Southern Trading Company vs The State of Tamil Nadu

Ramanujam, J.—The disputed turnover in this case is Rs. 3,61,545.80. The assessee''s case is that this turnover represents seconds sales of

yarn and therefore the same is entitled to exemption. But the case of the Revenue is that this turnover represents the sales effected by the assessee

in respect of cotton yarn entrusted to it by the mills as a selling agent. The assessee relied on certain pro forma invoices issued by the mills wherein

certain prices were mentioned. On the basis of the said pro forma invoices the assessee contended that there is a sale from the mills to the assessee

and there is a subsequent sale by the assessee which is the subject-matter in dispute now. The Tribunal after going through the contract between

the assessee and the Somasundaram Super Spinning Mills found that the assessee has been appointed as a selling agent for the yarn produced by

the mills, that under the contract the assessee has to get the stock from the mills after paying a part of the value of the yarn on the basis of

provisional invoices to be made out by the mills. The contract also provided that the assessee will dispose of the yarn stocks given to them by the

mills on the mills'' account and at the price fixed by the mills. After considering the terms and conditions of the contract entered into between the

mills and the assessee, the Tribunal held that the assessee is only a selling agent in spite of the fact that he has made some payment on the basis of

the provisional invoices when he took delivery of the stocks of yarn, as he has agreed to sell the stocks only at the price fixed by the mills and on

the ''mills'' account which means the assessee''s sale is the first sale and there was no actual sale by the mills to the assessee and the provisional

invoices raised by the mills on the assessee is only for getting a provisional payment from the assessee. The learned counsel for the assessee would

very much rely on the provisional invoices raised by the mills and the payment made by the assessee on the basis of the said provisional invoices in

respect of the yarn stocks taken delivery by it. Whatever be the provisional invoice and whether sales tax is mentioned in the provisional invoice or

not, the fact remains that under clauses 7 and 8 of the contract between the assessee and the mills, the assessee is holding the stocks in its hands on

mills'' account and that the price has to be fixed by the mills. These mean that there is no sale by the mills to the assessee. We are therefore of the

view that the Tribunal''s finding is correct and to interference is called for with the order of the Tribunal on the facts and circumstances of the case.

The tax case is therefore dismissed.