JUDGMENT Rajes Kumar, J.
1. These two revisions under Section 11 of U. P. Trade Tax Act (hereinafter referred to as Act) is directed against the order of Tribunal dated 13.4.1994 relating to the assessment years 1985-86 and 1986-87 respectively. The following common question has been raised and argued in the present revisions:-
"Whether the Trade Tax Tribunal was legally justified to hold that freight is not a part of taxable turnover despite the fact that Section 2 (i) of the U. P. Trade Ta Act indicate otherwise?"
2. The dealer opp. 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. Dealer claimed itself to be a Coal Agent under the Coal Control Order, 1977 (hereinafter referred to as Coal Control Order) and stated that the license in Form-B was issued in this regard. In the assessment years under consideration, dealer had imported coal against its own Form 31 and supplied coal to various parties mainly to the Brick Kiln owner. Freight incurred in bringing coal from coallery to its destination was separately shown in the bill. It is claimed that the amount of freight was paid directly by the purchaser, but this fact had not been accepted, but it was not disputed that in the bill, freight was separately mentioned. It was claimed that freight charges which was incurred for bringing coal from coallery to the destination of the dealer was not liable to be included in the turnover on the ground that the dealer was a Coal Agent and charged 2% commission from its customers apart from the value of coal. Assessing Authority had not accepted the plea of dealer and included the amount of freight incurred in bringing the coal from coallery to its destination in the turnover. In the first appeal, Appellate Authority also up held the view of Assessing Authority treating the freight incurred prior to sale as part of the turnover. Dealer filed appeals before the Tribunal. Tribunal vide impugned orders, allowed the appeals and held that freight would not be part of the turnover.
3. Learned Standing Counsel submitted that the Tribunal has erred in holding that the amount of freight incurred for bringing the coal from Coallery to the destination of dealer was not part of the 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, Coallery 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 various parties. He submitted that the manner of preparing bill is wholly irrelevant and in substance, dealer had sold the coal on principal-to-principal basis to various customers and there was no agreement of any agency between the dealer and the purchaser. He further submitted that merely because, dealer was issued B licensee under the Coal Control Orders issued by the District Supply Officer and the dealer may be treated as Coal Agent under the U. P, Coal Control Order, but there should be a contract for commission agency which is not present in the present case and therefore, pre sales expenses including freight would be part of turnover. He relied upon the decision of Apex Court in the case of T. B. L. Remco Cement Distribution Company State of Tamil Nadu v. State Govt. reported in AIR 1993 S. C. page 123 Hindustan Sugar Ltd. v. State. 43 STC page 13 (SC) and latest judgment of this Court in the case of CIT v. Sunil Kumar Coal Agent. Gorakhour reported in UPTC 2003 page 1036.
4. Learned Counsel for the dealer opp. party submitted that the dealer was a Coal Agent under the U. P. Coal Control Order and was holding B license in this regard issued by the District Supply Officer. He submitted that the freight amount was separately mentioned in the bill and 2% commission was only charged apart from the value of coal. He submitted that in the case of dealer itself in the assessment year 1984-85, this Court held that if the freight separately charged, would not form part of the turnover, judgment is reported in 1993 UPTC page 881. He submitted that for the assessment year 1988-89 and 1989-90 in the case of CST v. S/S Sharma Coal Company reported in 1999 UPTC page 62 this Court held that inward freight would be part of turnover and against the said order, a Civil Appeal No. 3997 of 1999 was filed which was allowed and Apex Court remanded back the matter to the Tribunal for reconsideration on the question whether the assessee was or was not a Commission Agent. He submitted that after remand, Tribunal vide order dated 15.3.2004 rejected the appeal filed by the Commissioner of Sales Tax and up held the order of First Appellate Authority, in which, freight was not included in the turnover. He submitted that the Tribunal held that the dealer acted as a Coal Agent relying upon the decision of Tribunal for the assessment year 1984-85. He further submitted that under Section 2 (i) freight charged separately would not be part of the turnover and in support of his submission, the decision of Apex Court in the case of Vinod Coal Syndicate v. Commissioner of Sales Tax reported in 1988 UPTC page 218 has been relied upon. In view of the aforesaid submissions, it is prayed that the revisions filed by the revenue, be dismissed.
5. Having heard Counsel for the parties. I have perused the order of Tribunal and the authorities below.
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 realised 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. 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 for 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 had to incur before sale and to make the goods available to the intending customer at the place of sale."
8. 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.
