1. Sales tax assessment dispute — claim for exemption of turnover regarding goods despatched outside state and contention of acting as an agent under Bengal Finance (Sales Tax) Act, 1941. (Para 1 , 2 , 3 )
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1958 Supreme(SC) 51
SUPREME COURT OF INDIA
7th April, 1958.
S.R. DAS, C.J.I., T.L. VENKATARAMA AYYAR, S.K. DAS, P.B. GAJENDRAGADKAR AND VIVIAN BOSE, JJ.
Gordhandas Lalji, Appellant
Versus
B. Banerjee and others, Respondents.
Gordhandas Lalji, Appellant
Versus
S. Ghosh and another, Respondents.
Civil Appeal No. 300 of 1956*
Civil Appeal No. 665 of 1957.
Civil Appeals Nos. 300 of 1956 and 665 of 1957.
Advocates Appeared
Mr. Veda Vyasa, Senior Advocate, M/s. S. C. Mazumdar and R. Banerjee, Advocate, with him, for Appellant; Mr. H. N. Sanyal, Additional Solicitor-General of India and Mr. B. Sen, Senior Advocate, Mr. P. K. Bose, Advocate, with him for Respondents.
Advocates:
B.SEN, H.N.SANYAL, P.K.BOSH, R.BANERJI, S.C.MAJUMDER, Veda Vyasa
B.SEN, H.N.SANYAL, P.K.BOSH, R.BANERJI, S.C.MAJUMDER, Veda Vyasa
A domestic sale to a buyer who subsequently exports the goods is not exempt under Article 286(1)(b) of the Constitution, as the sale does not occasion the export. Tax exemptions for goods despatched outside a state are unavailable if title passes to the buyer before despatch.
Headnote:(A) Bengal Finance (Sales Tax) Act, 1941 - Sections 2(i), 2(c), 5(2)(a)(ii), and 5(2)(a)(v) - Constitution of India - Article 286(1)(b) - Registered dealer claiming exemption for goods exported - Filing of return as a dealer precludes claim of acting as an agent (Para 7) - Exemption for goods despatched outside the state is unavailable if property in goods passes to the buyer before despatch (Paras 8 and 9) - Sale to a domestic buyer who subsequently exports the goods does not fall within the exemption of Article 286(1)(b) as the sale does not occasion the export (Paras 10 and 11).
(B) Constitution of India - Article 286(1)(b) - Scope of "integrated activities" - A sale by export involves a series of integrated activities from the agreement of sale with a foreign buyer to delivery to a common carrier; a domestic sale preceding such export is a separate taxable transaction (Para 11).
Facts of the case:
A registered dealer purchased goods at auctions, blended and repacked them, and shipped them to foreign destinations. The dealer claimed he was acting as an agent for parties in another state and sought tax exemptions on the grounds that the goods were despatched outside the state and were part of an export transaction.
Findings of Court:
The court found that the dealer filed returns as a dealer, not an agent. Evidence showed that property in the goods passed to the buyers before the goods left the state, as the buyers consistently referred to the goods as their own stock and provided specific instructions for blending and packing.
Issues: Whether the dealer was acting as an agent or a dealer; whether the goods were despatched by the dealer to an address outside the state for exemption; and whether the transaction was exempt as a sale occasioning export under the Constitution.
Ratio Decidendi: A person who files tax returns as a dealer cannot claim to be an agent for the same transactions. Exemption for despatch outside the state is inapplicable if title passes to the buyer before the goods leave the state. Under Article 286(1)(b), only sales that are part of integrated activities occasioning export are exempt; a sale to a domestic buyer who then exports the goods is a taxable domestic sale.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the assessee acted as an agent or dealer — eligibility for exemption for goods despatched outside state — protection under Article 286(1)(b) of the Constitution. (Para 3 , 7 , 8 , 10 )
3. Filing returns as a dealer precludes agency claims — property passed upon appropriation before despatch — sale completed before export, excluding constitutional protection for export sales. (Para 7 , 8 , 9 , 10 , 11 )
4. Property passes upon unconditional appropriation to the contract — Article 286(1)(b) excludes sales where title passes before goods are entrusted to a carrier for export. (Para 9 , 10 , 11 )
6. Does filing a tax return as a dealer preclude a subsequent claim that the person acted as an agent for the transactions?
