TMI Blog1959 (11) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay Export Company, the principal, and also Jitendraprakash Goel of Bombay, the guarantor. Under the terms of the said agreement, the company appointed the assessee as its agents for the purpose above-mentioned with a stipulation of payment of commission on the purchases made. The amounts paid by the assessee had to be repaid within two months with interest thereon at 6 per cent. There was a further condition that both the commission and the amounts advanced shall be a first charge on the goods. In pursuance of this agreement the assessee paid the price, took delivery and stocked the goods. In relation to these transactions they were assessed to a tax stated above. The assessee, Messrs Ramdayal Ghasiram and Sons, demurred to this assessment on the ground that they are not the agents of a non-resident principal within the meaning of section 14-A as the Bombay Export Company had a branch in the first floor of buildings of Raja Kishandas in Sultan Bazar during the period for which the assessment is made. The second ground shown was that the assessee-firm in relation to the purchases made by the company in the State occupied the position of a mere financier, which for the advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derabad. Besides they were also agents of the non-resident principals in relation to castor seed transactions entered into by the Bombay Export Company. Since they had deliberately omitted to file 'A' returns in respect of the transactions of the Bombay Export Company, the rule 14 notices were issued calling upon them to show cause why the turnover of the Bombay Export Company in respect of the goods handled by them as agents should not be taxed and the tax levied against them as agents. It will be seen that notices given for the respective years specifically mention section 18 of the Act as the basis of making the petitioners liable on account of castor seeds taken delivery of within the State on behalf of the Bombay Export Company which is liable to tax under section 18 of the Act. It cannot, therefore, be said that the appellants had no opportunity to know and meet the case against them or that they did not have any fair treatment at the hands of the assessing authority. When the bases on which the petitioners were sought to be taxed have been distinctly stated to them and they were given sufficient opportunity and further the order of assessment discloses fully such bases, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created by this provision. The only condition attached to the application of this fiction is that he should be the agent concerned residing in the Hyderabad State. That the Bombay Export Company Ltd., had entered into business of buying castor seeds at various places in Hyderabad State is an admitted fact. There is no dispute that the petitioner resides in the Hyderabad State. The only dispute is as to his capacity as an agent but this is amply established by the very agreement which vests him with the authority to handle the goods and deal with it. As already stated, there is a tripartite agreement entered into at Bombay between the Bombay Export Company Ltd. and the assessee and Jitendraprakash Goel as guarantor in connection with this business. Its preamble shows that the company had agreed to appoint the petitioner as its agent to pay the balance of the purchase price and to take delivery of the castor seeds purchased by the company and to store the goods on his behalf on the terms detailed in the agreement. In para. 2 of the terms of the agreement it is stipulated that the firm shall pay on behalf of the company the balance of the purchase price and take delivery of the casto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further margin of Rs. 25 per candy for every drop of Rs. 20 in the market price. The company further agrees to maintain and stock with the firm till all moneys due under these presents are fully paid off goods of such value as is equivalent to twice the amount for the time being due to the firm under these presents. The firm shall be at liberty to decline to give delivery of any part of goods if the above margin is not maintained or if the firm considers that their security is jeopardised." Paragraph 10 gives a right to the firm to sell and dispose of the goods either by entering into a vaida transaction in Bombay or by public auction or by private treaty subject to such conditions and terms as may be fixed and determined by the firm. In case the deposit is not paid within 24 hours from the date of demand or if the amount payable under clause 6 by the company is not paid the firm shall have a right to sell and dispose of the goods. The various stipulations referred to have been extracted here as they have a bearing on the question not only touching the capacity of the assessee as agent but also in relation to the question raised under Article 286(2) of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted agent. He may also be a financier for which he is paid interest. But that is merely an incidental aspect and at any rate does not derogate from its character as an agent. Besides the right to pledge the goods for payment for the purchase of further goods for the principal is not consistent with the right of a financier but is only consistent with that of a mercantile agent as under section 178 of the Contract Act. Thus judged in any manner the whole agreement is consistent with his capacity as an agent who handles goods and has vast powers to deal with it. In these circumstances the plea that the firm is not the agent cannot be sustained. Now the last question for consideration is whether the transaction is within the protection of Article 286(2) of the Constitution of India so that no tax can be levied by the State Legislature. It will be seen that while the State Legislature has exclusive powers to make laws for the State or any part thereof with respect to taxes on sales and purchases of goods other than newspapers as contemplated by Entry 54 in List II of VIIth Schedule, the Constitution has placed certain restrictions in Article 286 as to the imposition of tax on such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... X, a merchant in State A goes to State B, purchases goods there and transports them into A, there is undoubtedly a movement of goods in inter-State commerce. But that is not under any contract of sale. X might be entitled under Article 301 to certain rights in the matter of transportation. But Article 286(2) has no application, as there is no sale in the course of inter-State trade or commerce. In the same illustration, if X after transporting the goods into State A sells them, then also there is no sale in the course of inter-State trade. It is true that there is a sale, and there is also a movement of goods from one State to another. But that movement has not been under the sale, there having been no sale at the time of transportation." No doubt the sale transaction in this case was originally entered into by the Bombay Export Company with various dealers in this State subject to the bye-laws of the Bombay Oil Seeds Exchange but the transaction on that account cannot be deemed to be a sale in the course of inter-State trade or commerce. It is clear from the transactions that the goods were to be delivered at various places in the State wherever the sellers are and the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted outside the State of Madras it was held that antecedent to the transport the property in the goods had passed to and had vested in the purchaser and that it was as his goods the purchaser transported them out of the State; such transport does not render the antecedent transaction of sale, a sale or purchase in the course of inter-State trade or commerce within the meaning of Article 286(2) of the Constitution. Similarly in State of Madras v. Gurviah Naidu Co. [1955] 6 S.T.C. 717., where the purchases made by the respondents after securing orders for supply of goods to the London buyers by going about or purchasing the requisite kind and quantity of goods to implement such orders, it was held such purchases though effected for the purpose of export did not fall within the exemption inasmuch as they did not themselves occasion the export. It is, therefore, manifest that the flow of goods into different States ought to be the direct result of the uninterrupted course of the transaction of sale to be caught up in the vortex of what is said to be the course of inter-State trade or commerce. Judged by this standard though the contract might have been entered into by the Bombay Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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