PROVINCIAL GOVERNMENT OF MADRAS Vs. MUDUKURU MUNIRATHNAM CHETTI
LAWS(MAD)-1953-4-47
HIGH COURT OF MADRAS
Decided on April 10,1953

PROVINCIAL GOVERNMENT OF MADRAS Appellant
VERSUS
MUDUKURU MUNIRATHNAM CHETTI Respondents

JUDGEMENT

- (1.) THE only question in this case is whether the respondents are liable to pay sales tax under the Madras General Sales Tax Act, 1939 as dealers in, i.e., as purchasers and sellers of groundnuts. THE suit was for the recovery of Rs. 3, 181-3-4 being the tax collected from them. THE learned Subordinate Judge dismissed their suit, but on appeal the learned District Judge had decreed it. THE Government is the appellant before me.
(2.) THE finding of the learned District Judge on a careful consideration of the entire evidence on the record as regards the nature of the transactions in respect of which the plaintiffs are sought to be made liable for sales tax is as follows : THE plaintiffs advance moneys to owners of groundnuts and enter the loans in the respective ledger folios of the customers. When the owners bring their stock of groundnuts, the plaintiffs allow them to be stocked in their godown, dry them, debiting the drying charges to the owners, and decorticate them in the decorticating machine which the plaintiffs own and debit the owners the decorticating charges. THEy then sell the groundnuts kernels to firms like Rally Bros. and Louis Dreyfus & Co., and others. THE sale proceeds when received are credited to the respective owners of the groundnuts. At the end of the season, there is a final settlement of the accounts between the plaintiffs and the respective owners. On these facts it is obvious that the learned District Judge was right in holding that the plaintiffs were in no sense dealers within the meaning of the General Sales Tax Act. I agree with the learned Judge's view of the law, having regard to the nature of the transaction, that when a transaction is treated by both parties as a loan and entrustment of goods for sale to others to discharge the loan, it cannot be treated as a sale. I may add that the entire sale proceeds are credited to the respective owners of the groundnuts and the fact that the owners are not credited with any amount representing the purchase price when the groundnut stock is received in the plaintiffs godown support the inference arrived at by the learned District Judge. It is not necessary to refer to any decided cases, and on the facts it is quite clear that the plaintiffs cannot be held liable to pay the tax as dealers. I may say that it was the case neither of the plaintiffs nor of the Government that they were commission agents.The second appeal is dismissed with costs. Appeal dismissed.;


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