ADDEPALLY SOBHANADRI THAMMANA GANGADHARAM AND SONS Vs. BOARD OF REVENUE ANDHRA C T COMMISSIONER OF COMMERCIAL TAXES AND PROHIBITION MADRAS

JUDGEMENT

(1.) IN this appeal, the validity of the order of the Commissioner of Commercial Taxes passed in a revision petition against the order of the Deputy Commissioner of Commercial Taxes is challenged. It raises the question of the correctness of the assessment to sales tax of certain transactions amounting to Rs. 64,721-2-8 and relates to the assessment year 1953-54.

(2.) THE facts that are material for the appreciation of the questions arising in this appeal may be briefly stated. The Chittivalasa Mills manufacture jute goods and effect sales of their products through guaranteed brokers. The appellants, a firm of merchants at Rajahmundry, are approved buyers of these goods from the mills. They bought several bales of jute bags on forward contracts at the rates and conditions contained in the form of contracts and paid some amount by way of advance. In their turn, they entered into agreements with third parties for the sale of these bags at rates higher than those fixed with the mills. The appellants received the advance paid by them to the mills as also the difference in price. They then issued kutcha delivery orders or mill letters requesting the mills to deliver the goods against payment of the price stipulated under the mill contract to the kutcha delivery order holders. These letters are registered in the books of the mills, which sends a communication of this registry both to its buyer, the appellants, and to the mill letter holder. Thereafter, the mill deals with the latter in regard to the delivery. After the goods agreed to be sold are ready they are taken delivery of by the mill letter holder on payment of the price less the advance paid by the original buyers, i.e., the appellants. The appellants did not include these transactions in their turnover. The Commercial Tax Officer assessed the appellants to tax on this turnover also, treating it as a "sale". On appeal, the Deputy Commissioner of Commercial Taxes set aside that order accepting the contention of the appellants that the transactions did not involve any sale of goods and were merely sale of contract. It is this order that was revised by the Commissioner of Commercial Taxes under section 12(1) of the Madras General Sales Tax Act. The Commissioner reversed the decision of the Deputy Commissioner and restored that of the Commercial Tax Officer.

(3.) IT is true that the appellants' contract with the mills was only an agreement to buy further goods and they agreed to sell those very goods to third parties before the goods were ready. But when they come into existence and appropriation is made, the property in those goods passes to the original buyers, i.e., the appellants, and they, in their turn, transfer their rights in the goods to their vendees. In regard to this transaction, the appellants occupy two capacities, one as buyers and the other as sellers. When delivery is taken by third parties pursuant to the instructions contained in the mill letters, they do it only as the agent of their vendor and not in their own rights. Delivery to the ultimate buyer involves nationally two transactions. He receives it on behalf of his principal and next he appropriates it towards his contract. This mode of delivery eliminates the unnecessary process of the immediate buyer taking possession and giving actual delivery to his buyer. Delivery to the vendee of the first buyer is in implementation of the original contract with the mills. Simultaneously, it operated to implement the agreement of the immediate buyers, i.e., the appellants, with their buyers. In this context, we may recall with advantage the remarks of the trial Judge extracted with approval by the Supreme Court in Duni Chand Rataria v. Bhuwalka Bros. Ltd. ((1955) S.C.J. 168).