Kumarayya, J.
1. This application for revision is directed against the assessment order made on 2nd September, 1955, by the Commercial Tax Officer, Guntur, as confirmed in appeal by the Deputy Commissioner on 4th October, 1956 and finally by the Appellate Tribunal on 28th June, 1957.
2. The undisputed facts as can be gathered from the orders passed, so far as they are necessary for the disposal of this revision, may be shortly stated:-The assessee is a firm doing business in cotton at Guntur and Sriram Venkata Subbarao and his undivided son, Sanker Pershad, are its partners, The said firm as purchasing agents of their non-resident principals at Bombay purchased cotton at Guntur. Their usual course of business in this regard was as follows :-They would send market quotations to Bombay daily to their principals. The principals in case of acceptance would close the offer by sending a wire intimating the acceptance at a certain rate. The appellants would then buy cotton at that rate by fixing up their contract with the seller-ryots or seller-dealers at Guntur arranging time for delivery. They would then get the contract form signed by the seller as well as by themselves as agents. The buyer's, i.e. the principal's signature would be taken later on. The quantity offered for sale would be tested and the bales would be marked with the mark of the principal's company and 80 per cent, of the cost price would then be paid as advance by the assessee. After the pressing and weighing of cotton is done, the balance of 20 per cent of the cost price would be paid to the seller-ryot or seller-dealer as the case may be. As and when the wagons are available the bales of cotton would be carted and despatched as per the principal's instructions. Money is usually received from the principal by T.T. just before the agent takes delivery from the ryot. The assessee-firm would charge pressing, cleaning and incidental charges together with the sales tax, commission, dharmam etc. to the principal. For the year 1954-55 the assessee-firm was assessed in accordance with the provisions of Section 5(2) of the General Sales Tax Act read with Rules 4(2)(b) and 4-A(iv)(b) of the Turnover and Assessment Rules to a tax of Rs. 4,983-10-0 on a turnover of Rs. 9,96,723-10-9 at the rate of per cent, as purchasing agents (residing in the State) of a non-resident principal under Section 14-A(1) of the Madras General Sales Tax Act. The assessee-firm called in question the said assessment on the ground that the firm is not the agent within the meaning of Section 14-A and therefore, not liable to tax and that since the business in question has elements of inter-State trade, the levy of sales tax is beyond the competence of the State Legislature under Article 286(1)(a) of the Constitution of India. These contentions have been negatived by the authorities concerned and also the Tribunal. The assessee therefore has come up to this Court in revision.
3. The learned counsel, Sri G. Suryanarayana has raised three points. Firstly, that Rule 4-A(iv)(b) is inconsistent with Section 5 of the Madras General Sales Tax Act and hence the levy of tax on the purchaser under the said rule is not valid. Secondly, the assessee being a commission agent or an intermediary and not a mercantile agent cannot be made liable to any assessment under the Act. The last point raised is that the transaction being impressed with inter-State character it is exempt from taxation under Article 286(2).
4. In order to appreciate the arguments, it is necessary to refer to some of the relevant provisions of the Act. The preamble of the Act will show that the object of the Act is to provide for the levy of a general tax on the sale of goods in the State. The principal charging section is Section 3 which provides for the levy and collection of tax from every dealer for each year on the total turnover of that year and also provides for the rate at which the tax shall be calculated and levied. Sub-clause (4) of Section 3 which is material for our purpose reads thus :-
For the purposes of this Section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed :
Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly.
5. Sub-clause (5) which is equally important reads thus :-
The taxes under Sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed :
Provided that-
(i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed;
(ii) where a dealer has been taxed in respect of purchase of any goods in accordance with the rules referred to in Clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.
6. Section 5 which provides for exemption and reduction of tax in certain cases in its Sub-Clause (ii) provides thus :-
(ii) The sale of cotton (including kapas) and of cotton yarn other than handspun yarn shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed and only at the rate of one half of one per cent, of the turnover at that point.
7. 'Sale' as defined in Section 2(h) means every transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and 'turnover' means the total amount for which goods are either bought or sold.
8. It is dear from the above provisions that the levy of general tax on sale being the object of the enactment, the Act provides for the levy and assessment of tax and also the rate at which and the manner in which the tax shall be collected. Cases of exemption and reduction of rates too have been stated in the Act and also the safeguards against the taxation of both the buyer and seller or against taxation twice over. In order to effectively carry out the scheme, the Act makes provision for making rules but the rules thus framed under delegated authority shall come into force only with the approval of the legislature in the manner prescribed. In this context we have to see how far the contention of the assessee that Rule 4-A(iv)(b) is inconsistent with the provisions of Section 5 of the Madras General Sales Tax Act is tenable. The said Rule in Clause (b) reads thus:
In the case of all cotton (including kapas) which is exported out-side the State, the tax shall be levied from the dealer who buys it in the State and is the last dealer not exempt from taxation under Section 3(3), on the amount for which the cotton is bought by him.
