Full Judgment Text
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PETITIONER:
STATE OF MADRAS
Vs.
RESPONDENT:
CEMENT ALLOCATION CO-ORDINATING ORGANISATION
DATE OF JUDGMENT01/09/1971
BENCH:
ACT:
Madras General Sales Tax Act 1959 and Rules-Agent a ’dealer’
under s. 2(9)-Packing materials deductible from total
turnover under r. 6(c) (II)-Agent selling cement on behalf
of principal-Price of packing material shown separately in
bills--Agent is entitled to some exemptions as principal-
Deduction in respect of packing material when can he
claimed.
HEADNOTE:
The assessee (respondent herein) was the selling agent of a
cement company. Under s. 2(g) of the Madras General Sales
Tax Act, 1959 the term ’dealer’ is defined to include a
commission agent. in February 1967 the Deputy Commercial Tax
Officer, Lalgudi. asked the assessee to show cause why its
turnover relating to the price of the packing material used
in packing the cement sold ’should not be included in its
taxable turnover under the Madras General Sales Tax Act,
1959. The assessee thereupon moved the High Court under
Art. 226 of the Constitution. In its petition the assessee
averred that its rights were the same as those of its
principal and since the price of packing material was
separately shown in the bills the same was deductible from
the total turnover in view of r. 6(c) (ii) of the Rules
under the Act. The High Court held that the assessee was
entitled to deduct from its total turnover the turnover
relating to the packing charges if its principal would have
been entitled to deduct the same had the principal sold the
cement in question directly. The question whether in the
present case the principal was so entitled was not decided
by the High Court. The State appealed to this Court.
HELD : Under the general law the agent merely represents the
principal. Therefore while functioning within the scope of
the agency he can exercise all the rights which his
principal could have exercised. This provision must hold
good even under the Madras General Sales Tax Act unless
otherwise provided therein. The fact that for the purpose
of that Act an agent is considered as a dealer does not
alter the legal position in other respects. Excepting to
the extent otherwise provided in the Act the agent must be
held to represent his principal while dealing with the goods
of his principal; he merely steps into the shoes of his
principal. He is entitled to the same exemptions as his
principal would have got had he dealt with the concerned
goods himself. The decision of the High Court to this
effect was correct. [550 H-551 B; 552 E]
[The question whether the principal in the present case was
entitled to the exemption claimed having been left open by
the High Court, this Court did not find itself called upon
to decide that question. However it drew the attention of
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the assessing authority to the principles laid down by this
Court in the case of the Hydrabad Deccan Cigarette Factory.]
[551 C]
Hyderabad Deccan Cigarette Factory v. State of Andhra
Pradesh, S.T.C. 17 p. 624, referred to.
549
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2300 of
1968.
Appeal from the judgment and order dated October 18, 1967 of
the Madras High Court in Writ Petition.No. 637 of 1967.
Bishan Narain and A. V. Rangam, for the appellant.
S. T. Desai and B. P. Maheshwari, for the respondent.
The Judgment of the Court was delivered by
Hegde, J. This appeal by certificate arises from the
decision of the High Court of Madras in Writ Petition No.
637 of 1967. The petitioner before the High Court is M/s.
Cement Allocation Coordinating Organization, a selling Agent
of Dalmia Cement (Bharat) Ltd. That Organization will be
hereinafter ’referred to as the ’assessee’. On February 28,
1967 the Deputy Commercial Tax Officer, Lalgudi wrote to the
assessee to show cause why its turnover relating to the
price of the packing materials used in packing the Cement
sold should not be included in its taxable turnover. The
assessee instead of showing cause against that proposal
moved the High Court of Madras under Article 226 of the
Constitution to direct the assessing authority not to
include that turnover in its taxable turnover. The High
Court entertained that Writ Petition. It would have been
proper if the High Court had directed the assessee to put
forward its case before the authorities under the Madras
General Sales Tax Act 1959. Now that the High Court had
entertained the Writ Petition and gone into the merits of
the case, it serves no useful purpose to refuse to go into
the merits of case.
In its Writ Petition the assessee had definitely averred
that it was functioning as the agent of Dalmia Cement
(Bharat) Ltd. and its rights are the same as that of its
principal. It was further alleged in the Writ ’Petition
that when cement was sold in packages, the packing charges
were separately shown in the bill,,, issued to the buyers.
On these grounds the assessee claimed that it is entitled to
deduct those charges from its total turnover in view of rule
6(c) of the Rules framed under the Madras, General Sales Tax
Act, 1959. The plea of the assessee that it was the Agent
of Dalmia Cement (Bharat) Ltd. during the relevant period
was not denied in the return filed by the State of Tamil
Nadu. It was also not denied that the assessee had shown
the packing charges separately in the bills issued by it to
the Purchasers of cement. On the basis of those admitted
facts the High Court came to the conclusion that the
assessee is entitled to deduct from its total turnover the
turnover relating to the packing charges if its principals
would have been entitled to deduct the same had they sold
the cement in question directly. The operative portion of
the High Court reads thus:
550
"The petition is allowed but with no costs.
