TMI Blog1949 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ountries. A strict grammatical and etymological interpretation of the word "dealer" as defined in Section 2(b) of the Act IX of 1939 would include persons like the plaintiffs in the present action even if they had merely acted as commission agents, because either as agents for buying goods on behalf of a known principal, or as a selling agent on behalf of a known principal, they should be deemed to be persons who carry on the business of buying or selling goods. If such a person is a "dealer" then Section 3 of the Act says that subject to the provisions of the Act every dealer shall pay, in each year, a tax in accordance with the scale specified. There are also various provisos to the section with which we are not actually concerned at this stage. It is only by a later section, viz., Section 8, that an agent is excluded. Had it not been for the incorpo- ration of Section 8, even a person who, for an agreed commission or brokerage, buys or sells goods on behalf of known principals, specified in his accounts in respect of each transaction, will be a "dealer" within the meaning of the Act and hence liable to be taxed. Therefore the question is how far the exemption contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey could...............A commission merchant using reasonable exertions to get the goods as cheap as possible, ought to buy them in small parcels if the state of the market in the country is such that it is the reasonable way to get them. If the merchant would get the goods cheaper, by giving a wholesale order to the manufacturer, which prob- ably would be the case in England, where Manchester goods are ordered from a London or Liverpool commission agent, he ought to give the wholesale order." This dictum of Blackburn, J., has been considered by the Court of Appeal in Cassaboglou v. Gibb, 11 Q.B.D. 797; but for the purpose of the present case it is unnecessary to deal with the criticisms or dis- cussions either by the Master of the Rolls or by the Lord justice in that case. In the three categories in which the learned District judge has divided the buying transactions of the plaintiffs, I can find no difficulty whatever in the first of them, viz., where the plaintiffs acting as buying agents, in addition to what appears in their accounts as an agreed commission, had already paid the rusum to the person from whom they purchased the goods and collected such rusum from the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires is that the agent should have a licence which allows him to transact business in that capacity. In doing so, if he mentions in his account books what each of the tran- sactions is, whether it is buying or selling on behalf of a known principal who has agreed to pay a commission, then the Provincial Government can exempt him from the tax or taxes. There are also provisos to the section but we are not concerned with them in this case. In any particular transaction, whether it be of buying or selling, the agent can act only on behalf of one principal and his name should be mentioned in the account as also the agreed commission. In cases where dealing with one and the same goods, at the time of purchase, he acts as the agent of the seller and then as the agent of the buyer in selling the goods it may be difficult to say whether the exemption under Section 8 can be availed of. In order to make my position clear, I would like to give the following illustration: Supposing the plaintiffs had been com- missioned by certain wholesale merchants to sell 100 bags of gingerly seed for an agreed commission. In selling those bags the plaintiffs act as the agent of the seller and get a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the open market at a particular price and sells the same to his buying principal at a higher price and at the same time collects a commission also, then he cannot take the advantage of Section 8, unless the buying principal knows that his agent had, in the open market, paid a lower sum for the same goods and either explicitly or by action or deed from which consent can be implied, acquiesced in it. The real import of Section 8 is that the agent should act only as a medium for the transfer of goods from one party to another and for acting as such a medium, intermediary, or agent, he should be paid a remuneration or commission. Such transaction might sometimes result in the medium, intermediary, or agent acting as vendor or purchaser himself, as understood in law. But even then he is only an agent and he should strictly conform to the mandatory provisions of Section 8 in order to get exemption. In cases where the plaintiffs have acted as agents for selling goods, the matter was not seriously pressed before the lower Court. In such ases where the plaintiffs, without paying rusum to the dealers from whom they got the goods, collected such rusum from their purchasers, from them who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. 3.. To take up first the buying agency business with which the main appeal is concerned its salient characteristics are these. The rusum was not collected in all cases; in fact, on a turnover of Rs. 1,54,371-11-3 no rusum at all was charged by the plaintiff firm to the buyer's principals on whose behalf they bought. According to another category of transactions listed in Ex. P-13(2) showing a total turnover of Rs. 4,17,927 rusum was collected from the buyer's principals and paid over to the sellers except for a small sum of only Rs. 49-2-8. In a third category of cases listed in Ex. P-13 (d) with a turnover of Rs. 45,797-5-6, the plaintiff firm charged their buyers with rusum, but did not pay it to their sellers apparently because the latter did not include this charge in their respective bills or pattis. A total sum collected as rusum of Rs. 360-6-6, which remained undisbursed, was appropriated though not in the circumstances perhaps intentionally by the plaintiff firm. 4.. The learned District judge was inclined to place this charge of rusum in the buying agency business as a little additional commission the principals, on behalf of whom they bought, were prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als specified in his accounts in respect of each transaction." Some decisions on commission agencies both in Indian and English law long prior to the Sales Tax Act have been placed before us to which we need not refer. The language of the section. appears to us plain and to present no difficulty. Nor is any nice question of breach of contract or agency liability involved, the point for determination being merely whether within the scope of Section 8 there is a liability to pay sales tax. The section clearly exempts from sales tax in the first place a commission agent who buys for a known principal specified in his accounts for an agreed commis- sion or brokerage. It may be that the commission agent buys on behalf of his principal in the open market. The section does not require that the seller be disclosed to the buyer before the purchase is effected; and it is a sufficient compliance with Section 8 if the buyer principal and the seller to the commission agent are specified in the latter's accounts. For instance, if the commission agent purchases goods for his buyer principal from some shops or dealers, he must show in his accounts the names of the shops or dealers and charge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anybody unless billed for. This doubtless accounts for the three different categories of cases referred to supra in the buying agency business. Rusum was probably charged to buyers by this commission agency from sellers who were considered not exempt from sales tax, but who did not take the pre- caution of including rusum in their own bills to the commission agency. It will therefore be seen that in the buying agency business the great bulk of the rusum was charged by the sellers to the commission agency and legitimately passed on to the buyers. We are in agreement with the learned Subordinate Judge that so far as the buying business is concerned the mere fact that the plaintiff firm did not actually pay to the sellers all the rusum collected from the buyers, will not make the entire turnover of the buying agency liable for the full sales tax. 8.. So far as the selling agency business is concerned, the position is entirely different, the accounts showing that the plaintiffs collected rusum as sellers from the dealers who bought from them, and their accounts nowhere show that they paid this rusum to the principals on whose behalf they sold, presumably because the latter made no d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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