# BAGAL KOT CEMENT CO v. STATE OF MYSORE

- **Citation:** [1976] 2 S.C.R. 852
- **Court:** Supreme Court of India
- **Decided:** 1975-11-27
- **Case number:** Civil Appeal No. 98 of 1971
- **Bench:** P. K. Goswami, N. L. Untwal!A
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bagal-kot-cement-co-v-state-of-mysore-6560
- **Pages:** 6

## Headnote

Cemral Sales 1'ax Act, 1956-S. 2(b)-"dealer" if includes a del credre
agent c.nd a mercantile agelll.
By an agreement, the State Trading Corporation appointed the appellant as
its selling agent for cement.
A term o[ the agreement was that the agent shall
collect State or inter-State sales tax on the sale of cement and pay the same
•
in accordance with law.
The appellant paid the sales tax on its annual turnover to me Sales Tax Authorit.ies.
Later, however, it filed an appeal stating ~
that it was ncit a dealer and, as such, was not liable to pay any tax, but that
was dismissed.
Its appeal to the Appellate Tribunal and later revision application
before the High Court were dismissed.
Dismissing the appeal to this Court,
HELD : (I ) The contention that the appellant being an agent of the State
Trading Corporation, it was not a dealer as defined in s. 2(b) of the Central
Sales Tax Act and hence was not liable to pay any sales-tax thereunder has no
substance.
Having realised the sales-tax from the various customers and voluntarily paid it as per the return submitted it was ill-advised to take an inconsistent stand of its not being liable to pay sales tax under the Central Sales Tax
Act.
[853F-G]
(2) From a reading of the 1-erms of the agreement it is abundantly clear
that sale was made by the appellant-company as it effected transfer of property
in the goods to the customers and 1ea!ised the sale price from them by issuing
invoices in its own name.
The restricted definition of the term "dealer" in the
Central Sales Tax Act is not wide enough to cover all kinds of agents such
as a broker or a commission agent simp/iciler.
The term "dealer" defined in
the Central Act, would, however, include a de/ crcdre agent or a mercantile
agent who carries on the busine5' of buying or selling goods not as an agent
simpliciter on behalf of the disclos~d princinal hut '" a principal 1·is-a-vis its
customers. f855F-H1
Ka11d11/a Radhakrisl111a Rao and others v. The Province of Madras represented by the Collector of Wesn Godavari, Eluru mid another, A.I.R.
1952 Madras
718, approved.
In the instant case it was the appellant company which carr :·c,l on the business of selling cement although it was acting as selling agent of the Corporation_
The Corporation was· not a Je<1ler which effccte,\ the 'ales but it wa' the company which did so.

## Text

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852
BAGAL KOT CEMENT CO.
v.
STATE OF MYSORE
November 27, 1975
[P. K. GOSWAMI AND N. L. UNTWAL!A, JJ.]
Cemral Sales 1'ax Act, 1956-S. 2(b)-"dealer" if includes a del credre
agent c.nd a mercantile agelll.
By an agreement, the State Trading Corporation appointed the appellant as
its selling agent for cement.
A term o[ the agreement was that the agent shall
collect State or inter-State sales tax on the sale of cement and pay the same
•
in accordance with law.
The appellant paid the sales tax on its annual turnover to me Sales Tax Authorit.ies.
Later, however, it filed an appeal stating ~
that it was ncit a dealer and, as such, was not liable to pay any tax, but that
was dismissed.
Its appeal to the Appellate Tribunal and later revision application
before the High Court were dismissed.
Dismissing the appeal to this Court,
HELD : (I ) The contention that the appellant being an agent of the State
Trading Corporation, it was not a dealer as defined in s. 2(b) of the Central
Sales Tax Act and hence was not liable to pay any sales-tax thereunder has no
substance.
Having realised the sales-tax from the various customers and voluntarily paid it as per the return submitted it was ill-advised to take an inconsistent stand of its not being liable to pay sales tax under the Central Sales Tax
Act.