We may, however, add that the order We have
made in this petition does not in any way
prevent the assessing authority from examining
the question, after giving a fresh notice,
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whether the principal himself would be
disentitled to exclusion of the value of the
packing materials in determining the
chargeable turnover."
It is against this order that the State of Madras has come
up in appeal to this Court.
The charging section under the Madras General Sales Tax Act,
1959 is section 3. It brings to all taxable turnover of a
dealer as defined in the Act. The expression "dealer’ is
defined in section 2 (g). Because of section 2(g)(iii) a
Commission agent is also considered as a ’dealer’ for the
purpose of the Madras General Sales Tax Act, 1959. Hence
the taxable turnover of a Commission agent is liable to be
brought to tax. The only other provision that we need refer
is rule 6 of the Rules framed under the Act. That rule
reads :
"The tax or taxes under section 3, 4 or 5
shall be levied on the taxable turnover of the
dealer. In determining the taxable turnover,
the amounts specified in the following clauses
shall, subject to the conditions specified
therein, be deducted from the total turnover
of a dealer :-
(c) all amounts falling under the following
two heads, when specified and charged for by
the dealer separately, without including them
in the price of the goods sold
(i) freight; and
(ii) charges for packing, that is to say,
cost of packing materials and cost of labour
and other such like services."
The first question that we have to consider is whether an
agent of a principal who is also a dealer under the Act is
entitled to the same rights as his principal has under the
Act. Under the general law the agent merely represents his
principal, Therefore, while functioning within the scope of
the agency he can exercise all the rights which his
principal could have exercised. In fact, in the case of an
ordinary agency, the agent merely acts for Ms principal.
This provision must hold good even under the Madras General
Sales Tax Act unless otherwise provided therein. The fact
that for the purpose of that Act an agent is considered as
551
a dealer does not alter the legal position in other
respects. Excepting to the extent otherwise provided in the
Madras General Sales Lax Act the, agent must he, held to
represent his principal white dealing with the goods of his
principal; he merely steps into the shoes of his principal.
He is entitled to the same exemptions as his principal would
have got had he dealt with the concerned goods himself.
Agents are considered as dealers under the tax so as to
effectively enforce the provisions of the Act. But that
provision does not convert an agent into a principal for all
purposes under the Act.
But the question whether the principal is entitled to the
exemption claimed has been left open by the High Court.
That question has to be decided after going into the facts
of the case. How than question should be, decided has been
laid down by this Court in Hydrabad Deccan Cigarette Factory
v. The State of Andhra Pradesh(1). Therein this Court has
ruled that it is for the department to establish that a
particular turnover constitutes a part or whole of the
taxable turnover. For establishing that fact the department
may call upon the assessee to produce before it such
material which the assessee has in his possession or under
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his control. The department before coming to the conclusion
that a particular turnover is taxable must take into
consideration all the facts and circumstances of the case.
On the question whether certain packing charges are exempt
from tax, the authorities under the Act before deciding that
question have to take into consideration the various aspects
mentioned in that judgment. This is what the Court observed
therein:
"In the instant case, it is not disputed that
there were no express contracts of sale of the
packing materials between the assessee and its
customers. On the facts, could such contracts
be inferred ? The authority concerned should
ask and answer the question whether the,
parties in the instant case, having regard to
the circumstances of the case, intended to
sell or buy the packing materials, or whether
the subject matter of the contracts of sale
was only the cigarettes and that the packing
materials did not form part of the bargain at
all, but were used by the seller as a conven-
ient and cheap vehicle of transport. He may
also have to consider the question whether,
when a trader in cigarettes sold cigarettes
priced at a particular figure for a specified
number and handed them over to a customer in a
cheap card-board container of insignificant
value, lie intended to sell the cardboard
container and
(1) STC 17 p. 624.
552
the customer intended to buy the same’. It is
not possible to state as a proposition of law
that whenever particular goods were sold in a
container the parties did not intend to sell
and buy the container also. Many cases may be
visualized where the container is compa-
ratively of high value and sometimes even
higher than that contained in it. Scent or
whisky may be sold in costly containers. Even
cigarettes may be sold in silver or gold
caskets. It may be that in such cases the
agreement to pay an extra price for the
container may be more readily implied. In the
present case, if we may say so with respect,
all the authorities, including the High Court,
dealt with the question as a question of law
without considering the relevant factors which
would sustain or negative any such agreement.
The determining factor in all such cases is whether the
buyer directly or by implication agree to buy and the seller
to sell, separately the packing material. In this case we
are not called upon to go into that question. We merely
indicated the approach as a matter of guidance.
The question for decision by us lies within a narrow compass
and that question is whether the, assessee is entitled to
claim exemption in respect of packing charges if his
principal could have claimed it had it sold the cement
itself. On that question, we agree with the view taken by
the High Court.
For the reasons mentioned- above, this appeal fails and the
same is dismissed. No costs.
G.C. Appeal dismissed.
1340Sup.CI/71-2500-(Sec.VII)-26-9-72-GIPF.
553
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