JUDGMENT Rajes Kumar, J.
1. The present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as Act), is directed against the order of Tribunal date 27.5.1995 relating to the assessment years 1990-91. The following question has been raised in the present revision:-
Whether in the light of the finding of Hon'ble Supreme Court reported in (AIR, 1993, Supreme Court page 123), the Trade Tax Tribunal was legally justified in holding that inward freight is not the part of taxable turnover?
2. Dealer/opposite party (hereinafter referred to as "dealer") was carrying on the business of Coal and was registered under the U.P. Trade Tax Act as well as under the Central Sales Tax Act. In the year under consideration, applicant had imported coal against its Form 31 and supplied Coal to various parties alleged mainly to Brick Kiln owner. Dealer paid freight charges and also incurred other expenses on the goods till the arrival of the goods at its destination, but the said freight was charged in the bill separately from its customers. It is alleged that the dealer was holding license from District Supply Officer and the coals were supplied to the Brick Kiln owner only on the basis of their orders. It was claimed that the freight charges, which was incurred for bringing the coal at the destination of the dealer, is not liable to be included in the turnover. Assessing Authority had not accepted the plea of the dealer on the ground that the dealer had purchased coal from coallery and imported the said coal against its own Form 31 and thereafter sold the said coal to the Brick Kiln owner and therefore, amount of freight incurred for bringing the coal from coallery to its destination, was part of the costs of coal and even if separately charged in the Invoices, it would be a part of the turnover. First Appeal filed by the dealer was rejected. Dealer filed Second Appeal before the Tribunal which was allowed and the claim of the dealer has been accepted. Tribunal held that the dealer was holding a B-license No. 623 issued by the District Supply Officer and apart from the value of coal, freight charges, labour charges, Dharamkata and Rs. 2/- per qtl. commission were charged separately. Tribunal also held that since the dealer was B-licensee and charged 2% commission freight would not be part of the turnover.
3. Heard learned Standing Counsel Inspite of service of notice, no one appears on behalf of the opp. party. Learned Standing Counsel submitted that the Tribunal has erred in holding that the amount of freight incurred for bringing the coal from coalery to the destination of dealer, is not part of turnover. He submitted that the dealer was registered under the U.P. Trade Tax Act as well as under the Central Sales Tax Act and purchased coal from coalery in its own account and imported such coal inside the State of U.P. at its destination against its own Form 31 and sold the coal for price to the various parties. He submitted that the manner of preparing the bill is wholly irrelevant and in substance, dealer had sold the coal on principal-to-principal basis to the various customers and there was no agreement of any agency between the dealer and purchaser. He further submitted that merely because, dealer was B-licensee under the Coal Control Orders issued by the District Supply Officer, it can not be said that the dealer acted as an Agent on behalf of purchaser. He relied upon the decision of Apex Court in the case T.B.L. Remco Cement Distribution Company State of Tamil Nadu v. State Govt. for Hindustan Sugar Ltd and latest judgment of this Court in the case of CIT v. Sunil Kumar Coal Agent, Gorakhpur UPTC 2003 page 1036.
4. I have perused the order of Tribunal and authorities below. Merely because dealer was B-licensee under the Coal Control Orders, it cannot be said that the sales of coal by the dealer was as a Coal Agent. Under the Coal Control Orders, a B-license may have authorized the dealer to act as a coal agent, but it does not mean that in respect of disputed sales, dealer had acted as a coal agent of purchaser. In the present case, dealer had made purchases of coal from coallery in its own account, imported goods against his own Form 31 and thereafter, admittedly, sold the coal to various parties alleged to be Brick Kiln owner. No evidence had been adduced to show that the dealer acted as a purchasing agent of purchaser. Separate price charged in the Invoices for the value of goods, freight charges, expenses are of no consequence. In the case of Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh reported in 24 STC 487 Apex Court held "that the form in which the invoice was made out was not determinative of the contract between the company and its customers". The substance of transaction is to be considered.
5. Section 2 (i) defines the turnover as follows:-
Turnover" means the aggregate amount for which goods are supplied or distributed by way of sale or are sold, by a dealer, either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration:
Explanation I (Omitted) Explanation-II. Subject to such conditions and restrictions, if any, as may be prescribed in this behalf, -
(i) the amount for which goods are sold or purchased shall include the price of the packing material in which they are packed and any sums charged for anything done by the dealer in respect of the goods sold, at the time of or before the delivery thereof, other than cost of freight or delivery or cost of installation or the amount realized as trade tax on sale or purchase of goods when such cost or amount is separately charged.
6. Definition of turnover thus says that the aggregate amount for which, the goods are supplied to the buyers is the turnover. Admittedly, dealer was required to pay freight to acquire the goods, therefore, such freight is included in the aggregate amount and form part of the turnover. Exclusion provide by Sub-section (i) of Explanation-II is in respect of freight i. e. paid by the buyers for transportation of the goods after their purchase from sellers, supplied to the buyers. Freight subject matter of dispute is not a freight contemplated by exclusionary provisions contained in the explanation. Freight paid by the seller for the goods purchased by him for sale is his legal burden and is a part of costs for acquiring the goods. It is the dealer who had settled the amount of Truck hire from coalery to his place of business and therefore, it was his legal obligation to pay the amount of Truck hire and it is of no consequence that subsequently recovers from the buyers.
