# Hydernbad Deccan Cigarette Factar.v v. Stnre of Andhra Pradesh

- **Citation:** [1972] 1 S.C.R. 548
- **Court:** Supreme Court of India
- **Decided:** 1972
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hydernbad-deccan-cigarette-factar-v-v-stnre-of-andhra-pradesh-5393
- **Pages:** 5

## Headnote

548
STATE OF MADRAS
v,
CEMENT ALLOCATION CO-ORDINATING
ORGANISATION
September 1; 1971
[K, S. HEGDE AND A. N. GROVER, JJ.l
Madras General Salt'.\' T(/x Act 1959 and
Rules-A~ent a 'dealer'
under .'i. 2(9)-PackinR n1nterials deductible front total turnover under
r. 6(c) (11)-Agent selling cement on behalf of principal-Price of packinR nu1teriaL shOll'n separately in hf!ls-ARellt is enritled to so111e
exe1np~
tions as principcd-Deduction in rrspect of pocking 111aterinl
11 1hen ran
he claimed.
The assessee (respondent herein)
\V~s the .<:elling: agent of a cement
company.
Under s. 2(g) of the Madras General Sales Tax Act, 1959
the term 'dealer' is defined to include a commission a~cnt. In February
1967 the Deputy Commercial Tax Officer. Lalgudi, asked the asscssee to
show cause why its tu'rnover relatirig to the price of the μacking material
used in packing the cement sold should not be included in its taxable
turnover under the Madras General Sales Tax Act. 1959. The assessee
thereupon moved the High Court under Art. 226 of the Constitution. In
its petition the assessee averred that its right.;; were the S'!me as those
of its principal and since- the p'rice of packing: material was separately
shown in the bills the same was deductible from the total turnovelr in
view of r. 6(c)(ii) of the Rules under the Act.
The High Court held
that the assessee was entitled to deduct from its total turnover the turnover -relating to the packing charges if its principal would have been entitled to deduct the same had the principal sold tne cement in question
directly.
The question whether in the present case the principal was so
. entitled was not decided hy the High Court. The State appealed to this
Court.
HELD; Under the general law the agent merely rcp'resents the prin·
cipal.
Therefore while functioning within the scope of the agency he
can exercise all the rights which his principal could have exercised. This
provision must hold good even under the Madra.s General Sales Tax Act
.unless othe'rwise provided therein.
The fact that for the purpose of that
Ai;t an agent is considered as a dealer does not alter the 1egal position
in other respects.
Excepting to the extent other,vise provided in the Act
the agent must be held to represent his principal while dealing with the
goods of his principal; he merely steps into the shoes of his principal.
He is entitled to the same exemptions as his principal \Vould have got
had he dealt with the concerned goods himself. The decision of the High
Comt to this effect wns correct. [550 H-551 B; 552 El
[The question whether the principal in the preo;ent case was entitled
to the exemption claimed having been left ooen by the High Court, this
Court did not find itself called upon to decide that question.
However
it drew the attention of the assessing authoritv to the principles laid dow,n
by this Court in the case of the Hyderahad Drcran Ci~nrrtte Factory.)
[551 Cl
Hydernbad Deccan Cigarette Factar.v v. Stnre of Andhra Pradesh,
S.T.C. 17 p. 624, referre<l to.
A
B
c
D
E
F
G
H
MADRAS V, CEMENT ORGANISATION (Hegde, !.)
549 '
A
crnr. APP!!LLATE JURISDICTION : Civil Appeal No. 2300 of
1968.
Appeal from the judgment and order dated October 18, 1967
of the Madras High Court in Writ Petition No. 637 of 1967.
Bishan Narain and A. V. Rangam, for the the appellant.
B
S. T. Desai and B. P. Maheshwari, for the respondenit.