9. This rule is intended to advance the cause of Section 5(2) by fixing the single point at which the tax shall be collected in the series of sales by successive dealers. The tax according to this rule shall be levied on the last dealer not exempt from taxation who is a buyer in the State. Thus not only the point at which the levy shall be made but also the person from whom it shall be collected are thus specified. We do not think that there is anything in this rule which militates against Section 5 or any other provision of the Act. The transaction of sale of goods must by its nature be a bilateral transaction with the seller on one hand and the purchaser on the other, for it is only when there is a contract to which both are parties, there can be a sale. The power to tax sale of goods is therefore a power to tax the transaction and the power to tax the transaction carries with it the power to tax either party thereto, i.e., the seller or purchaser as has been held in Syed Mohamed & Co. v. The State of Madras [1952] 3 S.T.C. 367. This is what is contemplated by the first proviso to Sub-section (5) of Section 3 of the Act also. Having regard to Item 54 in List 2 of Seventh Schedule of the Constitution, the competence of the State Legislature to levy tax on the sale or purchase of goods other than newspapers cannot be disputed. That being the case, the assessee cannot make a grievance of the fact that his purchase has been subjected to the levy of tax. What is in fact complained of is that Section 5 itself does not provide for the levy of such tax on purchases but only on sales and Rule 4-A(iv)(b) which subjects the purchasers to tax is therefore inconsistent with this provision. We do not find any warrant for such conclusion from the language of the provision.
10. Besides, Section 5 of the General Sales Tax Act only provides for cases of exemption and reduction of tax and in fact Section 3 is one of the main charging sections. In its Sub-Clause (4) it contemplates rules to carry out the policy of that section and other provisions of the Act including the proviso to Sub-clause (5) which specifically states that either buyer or seller but not both shall be taxed. The rules, it may be noticed, come into force only on approval by a resolution of the Legislative Assembly. Such approved rules therefore which advance the purpose or object of various provisions of the Act within the allotted field covered by item 54 are not open to question. Rule 4-A (iv)(b) indeed precisely prescribes the single point as contemplated by Section 5 of the Act in the series of sales by successive dealers. It says the tax shall be levied from the dealer who buys it in the State and is the last dealer not exempt from taxation under Section 3(3). The term 'dealer' in Section 5 is a comprehensive term and determination of single point may not therefore be complete without specifying the person who may be taxed. The rule therefore ensures precision in carrying out the purpose of Section 5. The plea that Rule 4-A(iv)(b) is inconsistent with the provisions of Section 5 or goes beyond the powers of the delegated authority is therefore untenable.
11. Then we turn to the next contention that the assessee is not liable to any tax under Section 14-A as he is not the agent within the meaning of that provision. Section 14-A makes the provisions of the Act applicable to a person who carries on business of buying or selling goods in Andhra State though residing outside it. For the purposes of the Act his agent concerned with this business residing in the State is deemed to be a dealer. Sub-section (2) provides the mode and the rate of levy of tax. Sub-section (3) gives the agent a right to retain the moneys of his principal to the extent of the levy imposed or paid by him without prejudice to his other rights and Sub-section (4) gives the benefit of Sub-section (3) of Section 3 of the Act by providing for refund of tax on an application made by the non-resident. Sub-section (5) prescribes the time limit for such applications. Thus a person living outside but carrying on business of buying or selling in the State cannot escape the liability of payment of tax by reason of his non' residence in respect of his transaction or transactions in the State for his agent concerned residing in the State shall be assessed to tax and shall have a right inter alia to claim refund out of the moneys payable to the principal. Having regard to the undisputed facts detailed above, it cannot be said that the petitioner firm is not an agent of the non-resident principal who carries on business of buying and selling goods in this State though residing outside it. As a matter of fact, the contract forms are signed as agent. This agent handled the goods on behalf of Bombay buyers for the purpose of testing the same for getting it pressed into bales and weighed and for keeping custody of the same till they are despatched by railway wagons to the Bombay dealers. He charges commission for the same together with all the other incidental charges and also sales tax and it is this agent who in fact pays the amount to the sellers in the State in two instalments first 80 per cent. as advance and then 20 per cent, as final payment after testing, weighing and pressing operations are completed and the bales are taken delivery of by the petitioner. G.O. 319 dated 10th July, 1951, no doubt exempts all agents but for the three categories of agents specified therein, but the agents such as the assessee who handle goods or documents of title relating to goods and make payments of money are not so exempt. Thus this plea also fails.
12. Now the last contention is that the sale being of an inter-State character, Article 286(2) of the Constitution would operate as a ban on the imposition of tax by the State Legislature. Article 286(1)(a) reads thus:-
Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce :
Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March 1951.
