TMI Blog1962 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that they were not mere agents of the mills but vendors of the yarn to the mills, the sales were effected in the course of import and were therefore exempt from sales tax because of the provisions of Article 286(1)(b) of the Constitution. Both these contentions were rejected by the Commercial Tax Officer, and on appeal, by the Sales Tax Appellate Tribunal. Hence this revision petition. Before us Sri V. Thyagarajan, learned counsel for the petitioners, has pressed only the question of agency. The facts as found by the Commercial Tax Officer and which have been accepted by the Sales Tax Appellate Tribunal are thus stated by the Commercial Tax Officer: "The appellant-firm placed orders with foreign firm for purchase of staple fibre yarn. In order to find a market for the goods purchased, the representatives of the local branch contacted the mills in the State and canvassed orders for the sale of staple fibre yarn. As there was trade restriction then requiring mills to take out permits for import of stable fibre yarn from foreign countries, the mills obtained permits for import under the Trade Control Order. Then on the strength of the permits, the mills in the State placed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also issued permitting Arthur Import Export Co., Bombay, to import the goods as stated in the licence, open a letter of credit and make remittances of foreign exchange. The letter of authority, for example, in the case of Dhanalakshmi Mills further stated: "The imports made under the letter of authority will be imports of the licensee who alone will be entitled to any quota licences on these imports." Sri Thyagarajan lays great stress on the fact that without the licence and the letter of authority, the yarn could not have been imported, that the licence was granted only to the particular mills because they were expected to consume the yarn in their mills, that the application for the actual user's licence itself mentioned in column 12 that the goods were to be imported through Arthur Import Export Co., that Arthur Import Export Co. could not divert the goods to anybody else and had therefore no dominion over the goods which alone could be the index of ownership necessary to bring about the relationship of vendor and purchaser as between the petitioners and the mills. He urged that the fact that the price charged by the foreign supplier to the petitioners was not communicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st them to issue the necessary import licence. Thanking you, Yours faithfully, Partner We confirm the above purchase For Dhanalakshmi Mills Ltd. M. Nanjappa Chettiar Sons by Seller. Sd. Managing Agents and Secretaries, Buyer There is a similar contract dated 26th September, 1953, between the petitioners and the Premier Mills, Udamalpet (page 59 of the papers given by the learned Additional Government Pleader). It is an elaborate form between the buyer and the seller and totally inapplicable to the case of agency. The petitioners as well as the mills are persons with expert legal assistance and we cannot therefore minimise the importance of the actual form in which they chose to embody the bargain, especially since they should have known that if the petitioners merely figured and acted as agents of the mills, there would have been only one sale, namely, from the foreign suppliers to the local mills and sales tax could have been avoided altogether by virtue of Article 286(1)(b) of the Constitution. Secondly, it is very significant that the contract quotes only a specific price (F.O.R. destination and the invoice drawn by the petitioners on the mills quotes only that pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Premier Mills, Udamalpet, there had been oral instructions from the Premier Mills and other such mills mentioning the quantity which they would be requiring and it was on the strength of such oral instructions that the petitioners placed the orders with the foreign suppliers. In a matter of this kind we are reluctant to accept such a submission, but even assuming that there were such oral instructions, it could not be contended that they would have sufficient legal efficacy to make the petitioners mere agents of the mills concerned when the petitioners placed bulk orders with the foreign suppliers. We may make it clear that this third circumstance which has been mentioned by us would have relevancy not merely as a question of fact to disprove agency, but would also have relevancy as constituting a legal impediment to the petitioners being agents of the concerned mills. So far as the foreign suppliers were concerned their transactions were only with the petitioners. That by itself would not prevent the petitioners contending that they were in fact acting as agents of principals who had not been disclosed to the foreign suppliers. But this, the petitioners could contend only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point need not be laboured further, because there is the authority of the Supreme Court on this point. The question arose in Gokal and Co. (Private) Ltd. v. Assistant Collector of Sales Tax[1960] 11 S.T.C. 186. There, the Government of India agreed to buy two consignments of foreign sugar from Gokal and Co. To enable Gokal and Co. to import the sugar, the Government ensured that the necessary licence was issued to Gokal and Co. It was Gokal and Co. who figured in the transaction with the foreign supplier and opened letters of credit and paid for the sugar to the foreign supplier. The bills of lading were transferred by Gokal and Co. to the Government against payment when the goods were on the high seas. Thereafter the Government cleared the goods across the customs frontier in India. On these facts Gokal and Co. claimed that the sales to the Government of India were in the course of import and therefore were exempt from sales tax under Article 286(1)(b) of the Constitution. This contention which prevailed with the primary authority did not prevail with the Assistant Collector of Sales Tax and hence Gokal and Co. came up before the Supreme Court. It was held on the facts that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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