An agent of a non-resident principal carrying on the business of selling goods in the State is liable to tax as a dealer under S. 14-A of the Madras General Sales Tax Act, 1939.

Judgement

HIDAYATULLAH, J. : These two appeals with special leave have been filed by Messrs. G. Gilda Textile Agency, Vijayawada, against the State of Andhra Pradesh. They are directed against a common order of the High Court of Andhra Pradesh in two revisions filed under S. 12-B (1) of the Madras General Sales Tax Act, 1939 (9 of 1939).

2. The matter relates to the levy of sales tax from the appellant on its turnover for the years, 1954-55 and 1955-56. The appellant was an agent of several non-resident principles, on whose behalf it booked orders and dealt with the indents. There were agreements between the non-resident principals and the appellant, and three such agreements contained in letters have been produced as instances, and are marked Exs. A-3, A-3 (a) and A-3 (b). Under these agreements, the appellant was appointed as indenting agent in Andhra Pradesh for cloth merchants, who, admittedly, resided and carried on business outside Andhra Pradesh. It was required to book orders and to forward them to the principals, receiving commission on sale of goods despatched to Andhra Pradesh. In some cases, this commission was only available on the orders booked by the appellant, and in others, on all the sales effected by the principals in this territory. The appellant did business in three different ways, which have been described as three separate categories in the case. In the first category, the appellant took delivery of the goods from the railway, stocked them in its own godowns, found buyers and delivered the goods to the buyers. This category of sales was held to be within the Madras General Sales Tax Act and the appellant, liable to the tax. The appellant does not question this part of the decision. The second category was in which it merely booked orders and forwarded them to Bombay and the principals sent the goods with the railway receipts through the bank to the purchasers in Andhra Pradesh. The connection of the appellant was not considered sufficient to constitute it the dealer , as defined in the Madras General Sales Tax Act, and such sales were omitted from the turnover. No dispute, therefore, arises about this category. The third category related to goods sold by the outside dealers to buyers in the State. The appellant in these transactions, besides booking orders, received the railway receipts from the outside principal, handed them over to the buyers and sometimes collected and transmitted the amount to the outside principal. The period involved is covered by the Sales Tax Validation Act, 1956 (7 of 1956), and no question under the Constitution arises. The only question is whether the appellant comes within S. 14-A of the Madras General Sales Tax Act, and is liable to tax as a dealer.

3. It may be pointed out that the appellant did not produce any correspondence between it and the non-resident principals or the covering letters which must have been sent along with the railway receipts. The Tribunal under the Madras General Sales Tax Act, therefore, came to the conclusion that the railway receipts which had been sent, must have been endorsed by the sellers either in favour of the appellant or in blank, to enable the appellant to claim the goods from the railway or to negotiate them. The Tribunal, therefore, held that the appellant must be deemed to be a dealer under S. 14-A and thus liable to tax under that section.

4. Section 14-A of the Act reads as follows:

In the case of any person carrying on the business of buying and selling goods in the State but residing outside it (hereinafter in this section referred to as a non-resident ), the provisions of this Act shall apply subject to the following modifications and additions, namely:

(i) In respect of the business of the nonresident, his agent residing in the State shall be deemed to be the dealer.

(ii) The agent of a non-resident shall be assessed to tax or taxes under this Act at the rate or rates leviable thereunder in respect of the business of such non-