13. The expression 'in the course of inter-State trade' used in Article 286(2)) of the Constitution is pregnant with meaning. If the sale is completed wholly in the State itself, the competence of State Legislature to tax the sale must be placed beyond the pale of dispute. Of course, the State shall have no power to tax what are outside sales. But the difficulty will arise in relation to the sale if it is not completed within the State. Such sale may have inter-State elements and hence would fall within the ban of Article 286(1)(a) or (2). In the case before us, it admits of no doubt that the sale or purchase was completed as soon as it was delivered in the State itself to the agent on behalf of the nonresident principal for the several ingredients of sale such as agreement to sell, transfer of ownership, payment of price and delivery of goods have all been thus completed within the State itself. It cannot be said that anything further was to be done in the matter so far as the seller is concerned. It may be that the agent to whom the goods are delivered by virtue of the sale transaction, according to convenience, may have to export the same subject to the terms and conditions as settled between him and the firm but the sale or purchase on that account cannot be deemed to be one in the course of inter-State trade. The case would be different if some of the ingredients of transaction were completed outside the State or though all the essential ingredients took place within the State, transport of the goods took place across the borders of the State as part and parcel of the transaction of sale itself. Thus, whether a sale has inter-State elements or not and whether it was made in the course of inter-State trade is a matter to be determined on the particular circumstances of each case. What constitutes inter-State trade or commerce within the meaning of Article 286(2) though directly did not arise for determination in Bengal Immunity Company Ltd. v. State of Bihar [1955] 6 S.T.C. 446, the observations of Venkatarama Ayyar, J., at pages 583 and 584 in this behalf are to the following effect:-
A sale could be said to be in the course of inter-State trade only if two conditions concur : (1) A sale of goods and (2) a transport of those goods from one State to another under the contract of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-State trade. Thus, if X, a merchant in State A goes to State B, purchases goods there and transports them into A, there is undoubtedly a movement of goods in inter-State commerce. But that is not under any contract of sale. X might be entitled under Article 301 to certain rights in the matter of transportation. But Article 286(1)(a) has no application, as there is no sale in the course of inter-State trade or commerce. In the same illustration, if X after transporting the goods into State A sells them, then also there is no sale in the course of inter-State trade. It is true that there is a sale and there is also a movement of goods from one State to another. But that movement has not been under the sale, there having been no sale at the time of transportation.
14. In Indian Coffee Board, Batlagundu v. The State of Madras [1956] 7 S.T.C. 135, a Division Bench of the Madras High Court had to deal with a case where the contract to sell and the sale took place at the headquarters of the Board at Batlagundu within the State of Madras and subsequently these goods sold admittedly were transported outside the State of Madras. It was held that since antecedent to the transport the property in the goods sold had passed to and had vested in the purchaser and that it was, as his goods the purchaser transported them out of the state, such transport does not render the antecedent transaction of sale a sale or purchase in the course of inter-State trade or commerce within the meaning of Article 286(2) of the Constitution. In State of Madras v. Guruviah Naidu & Co. [1955] 6 S.T.C. 717, their Lordships of the Supreme Court were called upon to decide whether the purchases made by the respondents after securing orders for supply of goods to the London buyers by going about for purchasing the requisite kind and quality of skins to implement such orders, were within the meaning of Article 286(1)(a) of the Constitution. It was held that as decided in State of Travemcore-Cochin and Ors. v. The Bombay Company Ltd. [1952] 3 S.T.C. 434, such purchases though effected no doubt for the purpose of export did not fall within the exemption inasmuch as they did not themselves occasion the export. Thus it is clear that there ought to be a direct connection between the movement of goods and the transaction of sale; but for which a sale which is an out and out intra-State sale cannot be deemed to have been made in the course of inter-State trade or commerce so as to attract the ban imposed by Article 286(2). In this premise, it is impossible to hold that the transactions in question are sales in the course of inter-State trade or commerce. The assessee entered into contracts with the ryots or dealers as the case may be for sale of cotton. The sales took place at Guntur, money was paid at Guntur and the delivery took place at Guntur. The transaction of sale was between the assessee and the dealer or ryot. The dealer or ryot was not in any way concerned with the export of goods though the purpose of purchasing so far as the assessee was concerned may be for export. The export of goods was not occasioned under the contract of sale. It is subsequent to the sale and the assessee on his own account sent the goods. The seller had nothing to do with the export nor was he interested in seeing that the movement of goods took place. The movement is regulated as per the terms agreed upon between the assessee and his principal with which the seller is not at all concerned. Thus having regard to the fact that the transactions were in substance intra-State sales and the movement of goods was not a direct result of the sale transaction, the sale is not a sale in the course of inter-State trade within the meaning of Article 286(2). On this basis the plea of the petitioner is without substance.
15. The result is that this petition fails and it is hereby dismissed with costs. Advocate's fee Rs. 200.