ARIYASENA v. PROVINCIAL COMMISSIONER OF REVENUE WESTERN PROVINCE

051-SLLR-SLLR-2003-V-2-ARIYASENA-v.-PROVINCIAL-COMMISSIONER-OF-REVENUE-WESTERN-PROVINCE.pdf


CA
Ariyasena v Provincial Commissioner of Revenue,
Western Province (Somawansa. J.)
325
ARIYASENA
v
PROVINCIAL COMMISSIONER OF REVENUE,WESTERN PROVINCE
COURT OF APPEALDISSANAYAKE, J., ANDSOMAWANSA, J.
CANO. 01A/99 (PC) .
BOARD OF REVIEW
NO. NWP/PR/APR/BR TT15/144/53
FEBRUARY 17, 2003
Finance Statute, No. 8 of 1990, sections 19(6), and 81 – Sale of GoodsOrdinance, No. 11 of 1896 – Commission Agent – Dealer who purchasesgoods and sells for profit – Difference ? – Liability to tax – Is it a question oflaw? – 'Nemo dat qui none habet.
The respondent made a determination that a certain sum as turn over taxinclusive of the penalty be charged from the applicant in respect of the turnover made by the appellant from the business. The appellant refused to acceptthe said assessments on the basis that he is not a seller of goods but only acommission agent of 3 companies and appealed against the said assessmentto the Provincial Commissioner, who dismissed the appeal. The Board ofReview confirmed the order on appeal.
The Board of Review stated a case for an opinion by the Court of Appeal onthe question whether the appellant did sell or committed the sale of any com-modity or article within the meaning of the Sale of Goods Ordinance.
Held:
The evidence shows that once the products are accepted by the appel-lant at the company stores, it becomes the property of the appellant.The appellant has to pay for the products before it is removed from thecompany stores and in the event of any default of such payment thecompany is to recover such sum from the Bank Guarantees furnishedby the appellant.
It was also revealed that companies, that supplied products to theappellant paid turnover tax to the Council in respect of the productssupplied to the appellant.
326
Sri Lanka Law Reports
[2003] 2 Sri L.R
The appellant is not a commission agent but a dealer who sells prod-ucts of the Companies for profit.
Case stated by the Board of Review under S. 84(1) of the FinanceStatute No. 8 of 1990 (North-Western Province).
Chandana Prematilake for appellant-appellant
W. Dayaratne for respondent-respondent.
Cur. adv. vult
September 19,2003SOMAWANSA, J.
This is a ‘case stated’ by the Board of Review under section84 (1) of the Finance Statute No. 08 of 1990 for an opinion of thisCourt. The case stated is said to arise out of a decision of the Boardof Review in (TT15/144/53) which dealt with an appeal made bythe appellant-appellant hereinafter referred to as the ‘appellant’ tothe Board of Review.
The following facts are not in dispute, that the appellant car-ried on business under the name and style of National Stores atKuliyapitiya within the limits of the Provincial Council of the NorthWestern province. That the respondent-respondent hereinafterreferred to as the ‘respondent’ made a determination that a sum ofRs.34500/- as the turnover tax inclusive of the penalty for the quar-ter ending on 31.03.1993 under reference No. 20/15/0153 and asum of Rs. 33,000/- as the turnover tax inclusive of the penalty forthe quarter ending on 30.06.1993 under reference no. 20/ 15/93/0154 be charged from the appellant in respect of the turn overmade by the appellant from the said business. The appellant whorefused to accept the said assessments on the basis that he is nota seller of goods but only a commission agent of 3 companiesappealed against the said assessment in terms of section 19(6) ofthe Finance Statute No. 08 of 1990 to the Provincial Commissionerwho after due inquiry dismissed the appeal of the appellant.Thereafter in terms of Section 81 of the said Finance Statute heappealed to the Board of Review where another inquiry was held.The Board of Review by a majority decision of 4 to 01 delivered on23.12.1998 came to a finding that the appellant is not a commission
01
10
20
CA
Ariyasena v Provincial Commissioner of Revenue,
Western Province (Somawansa. J.) .
