TMI Blog1963 (6) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no sale by that company to the assessee. The second is that the import itself was occasioned by the purchase and that the transaction was in the course of such import and was within the constitutional ban. In order to appreciate the true nature of the purchase of cotton effected by the assessee, it is necessary to refer to the statutory restrictions upon the import of raw cotton from outside India and also to the actual dealing between Galiokotwala Co., and the assessee. The enactment that is relevant is the Imports and Exports (Control) Act, 1947. Section 3 of that Act provides that the Central Government may, by order published in the Official Gazette, make provisions for prohibiting, restricting or otherwise controlling the import and export of goods of any specified description. In exercise of the powers conferred by section 3 referred to, the Government of India promulgated the Imports (Control) Order, 1955. Section 3(1) of the Order reads as follows: "(1) Save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I, except under, and in accordance with, a licence or a customs clearance permit granted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted rate is drawn up. " The procedure for the issue of letter of authority has also been prescribed (vide paragraph 19, page 68 of the Red Book-Hand Book of Rules Procedure, 1961-Import Trade Control). The licensee who desires another party to import goods from abroad should apply for a letter of authority to the licensing authority concerned. A letter of authority cannot be claimed as a matter of right; but it is normally granted on application to " actual users ". In the case of established importers letters of authority are granted only in special circumstances where the licensing authority is satisfied that the transactions involved are genuine and bona fide and that the licence-holder is not endeavouring to part with his licence for a consideration. In view of the admission made by the State, we shall assume that Galiokotwala Co., imported 25 bales of raw cotton from Sudan, only in pursuance of the letter of authority issued to it by the appropriate authority and under cover of the licence in favour of the assessee. We must however mention that there is no evidence before us establishing this fact. Now it will be convenient to refer to the actual terms of the contract b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that there was no defect in the quality in the cotton supplied which, according to them, was in accordance with the samples. It is thus abundantly clear from the express terms of the contract and the conduct of the parties that they dealt with each other, not as principal and agent, but as buyer and seller. Sri N. Srinivasan, learned counsel for the petitioner, draws our attention to the Appendix 9 of the Red Book which relates to the issue of letters of authority. It is stated therein that in bona fide cases, where the licence-holders desire to employ an agent to perform the limited functions of importing the licensed goods, the following procedure should be followed for consideration of requests for the grant of a letter of authority. There should be a written request in specific terms by the licensee himself. Where the goods are sought to be imported through an indenting agent, the request for grant of a letter of authority should be accompanied by documentary evidence to show that the indenting house concerned has an agency agreement with the foreign supplier. The letter of authority would authorise the person in whose favour it is issued to operate the licence on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. " Logically that is only a post hoc propter hoc deduction ; and in practice it may be dangerous to assume the existence of the relation, because the result may sometimes be to attract improperly some legal effects which result only from the proper establishment of the relation " (Powell on the Law of Agency, Second Edition, page 295). The imposition of some effects inherent in the relationship of principal and agent by a Statute is not the formation of agency by Legislature but is only the fastening of a liability or clothing of a right in an individual as if the parties concerned occupied the position of agent and principal. An agent is liable to render accounts of the principal's money in his hands. But the accounting liability of a person to another would not make him by itself an agent of the other. To put it shortly, and tersely, as we hope to, the rights and obligations are the legal incidents of the relationship, but the relationship is not the resultant of such rights and obligations. There can, however, be no doubt that a Statute can create rights and impose liabilities some or all of which might be those pertaining to a principal-agent relation. For example, a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was not a sale though it purports to be a sale and was intended to be a sale by the parties, because of the provisions of the Regulation enabling the Government to treat the imported goods as belonging to the licensee for the purpose of its fiscal policy. The Tribunal reached the correct conclusion in holding that it was a sale and that Galiokotwala Co., was not a mere agent of the assessee. We may also point out that in circumstances almost similar, a Division Bench of this Court has taken the same view in Arthur Import Export Co. v. State of Madras Tax Case No. 100 of 1959; since reported at [1963] 14 S. T. C. 1022. There is no substance in the contention urged by learned counsel for the petitioner that the purchase of cotton was in the course of import. We agree with the Tribunal that once it is held that it was a sale to the assessee by Galiokotwala Co., the import became completed after Galiokotwala Co. took delivery of the consignment and cleared the goods from the harbour. The sale was subsequent to the taking of such delivery and was effected after the goods were taken out beyond the customs barrier. The Tribunal observes as follows in its order: "The impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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