C.V. Ramasamy Goundar Sons vs Deputy Commercial Tax Officer, Mettur Road Circle, Erode

S.A. Kader, J.—This writ petition has been filed under article 226 of the Constitution of India for the issuance of a writ quashing the

assessment order passed by the respondent against the petitioner in TNGST No. 719976/86-87 dated 15th February, 1988, for the assessment

year 1986-87.

The petitioner is a partnership firm carrying on business of turmeric commission agency at Erode. According to the petitioner, agriculturists in

and around Erode used to bring their turmeric to the petitioner-firm to be stored in the godowns of the petitioner. They are sold subsequently in

public auction in the premises of the Erode Turmeric Merchants'' Association in the immediate presence of the concerned agriculturist. The highest

offer is accepted by the concerned agriculturist and thereafter the goods are sold in specific quantities. The contention of the petitioner is that he is

not a dealer within the meaning of section 2(g) of the Tamil Nadu General Sales Tax Act (hereinafter referred to as ""the Act"") and is not liable for

any assessment of sales tax. Previously the petitioner not being aware of the correct legal position was paying sales tax. As soon as it came to

know of the real legal position, the petitioner denied its liability for assessment. But, the respondent-Deputy Commercial Tax Officer, Erode,

rejected the contention of the petitioner and passed impugned order levying tax for the year 1986-87 on a total turnover of Rs. 23,57,198. Hence

this writ petition.

The Deputy commercial Tax Officer, Erode, has filed a counter-affidavit challenging the contentions of the petitioner and disputing the

maintainability of this writ petition.

u/s 3 of the Act, the liability to pay sales tax on the taxable turnover is fastened on every dealer whose total turnover for a year is not less than

Rs. 50,000. The main question which, therefore arises is whether the petitioner is a ""dealer"" within the ambit of section 2(g) of the Act, which runs

thus :

''Dealer'' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash

or for deferred payment, or for commission, remuneration or other valuable consideration, and includes -

(i) ............

(ii) ............

(iii) a commission agent, a broker or a 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"".

It has been held by a Bench of this Court in National Chamber of Commerce v. State of Madras [1970] 25 STC 185, that the ""distribution

referred to in the aforesaid definition is such as involves a transfer of property. ""Supplying"" and ""distributing"" are therefore associated with the

transfer of property. We have now to see whether the petitioner is a dealer.

The modus operandi adopted in the transactions carried on by the petitioner and similar commission agents is this : The agriculturists being the

turmeric grown in their lands to the petitioner and other commission agents in Erode and these goods are stored in the godowns of the commission

agents. Periodically, auction is held in the premises of the Erode Turmeric Merchants'' Association on the basis of the samples taken from the stock

stored in the godowns of the commission agents. The concerned agriculturists are present at the time of the auction and the highest bid has to be

accepted by the particular agriculturist and thereafter his goods are sold in specified quantities at the agreed price. They are then weighed and

delivered to the buyer. The price is received by the commission agent, and after deducting the storage, labour, weighment and other charges he

pays the balance to the agriculturist concerned. It is, therefore, the contention of the petitioner that it acts only as an intermediary bringing together

the agriculturists and the respective purchasers in the auction held in the presence of the agriculturists and the petitioner does not do any business of

purchasing or selling to make itself liable to assessment under the Act. In support of this contention the petitioner has produced copies of receipts

issued in the course of these transactions. As soon as the agriculturist brings the turmeric to the petitioner-firm, a receipt is issued for the quantity of

the turmeric received and this receipt is signed by the petitioner''s agent by the agriculturist concerned. On the back of this receipt there are several

conditions of which the important ones are : that the agriculturist is liable for any shrinkage, the commission agent has no right to sell the turmeric

and that it is the responsibility of the agriculturist-producer to decide the price and sell the same. After the auction is over and the price is agreed to

by agriculturist-producer, the weighing receipt is issued by the petitioner-commission agent giving the full details about the agriculturist-producer,

the purchaser, the weight of the goods sold, their total value and the service charges. It contains a recital by the agriculturist-producer that his

turmeric bags are sold by him in auction at the rate agreed to by him and that he is receiving the sale amount from the petitioner after deducting the

expenses and charges. This receipt is signed by the agriculturist-producer, the purchaser and by the representative of the petitioner-firm. On the

same day the Marketing Committee, in whose premises the auction take place, issues a receipt for the number of the bags and the weight therefore

and this is signed by the agriculturist as seller and by the merchant. It also contains the signature of the weigher and the receipt of the weighing

charges.