7. An agency is the matter of contract. An agent is defined under Section 182 of Contract Act. There must be some material, which shows that there was a contract of agency between the dealer and buyers for making purchases on its behalf. No such finding has been recorded by the Tribunal and no such claim appears to have been made by the dealer. Mere charging of amount of freight expenses, value of goods and profit in the name of Commission, will not make dealer as purchasing agent on behalf of purchaser. Issue of B-license under the Coal Control Orders, only authorizes dealer to act as a coal agent, but whether dealer in respect of transaction in dispute acted as a coal agent of buyers or not, is a question has to be decided on the basis of nature of transaction. In the present case, record does not show any material that there was any contract of agency between the purchaser and seller and inasmuch as, dealer purchased coal in its own account, imported such coal against its own Form 31 and sold it to the purchaser and passed on the title on the coal to the purchaser by raising invoices and charging price of goods.
In , Loon Karan Sohan Lal v. Firm John and Company and Ors., a Division Bench of our Court has held that in determining legal nature of relationship in between the alleged principal and agent the use or omission of the word agent is not conclusive. The Court must examine the true nature of the agreement and the subsequent dealings between the parties, and then decide whether it establishes a relationship of agency under the law.
In the aforesaid case, the Court has relied upon following observations made in , Gordon Woodroffe and Co. v. Sheikh M.A. Majid and Co.:
The essence of sale is the transfer of the title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferor of the goods as a debtor for the price to be paid and not as agent for the proceeds of the sale. On the other hand, the essence of a agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and who is therefore, liable to account for the proceeds.
In A.I.R. 1968 SC 784, Sri Tirumala Venkateswars Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry, distinction between a contract of the sale and contract of agency was pointed out with reference to Sales of Goods Act. The essence of contract of sale is the transfer of property to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as an agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will, therefore, be liable to account for the sale proceeds.
8. In the case of Dyer Meakin Breweries Ltd. v. State of Kerala 26 STC 248 (SC), company was engaged in the manufacturing of liquor at various places in U.P. and Haryana, transported the goods from its breweries and distilleries to its place of business in Ernakulam and sold them there. When selling liquor to the customers the appellant made out separate bills for ex-factory price and for "freight and handling charges". The appellant claimed that the amount charged for "freight and handling charges" incurred by it in transporting the goods from the breweries and distilleries to the warehouse in Kerala were eligible for deduction under Rule 9(f) of the Kerala General sales Tax Rules, 1963, a rule which is in the same terms as Rule 6, This claim was negatived by Apex Court The Court observed:
It is common ground that the sale of the liquor took place in Ernakulam. The company arranges to transport liquor for sale from the factories to its warehouse at Ernakular. It was not brought for any individual customer. All the expenditure incurred in prior to the sale and was evidently a component or the price for which the goods were sold. It is true that separate bills were made out for the price of the goods ex-factory and for "freight and handling charges". But, in our judgment, the Tribunal was right in holding that the exemption under Clause (f) of Rule 9 applied when the freight and charges for packing and delivery are found to be incidental to the sale and when they are specified and charged fur by the dealer separately and expenditure incurred for freight and packing and delivery charges prior to the sale and for transporting the goods from the factories to the warehouse of the company is not admissible under Rule 9(f). Rule 9(f) seeks to exclude only those charges which are incurred by the dealer either expressly or by the necessary implication for and on behalf of the purchaser after the sale when the dealer undertakes to transport the goods and to deliver the same or where the expenditure is incurred as an incident of sale. It is not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he lad to incur before sale and to make the goods available to the intending customer at the place of sale.
9. The aforesaid decision has been followed by the Apex Court in the case of D.C. Johar & Sons (P) Ltd. v. Sales Tax Officer, Ernakular and Anr. reported in 26 STC 120.
10. Both the aforesaid decisions have been relied upon in the case of TVL Ramco Cement Distribution Co. Pvt. Ltd., Tamil Nadu v. State of Tamil Nadu .
11. In the present case, dealer failed to prove that it acted as a Purchasing Commission Agent, inasmuch as, no evidence has been adduced for a contract of agency as stated above, holding of B-license under the Coal Control Orders and charging of costs of coal, freight charges and expenses and commission separately in the invoices are of no consequence. Prices charged separately in the invoices are only device with an intent to reduce the sale price. In the case of Commissioner of Trade Tax v. Sunil Kumar Coal Agent, Gorakhpur U.P.T.C. 2003 page 1036 in the similar circumstances, this Court held that inward freight is the part of turnover and dealer failed to prove that he acted as Purchasing Coal Agent in the absence of any contract of agency.
12. In the result, revision is allowed. Order of Tribunal is set aside and it is held that the freight incurred prior to sale in bringing the coal from Coalery to the dealer destination would be part of the turnover.