V.O. Vakkan and Ors vs State Of Madras

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Appeal (civil) 1 of 1955

Decision Date: 19 September 1955

Coram: N.H. Bhagwati, B. Jagannadhadas, S.J. Imam, S.R. Das, N.C. Aiyar, Chandrasekhara Aiyar

The Supreme Court of India decided the appeal V.O. Vakkan and Ors v State of Madras on 19 September 1955. The bench consisted of N.H. Bhagwati, B. Jagannadhadas, S.J. Imam, S.R. Das, N.C. Aiyar (the judges). The appeal (Civil Appeal No. 1 of 1955) was filed under Article 132(1) of the Constitution against the Madras High Court judgment and decree dated 28 March 1952 in A.S. No. 185 of 1950. The judgment was delivered by Justice Chandrasekhar Aiyar. The appeal was granted leave by the Madras High Court. Appellants numbered 2 to 6 were legal representatives of V.O. Vakkan, who had been the plaintiff in the Subordinate Judge’s Court and the appellant before the High Court. V.O. Vakkan was a resident of Palluruthy in the Cochin State, engaged in the trade of coir yarn. For the financial year ending 31 March 1946, the Deputy Commercial Tax Officer, Chowghat (in Madras State), assessed him under the Madras General Sales Tax Act on a net turnover of Rs. 12,30,124. The assessment imposed a sales tax of Rs. 12,301.40. Vakkan objected, claiming that he was a non-resident foreigner with respect to Madras State and that he neither carried on business personally nor through an agent within that state. The Deputy Commercial Tax Officer, the Commercial Tax Officer of Malabar, and the Board of Revenue rejected his objections. Consequently, Vakkan instituted suit O.S. No. 25 of 1948 in the Subordinate Judge’s Court, Cochin, seeking a declaration that the assessment was unauthorized, illegal and ultra vires. The Subordinate Judge dismissed the suit, and on appeal the Madras High Court affirmed the dismissal. However, the High Court granted leave to appeal because the issue raised a substantial question of law concerning the construction of the Madras General Sales Tax Act. The courts below accepted that Vakkan resided in Palluruthy, maintained his factory and place of business there, and had no residence, place of business or agent in Madras State. Nevertheless, the lower courts found that many, if not all, contracts for the sale of coir yarn were concluded with European firms in Fort Cochin, an area forming part of Madras State. They also held that delivery of the goods was effected at the purchasers’ yards in that location. On the basis of these facts, the courts held that Vakkan qualified as a “dealer” within the meaning given to the term in the Madras General Sales Tax Act.

In this case, the Court noted that the assessment of sales tax against the appellant had been held to be proper. The learned counsel for the appellant, Mr K S Krishnaswamy Iyengar, first contested the finding that the contracts of sale had been concluded in Fort Cochin, arguing that no evidence had been produced to support that conclusion. The Court observed, however, that the testimony of the third witness called by the defendant was offered in support of the finding that the contracts were indeed entered into at Fort Cochin. Moreover, the plaintiff had never raised any objection to the place of contracting either in his reply to the demand notice issued by the Deputy Commercial Tax Officer or in the plaint itself. The Subordinate Judge had recorded that “it is not denied that some of the contracts were executed in Fort Cochin.” The second argument advanced by the appellant was that, being a non-resident foreigner without any place of business in the Madras State, the plaintiff could not be liable to sales tax. The Court observed that even if the plaintiff had to come to Fort Cochin to execute the contracts or to deliver the goods, such a circumstance would not convert him into a resident for the purpose of liability. The Court further held that the question of residence was irrelevant; what mattered was whether the plaintiff qualified as a “dealer” under the definition contained in the Madras General Sales Tax Act. The Court found that the appellant unquestionably fell within that definition because he carried on the business of selling goods within the State of Madras. Explanation (2) to section 2 of the Act expressly includes any agent, if any, within the meaning of “dealer” and is not intended to exclude the principal from liability. Consequently, the appeal was dismissed with costs.