LAWS(MAD)-1968-3-12

JAIN JARI STORES MADRAS Vs. STATE OF MADRAS

Decided On March 21, 1968
JAIN JARI STORES MADRAS Appellant
V/S
STATE OF MADRAS Respondents

JUDGEMENT

(1.) THE petitioner-firm-assesseee, a dealer in textiles, was carrying on the business of buying and selling such goods in Madras . THE assessee was a registered dealer under the Madras General Sales Tax Act, 1939. For the years 1956-57 and 1957-58 the petitioner was assessed to an additional tax on its assessable turnover as per section 3 (2) of the Act. THE assessable turnover represented the price of textile goods purchased by the assessee-firm from the local agents of nonresident principals, and, according to the assessee, the goods were subject to a first sale at that point. THE petitioner would also state that such purchases were made either through agents as such or through branch offices of the non-resident principals or through del credere agents with full rights to deal with the goods. THE petitioner's case is that the textile goods were dealt with by such agents, branch offices or del credere agents of non-resident principals as dealers within the meaning of section 14 (a) of the Act. THE petitioner has produced declared statement giving particulars about the purchases from such local agents, the date of receipt of the railway receipt, the date of collection of the railway receipt and the mode of payment for the value of such goods. In fact the relevant facts in the instant case were noted by this Court in Jain Jari State v. State of Madras which related to the year 1956-57. On appeal by special leave to the Supreme Court, the order of this Court was set aside and the proceedings remanded to this Court for disposal according to law. Whilst remanding the case, the Supreme Court in Jain Jari Stores v. State of of Madras observed as follows : "we are of the view, having regard to the circumstances, that the case should be remanded to the High Court to determine the questions whether the agent of the non-resident supplier was the agent covered by the explanation to the definition of the word'dealer'in section 2 (b) whether the property in the goods purchased by the assessee passed within the State of Madras, whether the sale was effected by a dealer resident within the State of Madras and whether such sale to place after the goods were imported within the State of Madras, THE High Court after determining those questions will proceed to dispose of the claim made by the assessee according to law. THE High Court may, if it is necessary, call for a finding from the taxing authorities on those question. " *

(2.) BEFORE the Supreme Court disposed of the matter as above, t. C. No. 262 of 1966 which related to the year 1957-58 was summarily dismissed by this Court on 11th October, 1966, as the point involved was then covered by the judgment in Jain Jari Stores v. State of Madras After securing an order of remand from the Supreme Court, the petitioner filed T. C. M. P. No. 88 of 1967 to review the order of this Court dated 11th October, 1966, and sought for a revision of the order of the Sales Tax Appellate Tribunal, Madras, dated 2nd december, 1965, and mode in T. A. No. 657 of 1959. This Court, in view of the remit order by the Supreme Court in which certain vital questions have to be determined, entertained the application for review and directed notice. Incidentally the papers in T. C. No. 148 of 1959 which have come once over to the file of this Court on remand for determining the correctness of the order passed by the Sales Tax Appellate Tribunal in T. A. No. 1028 of 1958 dated 17th april 1959, were forwarded to the Joint Commercial Tax Officer, Godown division, to record his findings on the questions formulated by the Supreme court and relating to the years 1956-57 and 1957-58. Tn accordance with the directions of this Court, given as above on 28th November, 1967, the Joint commercial Tax Officer; Godown Division, has filed a report after raising four questions. The questions and the relative answers are set down below : " (i) Whether the agent of the No As Discussed above, it has non-resident supplier was the not been proved by the agent covered by the petitioner and it has also explanation to the definition been denied by one of the of the word'dealer in agents that the not a dealer section 2 (b) of the madras as defined in section 2 (b) of General Sales Tax Act, 1939. the Madras general Sales Tax Act, 1939. (ii) Whether the property in Yes. the goods purchased by the assessee passed within the State of Madras. (iii) Whether the sale was No. the sale was effected only by effected by the dealer the non-resident dealer direct to resident within the state of the buyer in this State Madras. (petitioner) who took delivery of the goods in all cases from the carrier. (iv) Whether such sale took The petitioner is the first place after the goods were dealer who sold the goods after imported within the state of import. The sales by the non- Madras. resident dealers to the petitioner are in the nature of inter-State sales. " *

(3.) IN this case, the reporting officer instead of examining thoroughly the evidence produced by the assessee, made an independent investigation and examined a partner of Shah and Company whose name was not even suggested to the assessee's partner when he was examined by him. It may be that the facts disclosed by Shah and Company may not collate with that spoken to and substantiated by the assessee. The reporting officer applied negative materials to positive data which by itself is not only erroneous but is obviously arbitrary. The modus operandi adopted by him violates the principle of natural justice in that the assessee was not given an opportunity to state his view about Shah and Company or to cross-examine the partner of Shah and company. The ultimate finding given by the reporting officer which he has to rest after applying the correct law bristles with an error apparent on the face of the record and offends natural justice as well We have therefore examined the record ourselves and we are satisfied that the agent in question of the nonresident supplier thus satisfied the material ingredients constituting the content of the explanation to the definition of the word "dealer" in section 2 (b) of the Act. The goods were consigned by the non-resident dealer to self and his agent who is admittedly a resident in Madras takes control over the goods by dealing with the railway receipt. The reporting officer failed to see that the partner whom he examined was not speaking the truth when he said that in no cast railway receipts were received by them. The statement filed before us supports the claim of the assessee that on arrival of the goods, it was the agent at Madras who dealt with and sold the goods to them. IN accepting this and finding it as the fact in this case, after applying the correct law thereto, we must confess that the revenue has not laid before us any evidence to the contrary or prompted us by materials aliunde that such is not the normal inference. Even viewing the transactions in a different perspective the idea that the dealer resident outside who effected the sale through his accredited agent in Madras, still remains as the first seller of the textile goods and the subsequent dealing of such goods by the assessee is the second sale. Under the proviso to section 3 (2) of the Madras General Sales Tax Act, 1939, it is only the first sale effected in the State of Madras by a dealer who is residing in the State of Madras which is taxable. We have no hesitation in holding that the first sale of the textile goods imported into the State of Madras was effected by the agent of the non-resident dealer and that the sale by the assessee is a second sale thereof and is not therefore a taxable sale liable to pay the additional tax. The ratio in Gilda Textile Agency v. State of Andhra Pradesh may be usefully referred to in support of our view. IN that case the transactions were very similar to that of the agent in the instant case. The supreme Court was of the view that a non-resident either was a dealer itself or it became a dealer by the fiction created by section 14 (a) of the Madras general Sales Tax Act, since in any event the non-resident principals had done business in the State of Madras. IN the course of arguments a doubt was raised whether the agent in question is a dealer who is residing in the State of madras. The proviso as it stood prior to the Amending Act (Madras Act XXIII of 1957) contained only the words "on the first sale effected in the State of madras by a dealer". This was sought to be amended as doubts arose as to what constitutes the first sale by a dealer after import of the commodity. By the amending Act, it was proposed to make it clear that the reference is to the first sale by a resident dealer after import. The Act was thus amended so as to levy additional tax on the first sale effected in the State of Madras by a dealer who is residing in the State of Madras. Before the Supreme Court, it was not disputed that the agent of the non-resident owner of the goods was residing in the State of Madras. This aspect therefore need not detain us.