[853F-G]
(2) From a reading of the 1-erms of the agreement it is abundantly clear
that sale was made by the appellant-company as it effected transfer of property
in the goods to the customers and 1ea!ised the sale price from them by issuing
invoices in its own name.
The restricted definition of the term "dealer" in the
Central Sales Tax Act is not wide enough to cover all kinds of agents such
as a broker or a commission agent simp/iciler.
The term "dealer" defined in
the Central Act, would, however, include a de/ crcdre agent or a mercantile
agent who carries on the busine5' of buying or selling goods not as an agent
simpliciter on behalf of the disclos~d princinal hut '" a principal 1·is-a-vis its
customers. f855F-H1
Ka11d11/a Radhakrisl111a Rao and others v. The Province of Madras represented by the Collector of Wesn Godavari, Eluru mid another, A.I.R.
1952 Madras
718, approved.
In the instant case it was the appellant company which carr :·c,l on the business of selling cement although it was acting as selling agent of the Corporation_
The Corporation was· not a Je<1ler which effccte,\ the 'ales but it wa' the company which did so.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 98 of 1971.
Appeal by special leave from the. Judgment. anct. Order dated the
26th February 1970 of the Mysore High Court m S. r.R.P. No. 18 of
1969.
D. V. Patel, Vineet Kumar and B. P. Singh for the Appellant.
v. P. Raman, Addi. Sol. General, N. Nettar and R. C. Kaushik for
the Respondent.
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BAGAL KOT CEMENT co. v. MYSORE (Untwalia, !.)
853
The Judgment of the Court was delivered by
UNTWALIA, J. In this appeal by special leave the question for
determination is whetl}er the appellant company is a dealer within the
meaning of section 2(b) of the Central Sales Tax Act, 1956-hereinafter referred to as the. Central Act, liable to pay sales tax thereunder.
The appellant, Bagal Kot Cement Co. Ltd., is a manufacturer of
cement. For the period 1st April, 1961 to 31st March 1962 it filed a
Return before the Assessing Authority showing a total turn-over of
Rs. 1,11,02,243/-. The entire sum was shown as taxable turn-over
on which an amount of Rs. 2,25,317.55 had been 'collected and paid
• as tax. No claim was made on behalf of the appellant before the
Assessing Authority that it was not liable to pay any sales tax.
The
Authority accepted the Return and assessed the tax as per the appellant's figure. It appears the appellant was advised there<(fter to file an
appeal before the Deputy Commissioner of Commercial Taxes and take
the stand that in respect of the transactions in question it was not a
dealer and was not liable to pay any tax. The Deputy Commissioner
dismissed the appeal. A second appeal filed by the appellant before
the Mysore Sales Tax Appellate Tribunal also failed.
The company
took up the matter in revision to the High Court under 'sectfori 23 of the
Mysore Sales Tax Act, 1957-hereinafter called the State Act, read
with section 9(2) of the Central Act. The High Court dismissed the
revision. Hence this appeal.
Under the Cement Control Orders, 1958 and 1961 the appellant
was bound to sell the entire quantity of cement to the State Trading
Corporation of India Ltd. By an agreement executed between the
parties the Corporation .appointed the Company as its selling agent for
sale of cement to different customers on its behalf at the controlled
price and in accordance with the instructions which may ·be given from
time to time by the Corporation. Pursuant to the agreement the company made the inter-State sales and realized sales tax from the customers under the Central Act. Its contention is that being an agent of
the State Trading Corporation and having effected all the sales under
its direction it was not.. a dealer as defined in section 2 (b) of the Central
Act and hence was not liable to pay any sales tax thereunder. The
liability was of the Corporation.
In our opinion there is no substance in the appellant's argument.
After having realized the sales tax from the various customers and
voluntarily and ex-contractu paid it as per the Return submitted it
was ill-advised to take an unsustainable stand of its riot being liable to
pay.sales tax under the Central Act.
