1975 (1) TMI 85 - HC - VAT and Sales Tax

Summary

Issues:
Whether the transaction between the respondents and a company constituted a sale or an agency relationship under the Bombay Sales Tax Act, 1959.

Analysis:
The judgment delivered by the High Court of Bombay involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, at the instance of the Commissioner of Sales Tax. The dispute arose from a transaction between the respondents and a company regarding the supply of certain goods. The company had an actual user's license for importing the goods, and the respondents were to act purely as agents of the company throughout the transaction. The key question was whether this transaction should be considered a sale or an agency relationship, determining the liability for sales tax.

The Court analyzed the facts and documents related to the transaction, emphasizing the importance of considering the true nature of the agreement between the parties and the circumstances of their relationship. The Court noted that the goods were imported under the company's license and a letter of authority clearly stating the agency relationship. The Court highlighted that in such circumstances, the default assumption should be that the transaction is one of agency unless there is clear evidence to the contrary.

The Court examined various aspects of the transaction, including the terms of the order, the mention of the "lowest" rate, and the provision regarding the time limit for accepting goods. The Court dismissed arguments suggesting a sale based on these factors, emphasizing that the overall context and the language of the documents indicated an agency relationship. The Court particularly emphasized a letter from the company explicitly stating that the respondents were acting as agents and that the property in the goods would not pass to them at any stage.

Ultimately, the Court upheld the Tribunal's decision that the transaction was one of agency, not sale, and therefore not liable for sales tax under the Bombay Sales Tax Act, 1959. The Court found that the circumstances, including the explicit terms of the agreement and the conduct of the parties, supported the conclusion that the respondents were acting as agents of the company. As a result, the Court answered the question in the affirmative, affirming the Tribunal's decision, and ordered the applicant to pay the costs of the reference.