## Text

548
STATE OF MADRAS
v,
CEMENT ALLOCATION CO-ORDINATING
ORGANISATION
September 1; 1971
[K, S. HEGDE AND A. N. GROVER, JJ.l
Madras General Salt'.\' T(/x Act 1959 and
Rules-A~ent a 'dealer'
under .'i. 2(9)-PackinR n1nterials deductible front total turnover under
r. 6(c) (11)-Agent selling cement on behalf of principal-Price of packinR nu1teriaL shOll'n separately in hf!ls-ARellt is enritled to so111e
exe1np~
tions as principcd-Deduction in rrspect of pocking 111aterinl
11 1hen ran
he claimed.
The assessee (respondent herein)
\V~s the .<:elling: agent of a cement
company.
Under s. 2(g) of the Madras General Sales Tax Act, 1959
the term 'dealer' is defined to include a commission a~cnt. In February
1967 the Deputy Commercial Tax Officer. Lalgudi, asked the asscssee to
show cause why its tu'rnover relatirig to the price of the μacking material
used in packing the cement sold should not be included in its taxable
turnover under the Madras General Sales Tax Act. 1959. The assessee
thereupon moved the High Court under Art. 226 of the Constitution. In
its petition the assessee averred that its right.;; were the S'!me as those
of its principal and since- the p'rice of packing: material was separately
shown in the bills the same was deductible from the total turnovelr in
view of r. 6(c)(ii) of the Rules under the Act.
The High Court held
that the assessee was entitled to deduct from its total turnover the turnover -relating to the packing charges if its principal would have been entitled to deduct the same had the principal sold tne cement in question
directly.
The question whether in the present case the principal was so
. entitled was not decided hy the High Court. The State appealed to this
Court.
HELD; Under the general law the agent merely rcp'resents the prin·
cipal.
Therefore while functioning within the scope of the agency he
can exercise all the rights which his principal could have exercised. This
provision must hold good even under the Madra.s General Sales Tax Act
.unless othe'rwise provided therein.
The fact that for the purpose of that
Ai;t an agent is considered as a dealer does not alter the 1egal position
in other respects.
Excepting to the extent other,vise provided in the Act
the agent must be held to represent his principal while dealing with the
goods of his principal; he merely steps into the shoes of his principal.
He is entitled to the same exemptions as his principal \Vould have got
had he dealt with the concerned goods himself. The decision of the High
Comt to this effect wns correct. [550 H-551 B; 552 El
[The question whether the principal in the preo;ent case was entitled
to the exemption claimed having been left ooen by the High Court, this
Court did not find itself called upon to decide that question.
However
it drew the attention of the assessing authoritv to the principles laid dow,n
by this Court in the case of the Hyderahad Drcran Ci~nrrtte Factory.)
[551 Cl
Hydernbad Deccan Cigarette Factar.v v. Stnre of Andhra Pradesh,
S.T.C. 17 p. 624, referre<l to.
A
B
c
D
E
F
G
H
MADRAS V, CEMENT ORGANISATION (Hegde, !.)
549 '
A
crnr. APP!!LLATE JURISDICTION : Civil Appeal No. 2300 of
1968.
Appeal from the judgment and order dated October 18, 1967
of the Madras High Court in Writ Petition No. 637 of 1967.
Bishan Narain and A. V. Rangam, for the the appellant.
B
S. T. Desai and B. P. Maheshwari, for the respondenit.
The Judgment of the Court was delivered by
Hegde, J.
This appeal by certificate arises from the decision
of the High Court of Madras in Writ Petition No. 637 of 1967.
fhe petitioner before the High Court is M/ s. Cement .Allocation
Co-ordinating Organization, a selling Agent of DalIIlla Cement
C
(Bharat) Ltd.
That Organization will be hereinafter referred
to a~ the 'assessee'. On February 28, 1967 the Deputy Commercial Tax Officer, Lalgudi wrote to the assessee to show cause
why its turnover relating to the price of the packing materials
used in packing the Cement sold should not be included in its
taxable turnover.
The assessee instead of showing cause against
D
that proposal moved the High Court of Madras under Article 226
of the Constitution to direct the assessing authority not to include
that turnover in its taxable turnover.
The High Court entertained that Writ Petition. It would have been proper if the
High Court had directed the assessee to put forward
its case
before the authorities under the Madras General Sales Tax Act
E
1959. Now that the High Court had entertained the Writ'Petition and gone into the merits of the case, it serves
no useful
purpose to refuse to go into the merits of case.
In its Writ Petition the assessee had definitely aYerred that
it was functioning as the agent of Dalmia Cement (Bharat) Ltd.
and its rights are the same as that of its principal. It was further
F
alleged in the Writ Petition -that when cement was sold in
package~, the packing charj!'es were separately shown in the bills
issued to the buvers. On these grounds the assessee claimed
that it is entitled to deduct those charges from its total turnover
in Yiew of rule ti ( c) of the Rules framed under the Madras
General Sales Taii: Act. 1959. The nlea of the assessee that it
G was the A!!ent of Dalmfa Cement (Bharat)
Ltd.
durin!! the
relevant neriod was not denied in the return filed bv the State
of Tamil Nadu. It was also not denied that the assessee h;,,!
shown the nacking charl!es seoaratelv in the bil!s issued by it
to the purchasers of cement.
On the basis of those admitted
facts d
1e Hfoh Court came to the conclusion that the assessee is
H
entitled to deduct from its total turnover the turnover relatin!!
to the D~ckinl! charges if its nrincinals would have been entitled
to deduct the same had they sold the cement in question directly.
The operative portion of the High Court reads .thus ;
550
SUPREME COURT REPORTS
[1972] I S.C.R.
"The petition is allowed but with no costs.
We
may, however, add that the order we have made in this
petition does not in any way prevent the assessing
authority from examining the question, after giving a
fresh notice, whether the principal himself would be
dis~ntitled to exclusion of the value of the packing