Yes. Filing a return as a dealer is inconsistent with the theory of acting as an agent, as a person acting solely as an agent would not be required to show such transactions in their return. (Para 7 )
7. When does property in goods pass from the seller to the buyer in a contract of sale?
Property passes from the seller to the buyer upon the unconditional appropriation of the goods to the contract by one party with the consent of the other. (Para 9 )
8. When is a sale exempt from state taxation under Article 286(1)(b) of the Constitution regarding the export of goods?
Exemption applies to sales that occasion the export, where the sale and export form a single integrated transaction. It does not apply if title passes to the buyer before the goods are entrusted to the carrier. (Para 10 , 11 )
Judgement
P. B. GAJENDRAGADKAR, J. : Civil Appeal No. 300 of 1956. The appellant Gordhandas Lalji had filed a petition in the High Court at Calcutta under Art. 226 of the Constitution for quashing an order of assessment made by the respondents against him for Rs. 23, 905-11-0 for the year 1949-50 under the Bengal Finance (Sales Tax) Act, 1941 (Act VI of 1941), hereinafter called the Act. Mr. Justice D. N. Sinha who heard the petition rejected all the contentions raised by the appellant and dismissed the petition. An appeal preferred against the order passed by Sinha, J., was dismissed by Chakravartti, C. J., and Lahiri, J. It is against this judgment that the appellant has come to this Court by special leave.
2. The appellant is a registered dealer under the Act. As required by the Act, the appellant submitted his return for the year 1949-50 which showed that his turnover was Rs. 24,21,023-3-3. The appellant s case, however, was that the taxable turnover for the relevant period was `nil . He claimed that goods sold worth Rs. 1,79,733-0-0 were sold to registered dealers and were thus exempt from tax under S. 5(2)(a)(ii) of the Act. In regard to the balance of goods worth Rs. 22,41,490-3-3, they had been despatched by the appellant or on his behalf to an address outside West Bengal and were thus exempt from tax under S. 5(2)(a)(v) of the Act.
3. In regard to the latter claim for exemption made by the appellant he alleged that, in his usual course of business and on the advices of Shah Narottamdas Harjivandas and Co., and two other well known tea exporters and tea merchants of Bombay, he had purchased at the tea auctions in Calcutta various quantities of teas as their agent and on their behalf and for the purpose of direct export to foreign countries. All the said teas carried export quota rights. After different kinds of teas were thus purchased they were mixed and re-packed in accordance with the instructions of the principals. The appellant then on similar advice applied for and obtained requisite licences for the export of the said teas from the Joint Controller, Indian Tea Licensing Committee and the said licences were all in the names of the said principals. Thereafter, in the usual course of business, the appellant put the said teas into ships through clearing or shipping agents and the teas were bound for export overseas. Thus the goods were shipped from Calcutta to destinations outside the territories of India in the course of foreign or international trade. Under instructions of the said principals, bills of lading for the said teas worth Rs. 5,74,422-7-3 were made out in the names of the said principals as the consignors & the consignees were sometimes the principals themselves and sometimes foreign parties. The appellant alleged that all the said acts and services were done by him in the usual course of business as an agent for the said principals in respect of the said teas. According to the appellant the total cost of the teas thus purchased came to Rs. 4,37,656-0-9 whereas the expenses incurred for handling the goods and dealing with them from the stage of purchase to shipment including the appellant s commission at 11/2 per cent. came to Rs. 1,36,766-6-6. That is how the total value of the goods were shown as Rs. 5,74,422-7-3. It was in respect of this amount that the appellant claimed exemption under S. 5(2)(a)(v) of the Act.
4. The Commercial Tax Officer allowed the claim for exemption under S. 5(2)(a) (ii) of the Act in full, but in regard to the exemption claimed by the appellant under S. 5(2)(a)(v) he disallowed it to the extent of Rs. 5,74,422-7-3 on the ground that the relevant bills of lading showed the consignor to be not the appellant but the aforesaid three Bombay parties. In the result, the appellant s taxable turnover was held to amount to Rs. 5,09,988-0-0 and on that basis he was assessed to pay the tax at Rs. 23,905-11-0 and a demand in that behalf was issued.
5. Against this order an appeal was preferre
