G. Gilda Textile Agency Vs. State of
Andhra Pradesh  INSC 159 (19 April 1962)
19/04/1962 HIDAYATULLAH, M.
CITATION: 1966 AIR 1402 1963 SCR (2) 248
Sales Tax-Agent of nonresident
principal-Liability Madras General Sales Tax Act, 1939 (Mad. 9 of 1939), s.
The appellant was an agent in Andhra Pradesh
of certain nonresident principals who were dealers in cloth. received
commission in some cases on the orders booked and in others on all the sales
effected by the principals in the territory. One kind of transactions it
carried on in course of its business related to goods sold by its principal to
buyers in the State. The appellant in these transactions, besides booking
orders, received the railway receipts from the outside principals, handed them
order to the buyers and sometimes collected and transmitted the amount to the
outside principals. The appellant was assessed to sales tax on its turnover for
the years 1954-55 and 1955-56. The question was whether in carrying on such
transactions the appellant was a dealer within s. 14A of the Madras General
Sales Tax Act, 1939. The Tribunal held that the appellant was such a dealer and
the High Court in affirming that decision held that the non-resident principals
were doing the business of selling in the State and the sales in question were
by the appellant either on behalf the principal or on its own behalf and that
the-appellant was in either cass liable.
Held, that the High Court had taken the right
view the matter.
Section 14A of the Act made the agent
fictionally liable as a dealer in the circumstances as specified by it, and the
agent was liable irrespective of whether the turn-over of its business was more
or less than the minimum prescribed by the Act.
Mahadayal Premchandra v. Commercial Tax
Officer Calcutta,  S. C. R. 551, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 397 and 398 of 1961.
Appeals by special leave from the judgment
and order dated September 19, 1958, of the Andhra 249 Pradesh High Court in Tax
Revision Cases Nos. 62 and 63 of 1956.
B. Sen and B. P. Maheshwari, for the
K. N. Rajagopal Sastri and D. Gupta for the
1962. April 19. The Judgment of the Court was
delivered by HIDAYATULLAH, J.-These two appeals with special leave have been
filed by Messrs. G. Gilda Textile Agency, Vijayawada, against the State of
Andhra Pradesh. They are directed against a common order of the High Court of
Andhra Pradesh in two revisions filed under s. 12-B(1) of the Madras General
Sales Tax Act, 1939 (9 of 1939).
The matter relates to the levy of sales tax
from the appellant on its turn-over for ,the years, 1954-55. and 1955-56. The
appellant was an agent of several non-resident principals, on whose behalf it
booked orders and dealt with the indents. There were agreements between the
non-resident principals and the appellant, and three such agreements contained
in letters have been produced as instances, and are marked Exs. A-3, A-3(a) and
A-3(b). Under these agreements, the appellant was appointed as indenting agent
in Andhra Pradesh for cloth merchants, who, admittedly, resided and carried on
business outside Andhra Pradesh. It was required to book orders and to forward
them to the principals, receiving commission on sale of goods despatched to
Andhra Pradesh. In some cases, this commission was only available on the orders
booked by the appellant and in others, on all the sales effected by the
principals in this territory. The appellant did business in three different
ways, which have been described as three separate categories in the case. In
the first 250 category, the appellant took delivery of the goods found buyers
and delivered the goods to the buyers. This a category of sales was hold to be
within the Madras General Sales Tax Act and the appellant, liable to the tax.
The appellant does not question this part of the decision. The second category
was in which it merely booked orders and forwarded them to Bombay and the
principals sent the goods with the railway receipts through the bank to the
purchasers in Andhra Pradesh. The connection of the appellant was Dot
considered sufficient to constitute it the ',,dealer", as defined in the
Madras General Sales Tax Act, and such sales were omitted from the turnover. No
dispute, therefore, arises about this category. The third category related to
goods sold by the outside dealers to buyers in the State.
The appellant in these transactions, besides
booking orders, received the railway receipts from the outside principal,
handed them over to the buyers and sometimes collected and transmitted the
amounts to the outside principal. The period involved is covered by the Sales
Tax Validation Act, 1956 (7 of 1956), and no question under the Constitution arises.
The only question is whether the appellant comes within s. 14-A of the Madras
General Sales Tax Act, and it liable to tax Act, as a dealer.
It may be pointed out that the appellant did
not produce any correspondence between it and the non-resident principals or
the covering letters which must have been sent along with the railway receipts.
The Tribunal under the Madras General Sales Tax Act, therefore, came to the
conclusion that the railway receipts which had been sent, must have been
endorsed by the sellers either in favour of the appellant or in blank, to
enable the appellant to claim the goods from the railway or to negotiate them.