There cannot be any do11bt that the sales of cement made· during
the period in question in the course of inter-State trade were exigible to
sales tax under the Central Act. The question for consideration is who
was liable to pay it ? The liability was of the dealer as defined in section 2(b). If the appellant company was the dealer which had made
the sales as defined in section 2 (g), then the liability to pay the tax
under the charging section 6 was its. If it was not a dealer then obviously it was not liable to pay any tax.
13-159SCI/76
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854
SUPREME COURT REPORTS
[1976] 2 S.C.R.
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To determine the point at issue as mentioned above it is necessary
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to advert to the primary facts and the course of conduct of the business
of the appellant as per the terms of the agreement entered into with the
State Trading Corporation. Thy High Court has pointed out that the
Deputy Commissioner found :
( 1) The Company was appointed by the State Trading Corporation as its selling agent;
(2) It had sold cement at the price specified in the Cement
Control Order to the customers who held permits from
the governmental authorities;
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(3) The customers purchased the cement from the company
directly and they were not aware of the identity of the
principal namely the State Trading Corporation.
The High Court also refers to the fact that the appellant did not place
the relevant papers pertaining to the transactions before the authorities
below. But its learned counsel conceded that the invoices were issued
by the company, that the company had possession and the custody in
the goods and it was authorised to transfer the property of the goods to
the purchasers. These facts were not disputed before us. Rather in
the special leave petition it is admitted that the invoices were issued by
the appellant company in its own name.
We may now refer to some relevant clauses of the agreement between the parties.
They are as follows.
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"l. The Corporation hereby appoints the agents to take on
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its behalf delivery of the entire cement produced at the
works of Bagalkot Cement Co. Ltd. and to arrange for
the distribution of such cement in accordance with such
directions as may be issued by the Corporation from
time to time.
2. The Agents may enter into contracts for sale of cement
on behalf of the Corporation and shall, inter-alia,
arrange for the despatch of. cement to the consignees,
submit bills for the sales, receive payments in connection therewith and do •all acts and things that may be
necessary to handle effectively, on behalf of the Corporation, all contracts of sale of cement entered into as
aforesaid.
7(a) The Agents shall sell cement at such prices as may be
indicated by the Corporation from time to time.
(b) The Agents shall collect State or inter-State sales tax
and other local and State Government taxes as may
be leviable, and pay the same in accordance with the
law. They shall also discharge all liabilities devolving
upon them as dealers under the various sales tax
Acts and Rules;
BAGAL KOT CEMENT co. v. MYSORE ( Untwalia, J.)
855
13. The Agents shall credit to the Corporation at the end of
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every ,month the sale proceeds of the cement sold by
them at a price referred to in clause 7 above, as reduced by:
(a) the amount paid to producers according to the provisions of clause 9 above;
( e) the Agents remuneration referred to
in
clause
8
above."
lt would thus be seen from the course of conduct of the appelB
• fant's business and the terms of agreement that the Company was not
a mere commission agent or broker selling the goods on behalf of its
principal-the Corporation. There was no privity. of contract betwe~n
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the various customers of cement and the Corporation. No property m
the goods sold was passed by the Corporation to them. After taking
the symbolical delivery of the entire. cement produced at the works of
the company as per clause ( 1) of the agreement the company was in
possession and custody of the goods. It was entering into contracts
for sale of cement and selling it. The property in the goods was passed
on to the buyers by the company. Under clause (7) it was authorised
to collect sales tax both on intra-State and inter-State sales, and to disD
charge its liability devolving upon it as dealer under the various Sales
Tax Acts and Rules. As per clause 13 of the agreement only the difference of price after deducting the company's remuneration was to be
credited to the Corporation's account.
'
Section 2 (b) of the Central Act reads as follows :
" "dealer" means any person who carries on the business
of buying or selling goods, and includes a Government which
carries on such business;"
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"sale" within the meaning of clause (g) means any transfer of property
in goods by one person to another for cash or for deferred payment or
for any other valuable consideration.
