SATYANARAYANA RAO, J. - (1.) THESE two petitions relate to the same assessee. T.R.C. No. 2112 of 1952 relates to the assessment year 1948-49 while T.R.C. No. 2111 of 1952 relates to the assessment year 1949-50. The assessee is the Indian Coffee Board, Batlagundu. It was assessed to sales tax on a turnover of Rs. 1, 97, 30, 968-6-3 during the assessment year 1948-49 and on a turnover of Rs. 3, 89, 275-2-8 during the assessment year 1949-50. The only question which was raised and argued on behalf of the assessee in these two petitions was whether the assessee, the Indian Coffee Board, which derives its existence from the Coffee Market Expansion Act (VII of 1942) is a dealer within the meaning of Section 2(b) of the Madras General Sales Tax Act, 1939. The definition as given in the Act is :- "'Dealer' means any person who carries on the business of buying or selling goods." There is an explanation to the definition which states :- "A co-operative society, a club, a firm, or any association which sells goods to its members is a dealer within the meaning of this clause."
(2.) TO solve the problem raised it is necessary to refer to the provisions of the Coffee Market Expansion Act, 1942, under which the assessee Board was constituted. The Act was passed by the Indian Legislature on 2nd March, 1942, with a view to continue the provisions made under Ordinance XIII of 1940. The object of the Ordinance and the Act is to give assistance to the coffee industry by regulating the export and sale of coffee and by other means. This was done as declared by Section 2 of the Act with the object of the Central Government taking under its control the development of the coffee industry in the interests of the public. The control of marketing of farm produce for the economic benefit of the producers and to bring about collective marketing of the produce is a recognised feature of Governments of several countries, particularly, United States of America, Britain and Australia. The object is to prevent unhealthy competition between producers, to secure the best price for the produce in the local market, to conserve for local consumption as much produce as is needed and make available the surplus for export outside the States and also to foreign markets. The method usually adopted to achieve the object is to establish a marketing board with power to control the prices, to obtain possession of the produce and to pool it with a view to collective marketing. The legislation in this behalf is compendiously described as "pooling legislation" and is based on the fundamental idea that the collectivist economy is superior to individualistic economy. Thus there are different marketing boards for different kinds of produce, such as sugar, dairy produce, wheat, lime fruit, apples, pears and so on. The Indian Coffee Market Expansion Act was modelled somewhat on the lines which obtain in other countries and was intended to control the development of the coffee industry and to regulate the export and sale of coffee.Section 4 of the Act relates to the constitution of the Board, and representation of various interests in the production of coffee and its marketing is secured by this section. Under Section 5 the Board derives its incorporation and it is a body corporate having perpetual succession and a common seal with power to acquire and hold property, movable and immovable, and to enter into contracts it could sue and be sued in the name of the Indian Coffee Board. Section 7 provides for the election of the chairman of the Board and for appointment of committees by the Board for such purposes as it may deem necessary for the efficient discharge of the functions under the Act. Section 8 provides for the appointment by the Central Government of a Chief Coffee Marketing Officer to exercise such powers and perform such duties under the directions of the Board as may be prescribed by the Central Government. Provision is also made for the appointment of Deputy Chief Coffee Marketing Officer. Both of them may be either salaried or unsalaried. If salaried, the Board has to pay such salary as may be fixed by the Central Government. Section 9 empowers the Board to make bye-laws consistent with the Act and the rules make thereunder to provide for the enumerated matters in the said section. Sections 11 and 12 relate to duties of customs and of excise which are not relevant for the present purpose. Section 14 requires that every person owning land planted with coffee plants aggregating not less than ten acres, whether such land is comprised in one estate or in more than one estate, should get himself registered. Under Section 15 the Central Government is empowered after consultation with the Board to fix the price or prices at which the coffee may be sold, wholesale or retail, in the Indian market and a registered owner or licensed curer or dealer is prohibited from selling coffee wholesale or retail in the Indian market at a price or prices higher than the price fixed by the Central Government. A registered owner is prohibited by section 17 from selling or contracting to sell in the Indian market coffee in excess of the internal sale