9. 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, reported in AIR 1993, SC, 123. In the case of Hindustan Sugar Mills v. State of Rajasthan, reported in 1979 UPTC page 37, the Section 2 (p) of the Rajasthan Sales Tax Act which defines sale price has been considered which means "the amount payable to a dealer as consideration for the sale of any goods less any sum allowed as cash discount according to the practice normally prevailing in the trade but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged" and the aforesaid provision is almost similar to Section 2 (i) of U. P. Trade Tax Act which defines turnover. On consideration of the aforesaid provision, Apex Court held as follows: -
"The second part enact an inclusive clause. It says that 'sale price' includes any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of installation in case where such costs is separately charged". Therefore, any sum charged for anything done by the dealer in respect of the goods of 'sale price', even if it does not fall within the first part of the definition. But there is an exception carved out of this inclusion. Not all sums charged for something done by dealer in respect of the goods at the time of or before the delivery thereof are covered by the inclusive clause. The cost of freight or delivery or the cost of installation certainly represents an amount charged for transportation or installation of the goods at the time of or before the delivery thereof and would, therefore, fall within the inclusive clause on its plain terms but it is taken out by the exclusion clause, "other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged". This exclusion clause does not operate as an exception to the first part of the definition. It merely enacts an exclusion out of the inclusive clause and takes out something which would otherwise be within the inclusive clause. Obviously, therefore, this exclusion clause can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purpose of bringing a particular amount within the definition of 'sale price'. But if the State is able to show that the particular amount falls within the first of the definition and, is therefore, part of the 'sale price' the exclusion clause cannot avail the assessee to take the amount in question out of the definition of 'sale price'. Here on the view taken by us, the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition and it is not necessary for the State to invoke the inclusive clause and in fact the State has not done so. The exclusion is, therefore, irrelevant and cannot be called in aid by the assessee. We may point out that even if the exclusion clause were read as an exception to the first part of the definition, which, as we have pointed out, cannot be done, it cannot avail the assessee. It is only where the cost of freight is separately charged that it would fall within the exclusion clause and in the context of the definition as a whole, it is obvious that the "...cost of freight.... Is separately charged" is used in contradistinction to a case where the cost of freight is not separately charged but is included in the price. It is not intended to apply to a case where the cost of freight is part of the price but the dealer chooses to split up the price and claim the amount of freight as a separate item in the invoice. Where the cost of freight is part of the price, it would fall within the first part of the definition and to such a case, the exclusion clause in the second part has no application."
10. In my opinion merely because dealer was issued B-license and was treated as Coal Agent under the U. P. Coal Control Order, it can not be said that the dealer in fact acted as a Commission Agent on behalf of purchaser. Separate amount 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.
11. 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 under the U.P. Coal Control Order for the purposes of distribution of coal, but whether dealer in respect of transaction in dispute acted as a Coal Commission Agent of buyers or not, is a question has to be decided on the basis of nature of transaction and existence of a contract of agency.
12. The condition of B-license issued in form-B to the Coal Agent shows that the licensee was authorized to import coal and to sell it. It has not been disputed that the dealer has purchased coal from coallery in his own account and imported such coal against its own Form 31 and thereafter, sold the coal to the consumer and also charged 4% tax on the value of Coal and admitted tax liability of 4% on the value of coal. Perusal of assessment order shows that the dealer had not made any claim that it had acted as a purchasing Commission Agent on behalf of consumer. A distinction has to be drawn between the Coal Agent under the Coal Control Order and Purchasing Coal Commission Agent.
13. Dealer may be Coal Agent for the purposes of Coal Control Order, but not necessarily be Commission Agent.
In AIR 1967 All 308, 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 A. I. R. 1967 SC 181, 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."
14. In the present case, Tribunal has not recorded any finding that whether dealer acted as a Commission Agent in respect of sale of coal to various parties. Matter is remanded back to the Tribunal with the direction to examine this aspect of the matter. It is made clear that merely because dealer was holding B-license under the Coal Control Order and was also called as Coal Agent and in the bill, freight is separately charged and 2% commission is further charged, would not be sufficient to treat him Commission Agent. To be Commission Agent, there must be a contract of agency. Prices charged separately in the invoices, may only be device with an intent to reduce the sale price. Manner in which, bill was made, is not relevant and true nature of transactions, has to be examined on the fact of the case. I have perused the order of Tribunal, which was passed for the assessment year 1988-89 and 1989-90. After remand by Apex Court, Tribunal only on the basis of order for the assessment year 1984-85 held the dealer as a Commission Agent without examining the real nature of transaction and without examining whether there was any contract of agency between the parties to make the dealer as a Commission Agent and therefore, order of Tribunal has no relevance in the present case. In any view of the matter, each year is an independent year and facts of each year has to be examined independently. Tribunal is directed to examine the matter afresh in the light of observations made above.
15. In the result, revisions are allowed in part. Order of Tribunal is set aside and the matter is remanded back to the Tribunal to examine the matter afresh in the light of observations made above.