"sale price" under clause (h)
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means the amount payable to a dealer as consideration for the sale
of any goods. On the facts stated above it is abundantly clear that
sale was made by the appellant company as it effected tnmsfer of property in the goods to the customers and realized sale price from them
by issuing invoices in its own name. The restricted definition of the
term 'dealer' in the Ce,ntral Act is not wide enough to cover all kinds
of agents such as brokers or a commission agent simplicter as many
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of the State Acts include them within their definitions.
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for
example the term 'dealer' defined in section 2(k) of the Mysore State
Act includes "a commission agent, a broker or del credere agent or an
auctioneer or any other mercantile agent by whatever name called, who
carries on the business of buying, selling, supplying or distributing goods
on behalf of any principal;" The term 'dealer' as defined in the Central
Act would, however, include a del credere agent or a mercantile agent
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who carries on the business of buying or selling goods not as an agent
simplicter on behalf of the disclosed principal but as a principal visa-vis its customers.
856
SUPREME COURT REPORTS
[1976] 2 S.C.R.
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In Halsbury's Laws of England, Fourth Edition, Volume 1, para
712 it is stated :
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"A mercantile agent is one having, in the customary
course of his business as such agent, authority either to sell
goods, or to consign goods for the purpose of sale, or to buy
goods, or to raise money on the security of goods. An
agent may be a mercantile agent although he has no general
occupation as an agent, or has only one customer, or although
his general occupation is that of an independent dealer in the
commodity entrusted to him, provided that he acts in the
transaction in his capacity as mercantile agent; but he must
not be a mere servant or shopman."
In para 713 is stated :
"A del credere agent is one who, usually for extra remuneration, undertakes to indemnify his employer against loss
arising from the failure of persons with whom he contracts to
carry out their contracts."
In the judgment under appeal the High Court repelled the stand of
the appellant relying upon the decision of a full Bench of the Madras
High Court in Kandula Radhakrishna Rao and others v. The Province
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of Madras represented by the Collector of West Godavari, Eluru and
and another(l). Referring to the identical definition of the 'dealer' in •
the Madras Act Rajamannar, C.J. delivering the judgment on behalf
of the Bench has stated at page 723 column 2 :
"In the case of a commission agent, the accepted mercantile practice is that he has control over or possession of
the goods and he has the authority from the owner of the
goods to pass the property in and title to the goods. If this
is so, undoubtedly when a commission agent sells goods belonging to his principal with his authority and consent and
without disclosing to the buyer the name of the owner, there
is certainly a transfer of property in the goods from the commission agent to the buyer. A business which consists. in such
transactions can properly be described as a business of selling goods. A similar position would arise even in the case of
a commission agent buying for an undisclosed principal. A
commission agent doing this kind of business would in my
opinion, fall within the definition of dealer in the Sales Tax
Act. Neither the definition of dealer nor of sale contemplates
as a necessary condition, that the goods sold should belong to the person selling or buying. There can be a sale or
purchase on behalf of another."
We agree with the above view of the learned Chief Justice.
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Mr. D. V. P~tel, learned counsel for the appellant heavily relied on
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the definition of the expressioa "place of business" given in clause ( dd)
of section 2 of the Central Act which includes "(i) in any case where a
(1) A.!.R. 1952 Madras, 718.
BAGAL KOT CEMENT co. v. MYSORE ( Untwalia, !. )
85 7
dealer carries on business through an agent (by whatever name called),
the place of business of such agent;" Counsel submitted that the above
inclusive definition would show that it was the Corporation which was
carrying on the business through the appellant company as its agent
and for the purpose of the Central Act the place where the business
was carried on by the company as the Corporation's agent would be the
place of the business of the Corporation. 011 the other hand, learned
Additional Solicitor General II pointed out that if the appellant was the
dealer within the meaning of section 2 (b) then it was not the Corporation which was carrying on the business through it as an agent to
attract the definition given in clause ( dd) . In our judgment it was the
appellant company which carried on the business of selling cement although it was acting as selling agents of the Corporation. The Corporation was not the dealer which effected the sales but it was the company which did so.
For the reasons st,ated above, we find no substance in this appeal.
It is accordingly dismissed with costs.
P.B.R.
Appeal dismissed.
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