In the counter-affidavit filed by the respondent, there is no denial of the fact that the turmeric stored in the godown of the petitioner-firm is sold

in public auction in the immediate presence of the concerned agriculturist, that the highest bid is accepted by the agriculturist and only thereafter the

goods are sold at the accepted price. We can, therefore, safely conclude that the sale of the turmeric takes place by public auction, that the

concerned agriculturist is present at that time, that he accepts the price and sells the goods. The petitioner-firm has no hand in the determination of

the price or the sale of goods. It only acts as an intermediary, delivers the goods to the purchaser after the sale is completed, receives the price,

deducts its charges and pays the balance to the agriculturist-seller. On the facts so established the question is, whether the petitioner-firm is a

dealer.

The point is covered by a direct decision of a Bench of this Court in Tiruchengode Co-operative Marketing Society Limited v. State of Tamil

Nadu [1978] 41 STC 212 and by another Bench decision of the High Court of Madhya Pradesh in Karelal Kundanlal Trust v. Commissioner of

Sales Tax [1980] 46 STC 202. In the Bench decision of this Court, the established facts were these : The stock was received by the Co-operative

Marketing Society from its members and placed for auction. The sale is knocked down in favour of the highest bidder and when only agreed upon

by the seller, i.e., the agriculturist, the sale is declared. The auction is conducted only in the presence of the agriculturist (member) and the buyer

(merchant). The commodity tendered is then weighed or measured and sales chit is prepared which contains details of tenderer, his address,

quantity tendered for sale, name of the buyer, rate of sale, total amount of sales proceeds, deductions such as advances, commission towards

handling and other charges, if any, and the net amount due to the agriculturist-member. A copy of this chit is handed over to him at the time of

payment. The receipt issued by the Co-operative Marketing Society (assessee) at the time of the receipt of the agricultural produce contained a

condition that the assessee had no authority to sell the goods without the consent of the member and that the goods are sold only when the

agriculturist-member accepts the price offered. The Bench observed :

These two facts about which there is no controversy clearly establish that the assessee cannot be said to have authority to transfer the property in

the goods. Even if the assessee could be said to have dominion over the goods if it did not have authority to transfer the property in such goods,

certainly as per the law laid down by the Bench, referred to already, [Zackria Sons Private Ltd. v. State of Madras [1965] 16 STC 136], the

assessee in the present case be said to have effected a sale and, therefore, cannot be said to have acquired a turnover liable to sales tax.

In Karelal kundanlal Trust v. Commissioner of Sales Tax [1980] 46 STC 202, the cultivators brought their produce to a place in the mundy in the

occupation of the assessee as licensee. The produce so brought by the cultivators are sold by auction and the bid was accepted by the cultivators,

who remained present till the goods were sold. The buyers then removed the goods from the place. The assessee issued a bill to the buyers and

entered the name of the buyers and sellers in the books. The price was paid to the cultivators and the assessee retained the commission. The

Bench held :

It is difficult to hold that the assessee was carrying on the business of buying, selling, supplying or distributing the goods on behalf of the

cultivators. The assessee made available his fad to the cultivators for stocking their goods. The assessee helped them with his technical knowledge

of the market. The assessee had no dominion over or custody of the goods. The sale was by the cultivators themselves who accepted the bids of

the buyers. The goods were removed by the buyers from the fad. The assessee recovered the price from the buyers and paid over the some to the

cultivators after retaining the commission. These facts do not bring the assessee within the definition of ''dealer''.