quota. Section 18 provides that a registered owner should not sell coffee unless it has been cured as provided by the section and he is also required to sell it in accordance with the provisions of the licence obtained from the Board under Section 24. An unregistered owner and a registered owner are prohibited from selling or storing in an estate coffee grown on any estate and not grown on his own. Section 20 vests the power of export of coffee in the Board or under an authorisation granted by the Board. Re-import of coffee exported except under the permit granted by the Board is prevented by Section 21. Under Section 22 the Board is empowered to allot to each registered estate an internal sale quota for the year. Section 23 provides for the returns to be made by registered owners. Uncured coffee could be sold by a registered owner only if the complies with the provisions of Section 24. Section 25 is the most important section. All coffee produced by a registered estate in excess of the amount specified in the internal sale quota allotted to an estate, or when no internal sale quotas have been allotted to the estates, all coffee produced by the estate shall be delivered to the Board for inclusion in the surplus pool by the owner of the estate or by the curing establishment receiving the coffee from the estate. Coffee is delivered for inclusion in the surplus pool and after delivery to the Board it remains under the control of the Board which is made responsible for storage, curing and marketing of the produce. The coffee delivered by each owner is classified in value in accordance with the provisions of Section 25(4). The effect of so delivering the coffee to the Board is stated in sub-section (6) of Section 25, which runs as follows :- "When coffee has been delivered or is treated as having been delivered for inclusion in the surplus pool, the registered owner whose coffee has been so delivered or is treated as having been so delivered shall retain no rights in respect of such coffee except his right to receive the payments referred to in Section 34. " * The duty is cast by Section 26 on the Board to take all practical measures to market coffee included in the surplus pool and all sales thereof shall be conducted by or through the Board. The Board is also empowered to purchase for inclusion in the surplus pool coffee not delivered for inclusion in it, under sub-section (2) of Section 26, Sections 27 to 29 provide for curing of coffee. Under Section 30 the Board has to maintain two separate funds, a general fund and a pool fund. Into the general fund are credited all proceeds from the duty of customs and the duty of excise levied under Sections 11 and 12 respectively and all receipts from the licences issued by the Board. The general fund has been earmarked to be applied to meet the expenses of the Board and the cost of such measures as it may consider advisable for promoting the sale and increasing consumption in India and elsewhere of coffee produced in India or for promoting the technological research in the interest of the coffee industry in India. The second fund is the pool fund, and under Section 32 to this fund are credited all sums realised by sales by the Board of coffee from the surplus pool. The pool fund shall be applied only to (a) the making to registered owners of estates of payments proportionate to the value of the coffee delivered by them for inclusion in the surplus pool, (b) the costs of storing, curing and marketing coffee deposited in and of administering the surplus pool, and (c) the purchase of coffee not delivered for inclusion in the surplus pool. If after applying these there is any excess from the sums realised by sales by the Board of coffee from the surplus pool in the manner indicated above, such excess may with the previous sanction of the Central Government, be transferred to the credit of the general fund. The Board is also empowered by Section 33 to borrow on the security of the general fund or the pool fund. Section 34 provides for payment to the registered owners, that is, to persons who have delivered coffee for inclusion in the surplus pool and payments are made to them out of the pool fund. It is paid in proportion to the value of the coffee delivered by the registered owner to the pool - the proportion which the value of the coffee delivered by him to the pool bears to the value of the coffee crop of the particular year. Section 35 onwards provides for penalties and procedure. Under Section 42 of the Act all acts of the Board are subjected to the control of the Central Government, such as the power to cancel, suspend or modify as it thinks fit any action taken by the Board. Section 43 provides for appeals to the Central Government by any person aggrieved by an order of the Board refusing a licence to or cancelling a licence of a curing establishment within sixty days from the making of the order.Under the Act coffee produced by a registered owner is divisible into two parts : (1) the internal quota which the registered owner is empowered to deal with, and (2) the excess over the internal quota which he is required to surrender and is not fee to