327
agent but a dealer who purchases goods from various companiesand sells for profit. Accordingly the assessment as determined bythe respondent was confirmed and the appellant’s appeal was dis-missed. On an application by the appellant requiring the Board ofReview to state a case for an opinion of the Court of Appeal onthe question whether the appellant did sell or committed the sale ofany commodity or article within the meaning of the Sale of GoodsOrdinance No. 11 of 1896 in respect of which the said turnover taxhas been imposed.
The majority of the Board of Review in its case stated has con-cluded that the appellant committed sales within the meaning of theSale of Goods Ordinance. The case stated contains the followingquestions of law for an opinion of this Court.
Did the appellant indulge in selling any commodity ofarticle in respect of which the said turnover taxes wereimposed within the meaning of the Sale of GoodsOrdinance No. 11 of 1896?
Alternatively even assuming that the appellant did sellany commodity or article as aforesaid did he do that asan agent of the principal companies within the principlesof law of agency?
If so were the contracts of sale entered into between theprincipal companies and the retail businessman accord-
– ing to the principles of law in the Sale of GoodsOrdinance and the law of agency?
If the question (1) is answered in the negative is theappellant not liable to pay the turnover tax in respect ofthe said commodities or articles?
If the questions (b) and (c) are answered in the affirma-tive are the principal companies liable to pay the turnovertax to the Provincial Council?
It was submitted by the counsel for the appellant that themajority of the Board of Review has misdirected themselves onfacts and thereby committed an error in law in coming to their saidconclusion and has also committed error in law in their order dated11.12.1998. Therefore he submits that there is a question of law
30
40
50
60
328
Sri Lanka Law Reports
12003] 2 Sri L.R
arising on the case stated as to whether the appellant did sell orcommitted the sale of any commodity or article within the meaningof the Sale of Goods Ordinance No. 11 of 1896 in respect of whichthe turnover tax has been imposed.
It appears to me that the short point that has to be decided inthe stated case is whether the appellant is a commission agent ora dealer and the answer would depend on what the evidence wouldestablish. Hence it is essentially a question of fact and not a ques-tion of law. In terms of section 84 (1) of the Finance Statute No. 08of 1990 case stated for the opinion of this Court has to be on aquestion of law.
Be that as it may, let us now consider the material placedbefore the Board of Review and see whether the appellant could beconsidered a commission agent and not a dealer. However if he isfound to be a dealer he would be liable to pay turnover tax in termsof the Finance Statute No. 08 of 1990. Imposition of turnover tax isdealt with in Chapter 1 Part 01 of the said Finance Statute No. 08of 1990 and the relevant Sections read as follows:
(1) “Subject to such limits and exemptions as may beprescribed by law made by Parliament and other provi-sions of this Statute, there shall be charged for everyquarter commencing on or after January 1st. 1991 fromevery person who carries on any business in theprovince a tax (hereinafter referred to as the “turnovertax”) in respect of the turnover made by that person fromthat business at such rate as the Minister may fix fromtime to time by Order published in the Gazette.
(2) For the purpose of this Chapter “business” shallmean selling by wholesale or retail of any commodity orarticle but shall not include a sale by a manufacturer.
(1) A person shall, in respect of any business carriedon by him in the province, be chargeable with turnovertax for each quarter.”
It is contended by the counsel for the appellant that the Boardof Review in its majority decision has failed to answer the vitalquestion as to whether there was evidence to establish the exis-
70
80
90
CA
Ariyasena v Provincial Commissioner of Revenue,
Western Province (Somawansa. J.)
329
tence of contract of sale between the appellant and the retailerwhereby the property in goods were transferred from the appellantto the retailers. At this point, I would refer to the relevant sectionsin the Sale of Goods Ordinance No. 11 of 1896. The relevantSections are as follows:
(1) “A contract of sale of goods is a contract wherebythe seller transfers or agrees to transfer the property ingoods to the buyer for a money consideration, called “theprice”. There may be a contract of sale between onepart-owner and another.
Where under a contract of sale the property in thegoods is transferred.from the seller to the buyer the con-tract is called “a sale”, but where the transfer of the prop-erty in the goods is to take place at a future time, or sub-ject to some condition thereafter to be fulfilled, the con-tract is called “an agreement to sell”.
