Case: Gordhandas Lalji Vs. B. Banerjee &amp; Others

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 appellants 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 Act3. 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 and 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 appellants 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 Act4. 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 appellants 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 issued5. Against this order an appeal was preferred by the appellant before the Assistant Commissioner but the appellate authority substantially agreed with the view taken by the Commercial Tax Officer and dismissed the appeal. According to the appellate authority, whoever might have physically put the goods in the hold of the ships, the consignors in the bills of lading, which were legal documents of despatch, must be deemed to be the despatchers. The appellate authority also held that it could not be disputed that the sales which occasioned the exports were the sales by the Bombay parties and as such there can be no question of the assessees taking protection under Art. 286 (1)(b) of the Constitution6. It was this order of the appellate authority that was challenged by the appellant in his petition filed before the High Court at Calcutta. Sinha, J., rejected the petition on two grounds. He held that the return filed by the appellant was the foundation of the present assessment proceedings and since the return had not been filed on the footing of an agent, the appellants case that, in regard to the transactions in question, he was no more than an agent acting for his principals in Bombay cannot succeed. The learned Judge also found that the sale of the goods by the appellant to the Bombay parties was complete when it was appropriated to the contract billed for and the price realised. The shipping to foreign ports of the goods thus sold was no part of the sale by the appellant to the Bombay parties; it constituted an event which is post-sale. It was on these findings that the appellants claim for exemption under S. 5(2)(a)(v) of the Act as well as Art. 286(1)(b) of the Constitution was rejected. This order was challenged by the appellant by preferring an appeal but Chakravarti, C. J., and Lahiri, J., who heard the appeal were not impressed by the arguments urged on behalf of the appellant. The result was that the appeal failed and was dismissed. The learned Judges of the Appellate Bench observed that the plea that the appellant was an agent was not seriously pressed before them and they held that the plea for exemption under Art. 286(1)(b) was not well founded because the sales in which the appellant was interested were completed as soon as the goods were appropriated to his contracts with the Bombay parties and whether subsequently the Bombay parties consigned the goods to themselves at some place outside India or to other parties was no concern to the appellant. It is against this appellate order that the present appeal has been brought to this Court by the appellant by special leave.

Reasoning: In our opinion there is no substance in this argument. It is significant that the appellant has obtained a certificate under the Act as a dealer and in consequence he is obviously a registered dealer under the Act. Besides the return on which tax has been assessed has been submitted by the appellant in Form No. III on the basis that he is a dealer. In other words, judging the character of the appellant in respect of the transactions in question solely by reference to the return, there could be no doubt that the appellant purports to be a dealer in respect of them and not an agent. It is really difficult to understand why the appellant should have included these transactions in his return at all if he had purchased the teas not for himself but as an agent on behalf of his Bombay principalsIt would thus be clear that unless the appellant had purchased the teas in question as a dealer he was not required to show these transactions in his return at all. The fact that those transactions were included in his return is consistent only with the theory that the appellant purchased the teas as a dealer within the meaning of the Act and is wholly inconsistent with his case that in these transactions he was concerned only as an agentUnder this provision, deduction is claimable in respect of sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by or on behalf of the dealer to an address outside West Bengal. It would be noticed that this provision would apply only to the sales of goods which are despatched by or on behalf of the dealer to an address outside West Bengal. In the present case it has been found that the property in the goods had passed in favour of the Bombay merchants long before the goods left West Bengal. Soon after the goods were purchased by the appellant they were appropriated to his contract with the Bombay parties and in consequence property in the goods immediately passed in favour of the Bombay parties and so the despatch of the goods outside West Bengal was not on behalf of the appellant but was by and on behalf of the Bombay partiesWe are not impressed by this argument.It must be remembered that the only case which the appellant set out before the Sales Tax authorities was that he was not a dealer in respect of the goods in question but was acting as an agent for the Bombay parties. No attempt was made by the appellant to make out the alternative case that, in case he was a dealer in respect of the goods, title to the goods did not pass in favour of the Bombay merchants until the goods left West Bengal. It was only during the course of argument on the writ petition before Sinha J. that this point was raised; and in dealing with the point the learned Judge had naturally to consider the question as to when the goods were appropriated towards the contract in favour of the Bombay merchants. Therefore the grievance made by Shri Veda Vyas that in recording this finding a new point has been made against him is without any substanceIt is clear that this is a finding of fact and it would normally not be open to the