C. Hajee Abdul Khalique Sahib and Company and Another vs The State of Tamil Nadu

Ismail, J.—The former appeal comes up for final disposal and the latter appeal comes up for admission. Both these appeals arise out of a

common order of the Board of Revenue. In the former appeal, the disputed turnover is Rs. 4,03,175.97 and, in the latter appeal, the disputed

turnover is Rs. 8,74,074.00 and the appellants contended that the said two turnovers referred to above were turnovers of export sales and that,

therefore, they are not liable to sales tax. The assessing officer declined to accept this contention relying upon the decision of the Supreme Court in

Coffee Board, Bangalore Vs. Joint Commercial Tax Officer, Madras and Another, , which itself was followed in Serajuddin and Others Vs. The

State of Orissa, . However, on appeal preferred by the appellants, the Appellate Assistant Commissioner (C.T.) III, Madras, held that the local

exporting houses, who exported tanned skins, did so only on behalf of the appellants and that, therefore, the respective turnovers were eligible for

exemption. It is these orders of the Appellate Assistant Commissioner that were sought to be revised suo motu by the Board of Revenue after

issuing notice to the appellants. The appellants contended that the exporting firms acted only as their agents and the transaction between them and

the said agents cannot be termed as first sale, that the entire sale proceeds were credited by the said exporting houses to the appellants less the

commission, that the relationship between the appellants and the exporters was only as principal and agent, that there was no sale by the appellants

to the exporting houses, that the appellants themselves did not raise any invoice on the exporting houses and that, therefore, there could be no sale

by the appellants to the exporters in order to enable the exporters to effect a second sale in favour of the foreign buyers. The Board of Revenue

rejected this contention of the appellants and revised the orders of the Appellate Assistant Commissioner and added the disputed turnovers.

Hence, the present appeals by the appellants u/s 37 of the Tamil Nadu General Sales Tax Act.

There are two matters which require immediate attention. The Board of Revenue in its order has pointed out that none of the correspondence

showed that the local exporters acted as the agents of the appellants herein. The correctness of this statement is not specifically challenged in the

grounds of appeal preferred to this Court. Apart from this, it is admitted by the Learned Counsel for the appellants themselves that, in the

correspondence that passed between the local exporting houses and the foreign buyers, there is absolutely nothing to show that the local exporting

houses were acting as the agents of somebody else and that they were not dealing with their own goods by way of selling them to the foreign

buyers. We are of the opinion that, on this admission, the sales in question must be held to be liable to sales tax, because it must be deemed that

there was a local sale by the appellants to the exporting houses in order to enable the exporting houses to effect a sale in their own right in favour of

the foreign buyers. In fact, that is the view taken by a Bench of this Court, to which one of us was a party, in its order dated 16th February, 1976,

in State of Tamil Nadu represented by the Deputy Commissioner (CT), Madras Division, Madras-1 v. A. Shafeeq Ahmed and Co. (Tax Cases

Nos. 458 and 459 of 1971). In that case, it was observed by this Court as follows:

If the contention of the assessees is that they were the exporters in fact and any other person was acting only as their agent, the privity of contract

between the assessees and the foreign exporter would be established and the assessees themselves could become an exporter. But, if the facts

were to be that the contract was entered into by the agent on his own right and not as an agent of the assessees, there shall be deemed to be a sale

by the assessees to the agent and there would be no privity of contract between the assessees and the foreign buyer and it would amount to a case

of sale for export to a local agent.

Thus, these observations of the Bench directly apply to the facts of the present case and, therefore, it must be held that the appellants must be

deemed to have sold the goods to the local exporting houses, who, in turn, effected the sale of the goods in favour of the foreign buyers. Under

these circumstances, we see no reason to disturb the conclusions of the Board of Revenue and, accordingly, these appeals fail and are dismissed.

There will be no order as to costs in the former appeal.

Appendix

[The judgment of the Division Bench of the Madras High Court consisting of V. Ramaswami and Sethuraman, JJ., in State of Tamil Nadu v. A.

Shafeeq Ahmed and Co. and Anr. (Tax Cases Nos. 458 and 459 of 1971 [Revisions Nos. 326 and 327 of 1971]) delivered on 16th February,

1976, is printed below:-]

The State of Tamil Nadu v. A. Shafeeq Ahmed and Co.

Ramaswami, J.—Though the assessees in these two tax revision cases are different, the point involved is the same. In respect of the disputed

turnover, the assessees claimed that the turnover related to sales in the course of export.

The assessees contended that the turnover related to sales effected through local exporting agents and that, in law, there was no sale to the local

agent and that the assessees themselves should be deemed to be the exporters. Though the assessing officer rejected this contention, the Appellate

Assistant Commissioner pointed out that the transaction could be either a sale to an agent or a sale through an agent and, only in the case of a sale

to an agent, who then exported, that the transaction could be stated to be a local sale and not in the case where the sale was through an agent, in

which case, the agent was acting on behalf of the assessee and the export shall be deemed to have been made by the assessee himself. Since the

assessing officer had not kept the distinction between a local sale to an exporting agent and an export sale through an agent, he set aside the

assessment order and remanded the matter for a fresh consideration on merits. But, on appeal, the Tribunal thought that there is no distinction

between a sale to an agent and a sale through an agent and that, therefore, the entire turnover is exempt as sales in the course of export. The

disposal by the Tribunal, in our opinion, is not satisfactory. If the contention of the assessees is that they were the exporters in fact and any other

person was acting only as their agent, the privity of contract between the assessees and the foreign exporter would be established and the

assessees themselves could become an exporter. But if the facts were to be that the contract was entered into by the agent on his own right and

not as an agent of the assessees, there shall be deemed to be a sale by the assessees to the agent and there would be no privity of contract

between the assessees and the foreign buyer and it would amount to a case of sale for export to a local agent. The Tribunal will have, therefore, to

analyse each transaction and come to a conclusion whether the export sale was by the assessees or by the agent in his own right. The Tribunal did

not also have the benefit of the decision of the Supreme Court in Serajuddin and Others Vs. The State of Orissa, , which came much later than its

order. The Tribunal will now dispose of the cases on merits and in the light of the decision of the Supreme Court in Serajuddin and Others Vs. The

State of Orissa, . The tax revision cases are accordingly allowed and the order of the Tribunal is set aside and the matter is remanded to the

Tribunal for fresh disposal in the light of the observations made above. But there will be no order as to costs.