4. Subject to the provisions of this Ordinance and of anyenactment in this behalf, a contract of sale may be madein writing, or by word of mouth, or partly in writing andpartly by word of mouth, or may be implied from the con-duct of the parties.
(1) The price in a contract of sale may be fixed by thecontract or may be left to be fixed in manner therebyagreed, or may be determined by the course of dealingbetween the parties.
(1) Where there is a contract for the sale of specific. or ascertained goods, the property in them is transferred
to the buyer at such time as the parties to the contractintend it to be transferred.
(2) For the purpose of ascertaining the intention of theparties, regard shall be had to the terms of the contract,the conduct of the parties, and the circumstances of thecase.
Rule 1. Where there js an unconditional contract forthe sale of specific goods, in a deliverable state, theproperty in the goods passes to the buyer when the
100
110
120
130
330
Sri Lanka Law Reports
12003] 2 Sri L.R
contract is made, and it is immaterial whether the time ofpayment or the time of delivery or both, be postponed.
On behalf of the respondent 3 witnesses were called whowere representing three companies. Anura Weerakoon, ManagerEveready Battery Co. Lanka Ltd., was one of the witnesses whogave evidence. In his evidence it transpired that his company had 140no transactions with the appellant during the period 01.01.1993 to
the period in respect of which the turnover tax in ques-tion has been imposed on the appellant. However he spoke of theperiod prior to and after the said period. Also it transpired thattransactions between his company and the appellant were notbased on payment of commission but were based on outright sales,that goods were sold to the appellant and accordingly reduced fromthe company stock ledgers, that all dealings are carried out oh acash basis by ‘cheque’ or ‘cash’ when goods are sold and once soldappellant became the owner of goods purchased and the goods 150are transported from company to the appellant’s shop not by com-pany vehicles but by vehicle of the appellant. The distribution ofgoods purchased by the appellant are done by the company vehi-cles bearing the company’s name and logo through a sales repre-sentative of the company. A representative of the appellant wouldalso accompany the salesman in the vehicle for the purpose ofaccepting cash and cheques in respect of goods delivered to retail-ers by the sales representative. The bills known as van job ordersand for this purpose are those of the company and is signed bythe sales representative and they do not bear the name of the 160appellant. The witness admitted that the company accepted the fullresponsibility as to the quality of the products and entertained com-plaints and a production manager was appointed to deal with suchcomplaints.
M.J.R.C. Fernando, Area Manager Deimage Forsyth & Co.
Ltd. was another witness who gave evidence on behalf of therespondent. His evidence revealed that sales by them are consid-ered as outright sales and ownership is transferred to the appellant,that sales are done on credit basis and payment is made bycheque. That where expiry date has lapsed or if there is a quality 170problem returns are accepted. No commission is paid, but a dis-count is given which is selling price less agents selling price, that
CA
Ariyasena v Provincial Commissioner of Revenue,
Western Province (Somawansa, J.)
331
for the distribution of the company products to the retailers from theappellant’s stores company employed a sales representative anda van with a driver and a person from the appellant’s stores accom-panied the sales representative for the purpose of accepting moneyfrom the retailers. The bill used for that purpose was calledRedistribution Sales Memo wherein a space is provided for theinsertion of the agent's name and seal and the words ‘sold onbehalf of’ appears on the top right hand corner of the memo. Hisevidence also revealed that a bank guarantee is obtained by thecompany for the appellant to secure payment of unsettled bills orcheques. That unsold goods after 6 months are taken back by thecompany, that for the consumer to set a claim to the goods pur-chased by him the only document available is the bill issued by thecompany. Further it was revealed that if someone from Kuliyapitiyawas to come to the company for purchase of goods that personwould be directed to the appellant and that the appellant could sellany product of the company without using a company memo.
S.Soundarajah, Accountant Eswaran Brothers was alsocalled by the respondent. It transpired in his evidence that theappellant is not a commission agent but a purchaser. That in thecontract entered into between the company and the appellantwhich is marked X12 the appellant is designated as dealer, thatgoods are issued to appellant on cash, cheques and credit. That nocommission is given to the appellant for distribution of goods butwith reference to X12 there could be other agreements or under-standing between the company and the appellant, that at the bot-tom of van job order marked X13 contains the words serviced byEswaran Brothers Marketing (Pvt) Ltd. on behalf of the dealer.
