RAJAMANNAR, C. J. -
(1.) THE State of Madras is the appellant before us. THE appeal arises out of a suit brought by the respondents, a registered firm carrying on business in firewood, for a declaration that the demand from and levy of sales tax on them by the State for the period ending 31st March, 1945, were illegal and unjustified and for a refund of the amount of such sales tax paid by them. THE learned Additional City Civil Judge decreed the suit holding that the demand and levy were illegal.
(2.) THE facts necessary for a disposal of this appeal may be stated briefly as the scope of the controversy in the suit lies within a narrow compass. In or about December, 1943, there was acute scarcity of firewood in the City and the Government were anxious to introduce in the City a system of rationing of firewood. For this purpose it was necessary to provide for a regular and satisfactory supply of firewood. THE respondent-firm, who were engaged in firewood business, submitted to the Government that they had been carrying on the business of supplying firewood as commission agents for over 25 years, that if the Government were to get all their supplies direct from the producers it would entail them much expenditure and suggested that they may be employed to procure for the Government such quantity of firewood as the government may require for distribution in the City. THE Government apparently accepted the proposal. On 31st January, 1944, an agreement was entered into between the respondent-firm and the Commissioner of Civil Supplies, Madras , under which the respondents undertook to supply such quantity of firewood as the Commissioner may from time to time require from the private forests and topes in particular areas of Chingleput and Nellore Districts. THE respondents who were described as the "suppliers" were given exclusive monopoly to transport the firewood from these areas to the City. THE firewood was to be supplied at prices which were fixed from time to time by the Government as the wholesale price for firewood within the City of Madras. This price was to be paid by the Collector of Madras to the suppliers. Paragraph 6 of this agreement is as follows :- "it is understood that ordinarily the suppliers will acquire the firewood by contract with the owners of the topes in the said areas. . . . . . . . THE price fixed as the proper price for the same shall be in relation to the sale price such that the suppliers (after paying the purchase price and the expenses of cutting, transport and supply etc.) will have such margin of profit as the Government may deem fair and proper. " *
In pursuance of this arrangement, the course of dealings between the three parties, viz. , the producers, i. e. , the owners of the firewood, the respondent-firm and the Government was as follows : The respondent-firm were transporting the firewood from the areas specified and collecting from the collector, or to be more accurate from the dealers to whom the firewood was eventually consigned, the cost of firewood supplied by them, and after retaining a sum of Re. 0-13-0 per ton of casuarina and Re. 1-0-0 per ton of junglewood as their commission, paying over the balance to the sellers. It appears from the correspondence, that this rate of commission was fixed by the government and agreed to by the owners of the firewood, i. e. , the sellers. When, however, the respondents attempted to deduct more than the agreed rate of commission the sellers complained to the Government and we find the Board of revenue passing proceedings warning the respondents against charging more than the agreed and fixed commission. Subsequently, there was another agreement entered into between the State and the respondent-firm on 9th October, 1944, exhibit B-4. Though the terms of this agreement were not identical with the terms of the prior agreement, there was no change in the course of dealings between the parties. A concrete instance of such dealings is to be found in a letter addressed by the Firewood Movement Officer, Nellore District, to the collector of Nellore on 11th October, 1944, Exhibit A-19, wherein he states; "casuarina firewood is paid for at Rs. 23-8-0 per ton delivered at Madras wharf. Of this, a sum of Re. 0-13-0 is deducted by the agency. This commission is authorised by the Government. The net price is therefore Rs. 22-11-0 per ton. " * We are not concerned with the subsequent correspondence between the Government and the respondents and the complaints which sometimes the producers were making to the Government against the unauthorised levy of more than the agreed commission by the respondents. The respondent-firm obtained a licence under Section 8 of the Madras General Sales Tax Act as commission agents. They returned a turnover of Rs. 8, 72, 914-15-9 for the year 1944-45 and submitted that they were entitled to the exemption under Section 8 of the Act. When the Sales Tax officers demanded sales tax on this turnover, the respondents objected on the ground that they had been supplying the firewood on behalf of the owners of the firewood who were the principal sellers and they took only such commission as wan fixed by the authorities. The objection was, however, overruled. The Deputy commercial Tax Officer held that having regard to the nature of the transaction and other attendant circumstances the business of the respondents could not be considered to have been done on commission basis and hence their entire turnover was liable to sales tax. The respondents filed an appeal to the commercial Tax Officer, Madras, but the appeal was dismissed. The appellate authority took the view that though the respondents had been taking only a sum of Re. 0-13-0 or Re. 1-0-0 for every ton of firewood supplied to the commissioner of Civil Supplies, they really sold the firewood to the commissioner of Civil Supplies in fulfilment of a contract entered into by them as owners and they could not therefore be treated as selling agents of the persons from whom they got the firewood; that they were not also buying agents for the Commissioner of Civil Supplies; and they were therefore clearly liable, as dealers, to be taxed under the Madras General Sales Tax Act. Thereupon the suit out of which this appeal arises was filed. The application of Section 8 of the respondents depends upon a determination of the nature of the concerned transactions, i. e. , we have to ascertain whether the respondents were buying or selling for an agreed commission on behalf of known, principals. If, from the course of dealings it is clear that the respondents were buying or selling of their own behalf, then of course they will not be entitled to the benefit of the provisions of Section 8. In our opinion, on the facts of the case, as to which there is no dispute, only one conclusion is possible, viz. , that the respondents were acting merely as commission agents of the owners of the firewood, who were the known-seller-principles. Though the language of the agreement, Exhibit B. 4. may, taken by itself, support the contention that the respondents were treated by the Government as the sellers, there can be no doubt that the Government never treated the respondents that way. The government knew, and proceeded throughout, on the basis that the sellers were the persons who owned the firewood. The Government, instead of themselves buying the firewood from the owners, gave a sort of monopoly to the respondents to procure form the sellers the firewood and to supply them, i. e. , the government. It was agreed, or in any event it must be taken as an implied term of the agreement between the parties, that the respondents should get a commission, which itself was fixed by the Government. Ordinarily no doubt it is the principal who fixes the commission payable to the commission agent; but it must not be overlooked that we are dealing with a set of circumstances out of the ordinary way. There was an emergency and the Government were acting under extraordinary powers conferred on them by emergency legislation in fixing the prices and in controlling the movement and distribution of essential commodities like firewood. That is why we find the Government, in the interest of all parties, fixing the commission payable to the respondents as agents for the owners of the firewood. The Government having proceeded all along on the assumption that all that the respondents were entitled to was commission at a fixed rate, cannot now claim to treat them as independent dealers. We agree with the leaned trial Judge's finding that the plaintiff's dealings come within the meaning of Section 8 of the Act and that therefore they are not liable to pay the tax. The appeal therefore fails and is dismissed with costs. Appeal dismissed.;