STATE OF MADRAS Vs. POTHURI SRINIVASULU CHETTY

JUDGEMENT

(1.) THESE cases are connected, and they raise a common question of law, namely, whether the principal is also liable to pay sales tax in respect of the turnover of his goods which were sold by an unlicensed commission agent, and in whose hands the turnover was taxed by the department. The facts in Tax Case No. 4 of 1953 may be taken to illustrate the facts out of which the question arises. The assessee in the case is one P. Srinivasulu Chetty and Sons, Ongole. He is a dealer in oil, coriander, pulses and other goods. He had a commission agent at Salem, through whom certain goods of his were sold. The turnover of such goods amounted to Rs. 35, 881-2-3, and in respect of that, sales tax of Rs. 4, 455-3-3 was paid by the commission agent. In respect of the same turnover the department levied sales tax from the assessee, that is the principal. The assessee contended that, as there was only one sale in respect of which the commission agent, who was treated as a "dealer", had paid sales tax, the levy of a tax a second time on the same turnover under Section 3 of the Madras Sales Tax Act was not justified in law. The contention, however, did not find favour with the department, but on appeal it was accepted by the Tribunal. The Government have filed these applications to revise the orders of the Tribunal.

(2.) ONE would have thought that the matter does not admit of serious argument that, when there is only one sale, on the turnover in respect of which tax was levied, no further tax could be levied in respect of that sale and the turnover. But the matter was argued with some insistence by the learned Advocate-General of the Andhra State and also by the Government Pleader of the Madras State.Before we deal with the arguments addressed before us, it is necessary to consider the question on a plain reading of the provisions of the Act. The charging section, Section 3 of the Madras General Sales Tax Act, 1939, stated :- "3. Subject to the provisions of this Act, - (a) every dealer shall pay for each year a tax on his total turnover for such year; ...." "Dealer" is defined under Section 2(b) of the Act as meaning :- "any person who carries on the business of buying or selling goods." "Turnover" is defined in clause (i) :- "'turnover'means the aggregate amount for which the goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover."

(3.) THE dual relationship of debtor and creditor arises from the fact that according to the relationship between the commission agent and the principal, the commission agent was to sell the goods in his own right and be responsible for the principal as debtor for the sale proceeds less the agency charges (vide the observations of the same learned Judge quoted at page 587 of the decision). That relationship was at no time altered into that of vendor and purchaser. THE relationship of agent continues up to the point of sale, and thereafter when the sale proceeds are received by the commission agent, it becomes a relationship of debtor and creditor and never that of vendor and purchaser. It is therefore impossible to spell out from a relationship of commission agent and principal any relationship of vendor and purchaser at any point of time during the period when the agency continued. It cannot be said therefore that the price which the commission agent realised by the sale of the goods and which he was bound to pay to the principal was price for which the goods were sold by the principal to the commission agent so as to make it a turnover of the principal within the meaning of the definition in the Sales Tax Act. THE argument, therefore, that there is a change in the relationship of principal and commission agent at any time and constituted the transaction as one of purchase and sale between them is without any force and is not supported by any authority.We are, therefore, clearly of the opinion that the view taken by the Tribunal that there was only one sale and in respect of that one sale, tax could not be levied twice owner by the department, once in the hands of the commission agent treating him as a dealer and a second time against the principal treating the same turnover as turnover of the principal, is perfectly justified, having regard to the provisions of the Act and the scheme underlying it.