The Tribunal, before, hold that the appellant 251 must be deemed to be a
"dealer" under s.14-A and thus liable to tax under that section.
Section 14-A of the Act reads as follows
"In the case of any person carrying on the business of buying and selling
goods in the State but residing outside it (hereinafter in this section
referred to as a 'non-resident'), the provisions of this Act shall apply
subject to the following modifications and additions, namely:
(i) In respect of the business of the nonresident,
his agent residing in the State shall be deemed to be the dealer.
(ii) The agent of a non-resident shall be
assessed to tax or taxes under this Act at the rate or rates leviable there under
in respect of the business of such non-resident in which the agent is
concerned, irrespective of the amount of the turn-over of such business being
less than the minimum specified in Section 3, sub-section (3).
(iii) Without prejudice to his other rights
any agent of a non-resident who is assessed under this Act in respect of the
business of such non-resident may retain out of any moneys payable to the
non-resident by the agent, a sum equal to the amount of the tax or taxes
assessed on or paid by the agent.
(iv) Where no tax would have been payable by
the non-resident in-respect of this business in the State by reason of the
turnover there of being less 252 than the minimum specified in Section 3, subsection
(3), he shall be entitled to have the amount of the tax or taxes paid by his
agent refunded to him or application made to the assessing authority concerned,
or where more than one such authority is concerned, to such one of the
authorities as may be authorised in this behalf by the State Government by
general or special order.
(v) Such application shall be made within
twelve months from the end of the year in which payment was made by or on
behalf of the non-resident of the tax or taxes or any part thereof." The
section makes the agent liable fictionally as a dealer in the circumstances
laid down in the section, viz., that be is acting on behalf of a nonresident
person doing business of buying or selling goods in the State. The agent is
assessed to tax under the Act in respect of the business of such non-resident
in which the a cut is concerned, irrespective of whether the turnover of such
business is more or less than the minimum prescribed in the Act. It is
contended that the first thing to decide is whether the nonresident could be
said to be carrying on the business of selling in Andhra Pradesh in the
circumstances of this case, and reliance is placed upon a decision of this
Court reported in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta (1)
In that case, this Court was called upon to consider the Bengal Finance (Sales
Tax) Act, 1941 (6 of 1941). There also, the agent was sought to be made liable
in respect of the sale of goods belonging to non-resident (1) (1959) S. C. R,
551, 253 principal under a section which may be taken to be in pari materia
with the section, we are considering. This Court held that the Kanpur Mille,
whose agent the appellant in the case was, were not carrying on any business of
selling goods in West Bengal and were selling goods in Kanpur and despatching
them to West Bengal for consumption. This part of the judgment is called in aid
to show that the first condition of the liability of the agent in the present
case under the Madras General Sales Tax Act is not fulfilled.
Unfortunately for the appellant, in this case
there is a clear finding by the High Court that the non-resident principals
were carrying on the business of selling in Andhra Pradesh. The High Court has
observed that if the nonresident principals took out railway receipts in their
own Dames, thereby manifesting their intention to remain the owners and to
retain. the control over the goods, the sales must be taken to have been
completed or to have taken place in the State of Andhra Pradesh. From this, the
High Court came to the conclusion that the non-resident principals were doing
business of selling in Andhra Pradesh. The High Court pointed out that inasmuch
as the appellant after securing the orders received the railway receipts from
the sellers and banded them over to the buyers and sometimes collected the
consideration and transmitted the same to the sellers, the sales thus resulting
must be hold to have taken place in the State either on behalf of the appellant
or on behalf of the nonresident principals, and whichever view be correct, the
appellant as agent was liable as a dealer within the Act. Either it was a
dealer itself, or it became a dealer by the fiction created by s. 14-A, since
the non-resident principals had done business in each case in the State of
Andhra Pradesh. The case of this Court on which reliance has been placed,
turned on its own facts, and a 254 finding there cannot be used in the present
case, because no finding on the facts of one case can be applied to the facts
Sub-section (2) of s. 14-A was said to be
connected with the opening part, and it was argued that the tax was leviable on
the turnover relating to the business of a nonresident, which was carried on by
the non-resident in the taxable territory. In our opinion, once the finding is
given that the non-resident principal carried on the business of selling in
Andhra Pradesh and the appellant was the admitted agent through whom this
business was carried on, the rest follows without any difficulty. The High
Court, in our opinion, was, therefore, right in upholding the levy of the tax
from the appellant, in view of our decision that the appellant came within the
four corners of s. 14-A in relation to the transactions disclosed in the last category.
The appeals fail, and are dis