carbide (India) Ltd. before there could be any question of failure on the part of the purchasers outside the State to pay the price. This would establish that the dealer was something more than a guarantor.

15. As to the dealer's claim to the benefits under Section 8A of the Central Sales Tax Act, 1956, which had been given retrospective effect, Mr. Bhattacharya did not seriously contend that such relief was not available to the dealer. A revision of the assessment was pending before the Tribunal and the assessment could not be said to have become final when such claim was made on behalf of the assessee.

16. Mr. Bhattacharya referred to Section 3 of the Central Sales Tax Act, 1956, which reads as follows:

3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.--A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation 1.--Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of Clause (b) be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2.--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.

17. Mr. Bhattacharya submitted that, on the facts found in the instant case, admittedly, the goods moved from one State to another and documents of title to the goods were transferred by the dealer by endorsement. Therefore, all the ingredients of an inter-State sale were present in such transactions. In support of his contentions, Mr. Bhattacharya cited a decision of this Court in Hari Mohan Dutt v. Dominion of India (1953) 57 C.W.N. 167 for the proposition that a railway receipt is a document of title to the goods covered thereby and that an endorsement of a railway receipt for valuable consideration made the endorsee an effective owner in respect of the goods consigned.

18. Mr. Bhattacharya lastly cited a decision of the Supreme Court in G.A. Galiakotwala & Co. (P.) Ltd. v. State of Madras [1976] 37 S.T.C. 536 (S.C.). The facts in this case were that certain mills all within the State of Madras had entered into an agreement with a dealer in the same State for purchase of cotton. The dealer in turn placed orders with its own sellers at Bombay for such supply and directed the latter to despatch the goods to the mills as consignee. The Bombay seller despatched the consignments to the mills but the railway receipts were sent to the dealer, who endorsed them in favour of the mills after collection of a substantial part of the sale price. It was contended by the dealer that the consignments, having been sent directly from Bombay to the mills, were direct inter-State sales and not amenable to sales tax under the Madras Sales Tax Act.

19. On such facts, it was held by the Supreme Court that the Bombay seller had no privity of contract with the mills having sold the goods to the dealer and, therefore, the sale by the Bombay party to the dealer was an inter-State sale. But the further sale by the dealer to the mills was not an inter-State sale because, at that stage, there was no inter-State movement of goods. In the instant case, there is no dispute that there has been a movement of goods from one State to another. The dispute is whether there has been a transaction of sale between the dealer and the customers outside the State. It appears from the orders of the different authorities below that it has not been found that there were agreements between the dealer and the customers outside the State for sale of the goods consigned by the Union Carbide (India) Ltd. It appears on the contrary that the orders were secured by either the dealer or the Union Carbide (India) Ltd. for sale of goods by the latter to the customers outside the State, after which the goods ordered were consigned by the Union Carbide (India) Ltd. and bills and/or invoices were drawn and issued by the Union Carbide (India) Ltd. for the goods despatched. All transactions were thus finalised and concluded. For collection of the price of such goods, the railway receipts were endorsed by the Union Carbide (India) Ltd. and, against such endorsements, the dealer acting as guarantor and/or a del credere agent advanced the price of the goods to the Union Carbide (India) Ltd. The dealer in turn further endorsed the railway receipts and made over the same to the bank forwarding the bill of the Union Carbide (India) Ltd. along with its own bill to the customers concerned, who retired the receipts from the bank on payment. The dealer thus obtained the reimbursement of the amounts advanced by it.

20. From such facts it cannot be said that the dealer entered into any contract for sale of the said goods expressly or by implication with the customers outside the State or effected transactions which would be treated as sales by it to the customers outside the State. In such circumstances, there could not arise any privity of contract between the dealer and the customers outside the State. In our view, the law laid down by the Supreme Court in Gannon Dunkerley Ltd. [1958] 9 S.T.C. 353 (S.C.) applies in all force to such facts.

21. Similarly, there was no sale by the Union Carbide (India) Ltd. to the dealer. From the letter dated 10th June, 1961, from the Union Carbide (India) Ltd. to the Commercial Tax Officer, it appears that the dealer at the relevant period merely functioned as one of the distributors of the Union Carbide (India) Ltd. and guaranteed payment of the bills of the Union Carbide (India) Ltd. issued to its customers. It is further stated in this letter that the goods had been despatched by the Union Carbide (India) Ltd. directly outside the State and bills were also raised directly on such customers. This letter has not been found to be incorrect or untrue. It is also a matter of record that the Union Carbide (India) Ltd. has been assessed to Central sales tax for such inter-State sales. The same transactions cannot be treated as two separate inter-State sales.

22. For the reasons above, the dealer succeeds in this application. We answer question No. (1) in the negative and in favour of the dealer. We hold that the relationship between the Union Carbide (India) Ltd. and the dealer was not one of vendor and vendee and answer question No. (2) accordingly. It is not necessary for us to define the precise relationship between the parties. Question No. (3) is answered in the affirmative and in favour of the assessee. The reference is disposed of accordingly. There will be no order as to costs.

C.K. Banerji, J.

I agree.


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