On an examination of this document marked X13 on the topright had corner there is a cage and on top of it the wordsDistributor is printed. Further his evidence revealed that the com-pany accepted responsibility with regard to quality of goods sold tothe appellant, that where the expiry date has lapsed or the goodsare damaged company would take back such goods, that goodsissued to appellant was distributed to retailers by company employ-ees using company vehicles and a person from the appellant’sstores accompanied them for the purpose of collecting paymentsfrom the retailers.
180
190
200
210
332
Sri Lanka Law Reports
12003} 2 Sri L.R
The position of the appellant was that he was an agent forthese companies, that his duty was to store and keep in safe cus-tody the goods received from the company in his stores atKuliyapitiya and to collect cash and cheques from the retailers,cash the cheques and remit the total amount at the rate of theagent’s price to the respective companies by his own cheque. Forthat he was given a commission which was the difference betweenthe wholesale price and the agent’s price, that originally he had togive blank cheques with his signature as security for stocksreceived by him, but later submitted bank guarantees for the same 220purpose, that goods were distributed by respective company vehi-cles driven by company drivers and the company sales represen-tative distributed the goods to the retail outlets, that what was notdistributed was returned to the company, that dishonoured chequeswere handed back to the respective sales representatives.Similarly, complaints as regards goods were also referred to thesales representative. He denied purchasing goods from the com-pany on credit and stated that it was incorrect to say that he pur-chased goods from companies and sold them to retailers.
On behalf of the appellant Sanjeewa de Silva who had been a 230sales representative of Eswaran Brothers covering Kuliyapitiyawas called! His evidence was that goods at the appellant’s storeswere loaded to company vehicles and that a person from the appel-lant’s stores would accompany him only for the purpose of takingcharge of cash and cheques collected by him from the retailers. Inhis evidence he referred to an occasion where two cheques he col-lected were dishonoured and as the retailer could not be traced hewas asked by the company to make good the amount of the twocheques to the appellant from his monthly salary.
On an examination of the evidence led at the inquiry, particu- 240larly the evidence shown above, it appears to me that the Board ofReview has come to a correct finding. In that representatives fromall three companies who were called to give evidence specificallysay that goods of the respective companies are sold to the appel-lant either on cash or cheques or on credit and once the goods aresold they become the property of the appellant and transportingthe goods from the company stores to the appellant’s stores atKuliyapitiya is done by the appellant using his own lorries. The
Ariyasena v Provincial Commissioner of Revenue,
CAWestern Province (Somawansa, J.);333
interpretion of contracts, the principles of offer and acceptance, therelationship between the companies, the appellant and the retailerand the common law principle 'nemo dat qui none habet’ (no onecan give what he does not have) will be of no significance when therepresentatives of the three companies in no ambiguous wordshave said in their evidence that the appellant is not a commissionedagent but a dealer who buys goods from the respective companiesand sells the same to the retailers.
It is conceded that ownership to goods sold by the companysales representative to the retailer is confirmed by the receipt or billissued by the company’s sales representative. However the receiptcannot be taken to be conclusive proof that the goods belong to thecompany or that its company’s property that is being sold. For allbills, or receipts issued by the sales representative carry the wordseither ‘sold on behalf of agent’ or ‘serviced by the company onbehalf of the dealer’. As evidence revealed the bills issued by thesales representative were called either redistribution sales memoor the van jobbing order whereas the company sold products to thedealer by issuing invoices on payment of cash.
The reason for the presence of the sales representative of thecompany, the user of fhe company vehicle driven by a companydriver is satisfactorily explained by the witnesses called by therespondent. Evidence revealed that the respective companiesadopted this procedure in order to maintain its goodwill, the qualityof the product and also with the intention of clearing a sales targetof at least 50% of the products to the public and also to prevent anysubstantive product being introduced through the dealers in theprocess of such sale.