materials in determining the chargeable turnover."
It is against this order that the State of Madras has come up in
appeal to this Court.
The charging section under the Madras General Sales Tax
Act, 1959 is section 3.
It brings to all taxable turnover of a
dealer <>s defined in the Act.
The expression "dealer' is defined
in section 2 (g).
Because of section 2(g) (iii) a Commission
agent is also considered as a 'dealer' for the purpose of the
Madras General Sales Tax Act, 1959. Hence the taxable turnover of a Commission agent is liable to be brought to tax.
The
only other provision that we need refer is rule 6 of the Rules
framed under the Act.
That rule reads :
"The tax or taxes under section 3, 4 or 5 shall be
le\·icd on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in
the following clauses shall, subject to the conditions
specified therein, be deducted from the total turnover of
a dealer:-
A
B
c
D
E
( c) all amounts falling under the following
two
heads, when specified and charged for by the
dealer separately, without including them in the
price of the goods sold :-
-
F
(i) freight; and
(ii) charges for packing, that is to say, cost of
packing materials and cost of labour and
other such like services."
The first question that we have to consider is
whether
an
agent of a principal who is also a dealer under the Act is entitled
to the same rights as his principal has under the Act.
Under the
general law the agent merely represents his principal. Therefore,
while functioning within the scope of the agency he can exercise
all the rights which his principal could have exercised. In fact,
in the ca1e of an ordinary agency, the agent merely acts for h1.s
principal. This provision must hold good even under the Madras
General Sales Tax Act unless otherwise provided therein.
The
fact that for the purpose of that Act an agent is considered as
G
H
A
B
c
D
E
F
G
H
MADRAS v. CEMENT ORGANISATION (liegde, J.)
5o!
a dealer does not alter the legal position in other respects.
Excepting to the extent otherwise provided in the Madras Ge.neral
Sales !'ax Act the agent must he held to represent lus prrnc1pal
while dealing with the goods of his principal; he merely steps
into the shoes of his principal. He is entitled to th~ same exemptions as his principal would have got had he dealt
with the
concerned goods himself.
Agents are
considered
as
dealers
under the tax so as to effectively enforce th~ provisions of the
Act.
But that provision does not convert an <.gent into a principal for al! purposes un'.\er the Act.
But the question whether the principal is
entitled
tu
the
exemption claimed has been left open by the High Court.
That
quest10n has to be decided after going into th\:. tacts of the case.
How tha< question should be decided has been laid down by
this Court in Hyderabad
Deccan Cigarette Factory
Y.
The
State of Andhra Pradesh (1). Therein this Court has ruled that it
is for the department to establish that a particular turnover constitutes a part or whole of the taxable turnover.
For establishing
that fact the department may call upon the assessee to produce
before it such material which the assessee has in his possession or
under his control.
The department before coming to the conclusion that a particular turnover is taxable must
take
into
consideration all the facts and circumstances of the case.
On
the question whether certain packing charge:; are exempt from
tax, the authorities under the Act before deciding that question
have to take into consideration the various aspects mentioned
in that judgment. This is what the Court oberved therein :
"In the instant case, it is not disputed that there
wer~ no express contracts of sale of the packing
materials between the assessee and its customers.
On
the facts, could such contracts be inferred'? The authority concerned should ask and answer
the
question
wheihcr the parties in the instant case, having regard to
the circumstances of the case, intended
to
sell
or
buy the packing materials, or whether the subjectmatter of the contracts of sale was only the cigarettes
and that the packing materials did not torm part of the
bargain at all, but were used by the seller as a convenient and cheap vehicle of transport.
He may' also have
to consider the question whether, when a
trader in
cigarettes sold cigarettes priced at 'l particular figure
for <1 specified number and handed them 0ver to a customer in a cheap card-board container of insignificant
value, he intended to sell the cardboard container and
(!)SIC 11 p, bl~.
552
SUPREME COURT REPORTS
tl972J 1 S.C.lt
tne customer intended to buy the same '! It is not possible to state as a proposition of law that whenever
particular goods were sold in a contain~r the parties
did not intend to sell and buy the container also.
Many
cases may be visualized where the container is comparatively of high value and sometimes even higiler
than that contained in it Scent or whisky may be sold
in c0stly containers.
Even cigarettes may be sold in
silver or gold caskets. It may be that in such cases
the agreement to pay an extra price for tht; container
may be more readily implied. In the present case, if
. we may say so with respect, all the authorities, including the High Court, dealt with the queslion as a question of Jaw . without considering the relevant factors
which would .sustain or negative any such agreement.
The determining factor in all such cases is whether the buyer
buyer directly or by implication agree to buy and the seller to
sell separately the packing material.
In this case we are not
called upon to· go into that question.
We lllerely indicated the
approach as a matter of guidance.
The question for decision by us lies within a narrow colllpass
and that question is whether the assessee is entitled to. claim
exemption in respect of packing charges if his principal could
have claimed it had it sold the cement itself. On that question,
we agree with the view taken by the High Court.
For the reasons mentioned above, this appeal fails and the
same is dismissed.
No costs.
G.C.
Appeal dismissed.
1 J40Sup.CI/71-2500--(S<c. VII )-26-9-72-G 1 PI'.
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