appellant to question the correctness of the findings of fact in appeals under Art. 136 of the Constitution. But even on the merits we think the finding in question is perfectly correct. There can be no doubt that, with the unconditional appropriation of the goods to the contract by one of the parties with the consent of the other property passes from the seller to the buyerThe goods were kept in the godown by the appellant. They were unpacked, blended by the appellant, repacked and duly marked before they were transported; and it is emphasized that for all these acts the appellant charged the Bombay parties and in substance included these charges in the price to be recovered from them. Prima facie this conduct may to some extent be in favour of the appellants contention. But, on the other hand, the correspondence between the appellant and the Bombay parties clearly and unambiguously indicates that the property had passed to the Bombay parties long before the goods were ultimately despatched from Calcutta. In all the letters, the Bombay parties have consistently referred to the goods as their goods an have given several instructions which would be consistent only with the theory that the tile in respect of the goods had already passed to themIt would thus be clear that the Bombay party has consistently described the goods as its own and minute directions have been given to the appellant as to the manner in which they should be packed and he has been asked to ship or otherwise transport the goods in the name of the Bombay party. If the appellant agreed to comply with these directions it was obviously because he wanted to do a good turn to his customer. Since the title had passed to the Bombay party the appellant would naturally be entitled to charge for the services rendered by him in the matter of the blending and packing of the goods. He was also allowed to charge the agreed commissions. It is well known that sellers are interested in rendering and agree to render such services to their constituents in order to cultivate their good will. That is why it would be erroneous to attach undue importance to the fact that the appellant included the other incidental and subsidiary charges in his bill and formally made those charges a part of the price. It cannot be argued that in every case the payment of price is a condition precedent for the passing of the property. We are, therefore, satisfied that the correctness of the findings made by the High Court on the question of appropriation cannot be effectively challenged by the appellant on the materials on record. If the goods were appropriated to the contract by the appellant with the consent, and to the knowledge, of the Bombay merchant, title to the goods clearly passed in favour of the Bombay party. Incidentally, the goods sent by the appellant were not the same as the goods originally purchased by him.There has been blending according to the instructions of the Bombay party and that also indicates that the sale of the goods by the appellant to the Bombay party had preceded the blending of several teas which was done under the instructions of the Bombay party on the basis that the title in the goods had already passed to the Bombay party. In that view of the matter S. 5(2)(a)(v) of the Act would be wholly inapplicableThe scope and effect of the provisions of Art. 286(1)(b) has been considered by this Court on several occasions and it can be stated without any difficulty that in the light of the decisions of this Court the appellant would not be entitled to claim the protection of this article once it is held that the title to the goods has passed in favour of the Bombay party long before the goods were entrusted to the carrier.It is clear that what is taxed are the sales made by the appellant in favour of the Bombay party and not the sales made by the Bombay party in favour of outsiders. The appellant sold the goods to the Bombay parties who had their place of business in Bombay.As soon as the goods were sold to the Bombay parties the appellants interest in the goods ceased and whatever happened to the goods subsequently was no concern of the appellant. In fact there is no privity between the appellant and the foreign merchants to whom the goods were ultimately exported.In a sense the finding about the appropriation of the goods which excludes the application of S. 5(2)(a)(v) of the Act to the sale made by the appellant would equally exclude the application of Art. 286(1)(b) of the ConstitutionThe same question has been recently considered by this Court in State of Mysore v. Mysore Spinning and Manufacturing Co. Ltd., and the Minerva Mills Ltd. Civil Appeals Nos. 66 to 73 of 1957 D/- 11-2-1958 : (AIR 1958 SC 1002  ) (C). There is no doubt that this decision clearly covers the case before us. Shri Veda Vyas could not seriously dispute this positionWe are, however, not impressed by this plea. We hold that, in view of the two. Travancore decisions and particularly in view of the recent decision in the State of Mysore etc. etc., supra (C), it would be impossible to accept the plea that the sale effected by the appellant in the present case can claim the protection of Art. 286(1)(b) of the Constitution11. The scope and effect of the provisions of Art. 286(1)(b) have considered by this Court in two decisions which are frequently described as the two Tranvancore casesWe are satisfied that these decisions do not support the appellants caseWe wish to point out that we do not propose to consider the correctness of the conclusions reached by the learned Judges in both these decisions. For the purpose of the present appeal it is enough to state these cases, even if they are assumed to be correctly decided, do not support the appellants contentionIn view of our decision in Civil Appeal No. 300 of 1956, Civil Appeal No. 665 of 1957 also must failWe are not inclined to adopt this course. If the appellant did not pursue his remedy available under the Act and failed to make an appeal in proper time, we see no reason why we should show him special indulgence and send this matter to the appellate authority with the direction as suggested by Shri Veda Vyas.