The facts of the case before me are identical with the facts of the cases dealt with in the aforesaid decisions. The petitioner had absolutely no

hand in the sale of the goods stored in his godown by the cultivators, who themselves sold the goods to the highest bidder in the auction held in the

premises of the Erode Turmeric Merchants'' Association. The petitioner is not, therefore, a ""dealer"" within the meaning of section 2(g) of the Act

and is not liable for assessment of sales tax.

It is pointed out that the petitioner had on prior years accepted his liability for payment of sales tax and must, therefore, be deemed to have

admitted that he is a dealer. This contention has no force. It is well-settled that there is no estoppel against a statute and particularly a fiscal statute.

In Karelal Kundanlal Trust v. Commissioner of Sales Tax [1980] 46 STC 202, already referred to, the assessee had recovered sales tax from the

buyer and it was contended that he was estopped from saying that the he was not a dealer as defined in the Madhya Pradesh General Sales Tax

Act. Rejecting the contention the Bench held that cannot be any estoppel against a statute and the question whether the assessee was a dealer in

respect of the transactions had to be answered in the light of the facts and the definition of dealer contained in section 2(d) of the Madhya Pradesh

Act. In Hyderabad Asbestos Cement Products Ltd. Vs. State of Andhra Pradesh, , the appellant-company collected sales tax on railway freights

also and subsequently challenged its liability to pay sales tax on the freight. It was held that the freight did not form part of the price and the

company was no liable for sales tax on the freight. The Supreme Court observed that if the company apprehending that it may have to pay sales

tax on the freight, collected sales tax on the freight, the true nature of the contract between the company and the purchasers cannot on that account

be altered, that the company may be liable to refund the amount of excess sales tax to its purchasers, but, that is a matter between the company

and the purchasers and the State cannot seek to levy tax on the road railway freight if it was not made a part of the price. Hence the fact that the

petitioner has in prior years accepted the liability and paid sales tax does not estop the petitioner from challenging the assessment for the

subsequent years on a true appreciation of the position of law.

It is finally urged by the learned government Advocate that the petitioner has not availed of the remedies available to him under the Act by way

of appeal, etc., and he is not, therefore, entitled to seek the extraordinary jurisdiction of this Court under article 226 of the Constitution. This

contention has not been specifically raised in the counter-affidavit. Further, the availability of alternative remedy is not an absolute bar to the

maintainability of a writ petition. It is a matter of discretion rather than of jurisdiction. Again, the liability of the petitioner for levy of sales tax arises

only if he is a ""dealer"" within the meaning of section 2(g) of the Act. This is a jurisdictional fact, the condition precedent to the levy of tax. As

pointed out by the Supreme Court in Raza Textiles Ltd. Vs. Income Tax Officer, Rampur, , the question whether the jurisdictional fact has been

rightly decided or not, is a question that is open for examination by the High Court in an application or a writ of certiorari. Further more, the Bench

of this Court in Tiruchengode Co-operative Marketing Society Limited v. State of Tamil Nadu [1978] 41 STC 212 already referred to, has clearly

laid down that such a transaction as is carried on by the petitioner does not render it a ""dealer"" within the meaning of the Act. But, the respondent-

Deputy Commercial Tax Officer has totally ignored this position. In East India Commercial Co. Ltd.,Calcutta and Another Vs. The Collector of

Customs, Calcutta, , the Supreme Court has pointed out that law declared by the High Court is binding on the lower courts and Tribunals within its

jurisdiction. The respondents-Deputy Commercial Tax Officer exercising quasi-judicial functions is bound by the aforesaid decision of this Court

and his failure to follow the same invites the exercise of the extraordinary jurisdiction of this Court. I therefore uphold the maintainability of this writ

petition.

In the result, the writ petition is allowed, the impugned order of the respondent in his TNGST No. 719976/86-87 dated 15th February, 1988,

levying sales tax on the petitioner for the assessment year 1986-87 is quashed. There will, however, be no order as to costs.

Writ petition allowed.