It is also to be noted that whatever may be the understandingor agreements entered into between Eswaran Brothers and theappellant, the dealership agreement between the said EswaranBrothers and the appellant marked X12 is vital evidence whichgoes to show that the appellant was dealing with the said EswaranBrothers company as a dealer. The document X12 is addressed tothe appellant’s National Stores, with the heading products dealer-ship. Some of the clauses relevant to the issue at hand are as fol-lows:
250
260
270
280
334
Sri Lanka Law Reports
[2003] 2 Sri L.R
4. Any Retail Orders booked by company personnel onyour behalf should be fulfilled by you within the short-est possible time and this period should not exceedthree weeks from the date of the Retail Orders.
7.(a) All orders (under 6) should be accompanied by pay- 290
ment in Cash or Cheque issued by your establish-ment. The acceptance of cheques will be at the discre-tion of the company. All payments should be directedONLY TO THIS OFFICE.
(b) Accepted cheque payments should not be stoppedafter goods have been collected from our stores with-out prior intimation to the Company in writing statingvalid reasons for such action. Such payments shouldbe made good only by CASH OFI BANK DRAFT with-in 7 days.300
Your supplies may be collected from the Company •warehouse.
Your representative or agent calling for collectionshould carry the necessary authority to do so on yourbehalf. The Company shall not be responsible for loss-es or damage caused to products in transit or other-wise after goods have been duly accepted from theCompany Stores by your representative or agentagainst the invoice certified by the stores.
' Products will be released from the Company Stores 310
only on presentation of the receipted invoice issued bythe Company Sales Office.
15. Return of goods purchased will not be accepted and/orreplaced unless faulty manufacture is clearly indicatedbased on test reports of our Quality ControlDepartment. Acceptance of returned products shall beonly by prior reference and approval of the Company.
All returned goods are subject to testing and the find-ings of the Company Quality Control Department, shallbe final.320
CA
Ariyasena v Provincial Commissioner of Revenue,
Western Province (Somawansa, J.)
335
When one looks at this agreement one could see that oncethe products are accepted by the appellant at the companystores, it becomes the property of the appellant. The appellanthas to pay for the products before it is removed from the compa-ny stores and in the event of any default of such payment thecompany is to recover such sum from the bank guarantee fur-nished by the appellant.
The evidence also revealed that the companies that suppliedproducts to the appellant paid turnover tax. to the WesternProvincial Council in respect of their products supplied to the appel- 330lant. Evidence on this point went unchallenged and this evidencewould show that between the respective companies and the appel-lant there was a sale of goods and once the goods were sold theybecome the property of the appellant. Also according to the evi-dence of M.J.R.C. Fernando of Delmege Forsyth & Co., and S.Soundarajah of Eswaran Brothers the profit that goes to the deal-er, or in the instant case to the appellant is the difference betweenthe agents price and the wholesale price.
It appears that even the evidence of Sanjeewa de Silva calledby the appellant as a witness would go to show that the appellant 340was in fact a dealer for when two cheques collected by the witnessfor goods sold were dishonoured and the person who issued thecheques could not be traced the witness was directed by the com-pany to pay the amount of the two cheques to the appellant fromhis monthly salary. This piece of evidence again go to show that thegoods sold by the sales representative of the company belong tothe appellant and not the company.
No amount of speculation that there was no offer and accep-tance between the appellant and the retailers and the applicabilityof common law principle nemo dat qui none habet in respect of the 350transaction that took place between the appellant and the retailerbased on the bills issued when goods are sold or in view of thecompany sales representative issuing company bills to the retailercould over shadow the clear unambiguous evidence of the repre-sentatives of the companies to the effect the appellant was aretailer.
336
Sri Lanka Law Reports
12003} 2 Sri L.R
For the above reasons. I hold that the appellant is not a com-missioned agent but a dealer who sells products of the above-men-tioned companies for profit. The Board of Review having closely
analysed and considered the evidence placed before them and therelevant provisions of law has come to a correct finding that theappellant has failed to establish that he is a commissioned agentand not a dealer of the said companies.
Therefore in expressing my opinion in terms of section 84(6)of the Finance Statute No. 8 of 1990 the question of law referred toin the case stated as set out above is answered as follows:
Yes.
No.
No.
Question •(a) has been answered in the affirmative.
Questions b and c have been answered in the negative.
I hold that the majority decision of the Board of Review hadmade no error of law.
DISSANAYAKE, J.I agree.
The decision of the Board of Review upheld.
36C
370