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TMI Blog1991 (4) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... have transferred to their own account from agency goods and sold the same at a premium and that those sales also constituted sale within the meaning of the Act but has escaped assessment. Consequently, proceedings were initiated under section 16 of the Act to revise the earlier assessment made and after giving due opportunity, a turnover to the tune of Rs. 5,38,999 was also brought to tax subjecting the same to levy at 3 1/2 per cent. So far as the assessment year 1976-77 is concerned, while making the assessment the claim made by the assessee in respect of a turnover of Rs. 2,18,511 as being exempt on the ground that they were agency transactions on behalf of non-resident principals, came to be rejected and the said turnover was also subjected to tax by an order dated November 2, 1977. The assessing authority held that the assessee appropriated the goods of the principals to their own account and sold them as their own goods. 3.. Aggrieved, the assessee filed two separate appeals before the first appellate authority who heard them in common and allowed the claim of the assessee on the ground that the turnovers referred to supra represented only sales on behalf of the non-residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. The assessees in that case were carrying on business as commission agents, and agriculturists, who manufactured jaggery from sugarcane grown by them entrusted the jaggery to the assessees for sale on commission. The assessees sorted out the jaggery into different qualities, piled it up into heaps according to the quality, auctioned the heaps of jaggery in the presence of their principals or someone on their behalf, prepared the bills indicating the quality of the jaggery and issued them to their principals. Out of the sale price and the total consideration, the assessee made certain deductions towards commission, gumasta rusum and kolagaram, but the pattis furnished to the principals made no reference to any of those deductions or even valtar and sales tax. The bills issued to the purchasers, however, seem to have stated that the sales tax collected from them would be made over to the Government and as a matter of fact in most of the cases was actually paid to the Government. In such a situation, having regard to the fact that jaggery was liable to sales tax only at the stage of first sale in the State, the assessees contended that they were not liable to pay sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the realisation in full to the principal's account but the default on his part to render a full account to the principal in respect of the transaction of sale. It was further held that there was really a distinction between the failure on the part of an agent to render a full account to his principal and the failure on his part to credit to the principal's account the realisation made on his behalf and that while in the former case the sale by the agent for the purposes of the Sales Tax Act becomes his own independent transaction, it does not become so in the latter. 7.. The Revenue in the course of the proceedings before the authorities below as well as before us, relied upon the decision reported in Chandramouli and Company v. State of Madras [1966] 18 STC 325, of a Division Bench of this Court and Nestle's Products (India) Limited v. State of Orissa [1974] 33 STC 356, of a Division Bench of the Orissa High Court. In Chandramouli and Company's case [1966] 18 STC 325 (Mad.), the assessee was a local agent of a non-resident principal carrying on a business of his own and he transferred the goods of his principal to his own business and collected commission from his principal on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal." The court further proceeded to state as hereunder: "It is well-settled that while interpreting the terms of the agreement, the court has to look to the substance rather than the form of it. The mere fact that the word 'agent' or 'agency' is used or the words 'buyer' and 'seller' are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. Thus the mere formal description of a person as an agent or a buyer is not conclusive, unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent. Learned counsel for the appellant relied on several circumstances to show that on a proper construction of the agreement it could not, but be, held to be a contract of sale. Learned counsel strongly relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case that the business carried on by the assessee was more or less similar to that of a pucca arhatiya and it is a misnomer to call it a kutcha arhatiya. It actually purchased the goods from the sellers, i.e., the cultivators, and then sold them in the market to the other buyers, as if they were its own, obviously at a profit. It paid to the cultivators the price of the goods it purchased and received from the buyers the price at which it sold. Selling of goods was not simultaneous with receiving them. These facts can lead to no other conclusion except that it bought and then sold goods and not merely brought buyers into contact with sellers and arranged transactions between them. In these circumstances, the High Court should have held the assessee to be a dealer under section 2(c) of the Act, read with the explanation thereto." 10.. So far as the Tamil Nadu General Sales Tax Act, 1959, is concerned, explanation (4) to section 2(n) is as follows: "Explanation (4).-Notwithstanding anything to the contrary contained in this Act, two independent sales or purchases shall for the purposes of this Act, be deemed to have taken place- (a) when the goods are transferred from a princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y rendered the following conclusion: "It is not denied that they received the goods for sale on commission basis and render account to the principals about the sale of these goods. Pages 515 to 547 of their ledger account clearly show that they have actually taken to their own accounts goods worth of Rs. 5,38,999.65 for sale as their own goods outside agency transaction and sold them in own accounts at higher rate of Rs. 5,50,261.15. Hence, the judgment of the Madras High Court in L.S. Chandramouli & Co. [1966] 18 STC 325, applies and the transactions of Rs. 5,38,999.65 are liable to tax as 'sale to self' from agency goods constitute a sale. According to explanation (4) of sub-section (n) of section 2 of the Tamil Nadu General Sales Tax Act there will be two independent sales if the agent is found to have sold the goods at one rate and to have passed on the sale proceeds to his principals at other rate. It is true that the clause 8 of the agreements entered into with the principals authorises them to retain 'from out of sale proceeds' a sum ranging from Rs. 5 to Rs. 15 per bag to meet the charges for collection. But in the instant cases, the excess amounts collected were not retai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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