sell in the market. The effect of surrendering to the pool is to place the coffee at the absolute disposal of the Board, and thereafter the owner has no right except to share the sale proceeds of the pool as provided by the Act after the coffee is marketed by the Board. The Board has, therefore, absolute control over the coffee surrendered to the pool and is treated practically as the owner of the coffee for purposes of sale and for distributing the sale proceeds to the registered owners in proportion to the value of the quantity surrendered by them to the pool. In other words, the Coffee Board is the owner of the goods and sells the goods for profit at the best possible price and distributes the sale proceeds thereafter to the owners of the coffee who have surrendered it to the pool. Though the Board may not be entitled to the profits of the pool, except to the small extent of the excess which could with the sanction of the Central Government be diverted to the general fund, there is no reason to infer that the Board as an incorporated body, which is a legal person, is not carrying on the business of selling coffee within the meaning of the definition of "dealer" in the Act. We have already held in other cases that the word "business" in the definition is used in a commercial sense with a profit-making motive. The Board, when it sells the coffee of the pool, does undoubtedly aim to make a profit though not for itself. The profit need not necessarily accrue to the dealer who carries on the business of buying or selling goods as in the case of commission agents, as was held in this Court. The collective marketing activity or sale by the Board of the coffee which is under its control and custody of which it becomes the absolute owner under the provisions of the Act is undoubtedly the business of the Board of selling goods, and therefore the transactions of the Board now under consideration are clearly transactions of a dealer within the meaning of the General Sales Tax Act.The argument on behalf of the petitioner strenuously urged was that the Board was merely an agent of the producer and as the sale by the producer of his produce is excluded from the "turnover" definition in the Act, there is no justification for imposing the tax on the assessee. In support of this argument reliance was placed upon the decision of the Judicial Committee in Welden v. Smith 1924 AC 484). We do not think that this argument is sound. There is no question of any agency between the producer and the Board, as there is no contract, express or implied, between them, nor is the Board constituted representative of the producer under the provisions of the statute. The Board does not hold the goods on behalf of the producer. After the goods enter the pool after delivery they become the absolute property of the Board and the producer, a registered owner, has no right or claim to the goods except to share in the sale proceeds after the goods are sold in accordance with the provisions of the Act. Welden v. Smith 1924 AC 484) was a case in which there was an agreement between the Government and the producer of the wheat and the question that arose for consideration was whether the Government were liable for damage to the goods while in their custody. The Judicial Committee held that the Government were bound to use reasonable care in the storage of the wheat. At page 493 Viscount Cave, L.C., answered the question propounded by him at the bottom of page 492, "Was the Government in the performance of its duties under this agreement free from any obligation to take ordinary and reasonable care "" in these words :- "In their Lordship's opinion, it was not. It is true that neither the agreement nor the statute expressly mentions such as obligation, nor was it to be expected that any such express mention should be made. A person who undertakes to perform an act as the mandatory of another, whether as bailee, agent or otherwise, and whether for reward or gratuitously, is bound, without express words, to act in a reasonable and prudent manner having regard to the circumstances of the case. It matters not whether his obligation is regarded as a common law obligation the breach of which gives rise to an action of tort, or as an implied condition of his contract in either case, the obligation arises without express words unless it is excluded by the terms of the contract. And if this is the case in an ordinary contract of bailment or agency, their Lordships see no reason why the same rule should not extend to the present case." *
(3.) IT was also pointed out that notwithstanding that the powers of the Government were imposed upon it by the statute, that circumstance would not make any difference and would not relieve the Government from all obligation of using ordinary care. The Privy Council held that the Government may be liable for negligence or want of reasonable and proper care, if proved. The position of the Coffee Board under the statute under consideration is entirely different from that of the Government who under the agreement obtained the goods in the case before the Judicial Committee in Welden v. Smith 1924 AC 484).;