TMI Blog1978 (6) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into by and between M/s. Ascu Wood Products, the predecessor-in-interest of the applicant, and one M/s. V.D. Swami Co. Pvt. Ltd. of Madras, the latter was appointed the sole selling agent of the applicant with effect from 1st September, 1963, for selling of products manufactured and services provided by the Ascu Wood Products on, inter alia, the following terms and conditions: "3. The agent would sell the products and services of the manufacturers and would within seven days of the receipt of such orders forward them together with an advance amounting to 25 per cent of the quoted price to the manufacturers for the fulfilment of the said orders, but where agreed or staggered deliveries might be spread out over a period exceeding 4 months any advance under the clause would be liable to be paid only on the value of agreed or staggered deliveries of products or services for the first 4 months of such period. 4.. The agent would sell the products and services on such terms and conditions of payment as they might deem fit, but on their own responsibility and on their own risk. 5.. The agent would sell the products and services of the manufacturers at the prices quoted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarters ending on 31st March, 1964. At the assessment the applicant claimed exemption in respect of an amount of Rs. 1,04,283.67 on account of sales made through the said M/s. V.D. Swami Co. Pvt. Ltd. The Commercial Tax Officers did not accept the contention of the assessee and held that the transactions between the applicant and M/s. V.D. Swami Co. Pvt. Ltd. were sales inasmuch as the latter were realising sales tax and had collected the declaration forms from the final purchasers. Accordingly, the said sum of Rs. 1,04,283.67 was included in the taxable turnover and assessed to sales tax. Being aggrieved, the applicant preferred an appeal against the assessments to the Assistant Commissioner of Commercial Taxes. It was contended in the appeal, inter alia, that the applicant did not effect any sales itself and all sales were made by the agent, M/s. V.D. Swami Co. Pvt. Ltd., in terms of the said agreement dated 1st January, 1964. The goods in the hands of the agent belonged to the applicant. It was contended further that sales tax was being paid by the agent in respect of the goods and no further tax was exigible in the hands of the applicant. The Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of bidis. (8) On the goods remaining in stock when the rate is increased or decreased, necessary adjustment of accounts will be made. (9) If I were to be acting in contravention of these conditions, you will have the right to cancel my agency. You will have right to make arrangements for the sale of your bidis as you think best." The question arose whether such agreements created a relationship of principal and agent or vendor and purchaser between the appellants and the merchants concerned. The Supreme Court held that though it was recorded in the agreement that the merchants would be agents the designation was of little consequence inasmuch as the real relationship between the parties had to be ascertained. Construing clauses 3, 6, 7 and 9 of the agreements in question, the Supreme Court held that in the hands of the merchants, the bidis were to remain the property of the assessee as in the said clauses the goods were referred to as "your bidis". Clause 4 of the agreement also emphasised that the property in the goods despatched would remain with the appellant as by that clause the merchants undertook to remit money towards goods after the sales were effected. On const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed to pay to the company Rs. 24 per ton of ordinary cement and above Rs. 24 per ton of special cement supplied, but such fixed rate was liable to be revised from time to time. (e) Provision was made for payment of interest by the company if they desired immediate payment in cash for any supply for which credit had been given by the Cement Marketing Company Ltd. (f) The Cement Marketing Company Ltd. was authorised to sell cement on such price or prices or at such terms as it might in its sole discretion think fit and the contracts were to be made by it in its own name. "(g) The company undertook to deliver, despatch and consign cement in accordance with the orders and instructions of the Cement Marketing Company Ltd. from the company's factories and works specified by the Cement Marketing Company Ltd. On a construction of these terms, the Supreme Court found that the Cement Marketing Company Ltd. was constituted a monopoly purchaser of the cement manufactured by the appellant during the subsistence of the agreement and that the relationship between the appellant and the Cement Marketing Company Ltd. was that of a seller and buyer. The appellant had no control over the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt taxes as may be leviable and pay the same in accordance with law. (f) The appellant would discharge all liabilities devolving upon them as dealers under the various Sales Tax Acts. (g) The appellant would credit to the Corporation at the end of every month the sale proceeds of the cement sold at the price referred, reduced, inter alia, by the appellant's remuneration. On a construction of the said agreement and its terms and after considering the course of conduct of the appellant's business, the Supreme Court held that the appellant was not a mere commission agent or a broker acting on behalf of the Corporation. There was no privity of contract between the ultimate customers and the Corporation and no property in the goods sold passed to the Corporation. After taking symbolical delivery of the cement produced at its works the appellant was in the custody of the cement. It was entering into contracts for sale of such cement and selling the same. The property in the goods was being passed on to the buyers by the appellant. The Supreme Court held that the appellant was carrying on the business of selling and was effecting sales of cement to the customers and thus came within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent not only for the goods but also for services to be rendered. Such services could obviously be rendered by the principal. The prices at which the ultimate purchasers would purchase the goods would be controlled by the manufacturer. The manufacturer had similar control over publicity. The agreement authorised the agent to issue invoices on behalf of the manufacturer. Railway receipts and other documents issued to the manufacturer would be made over to the agent for the purpose of collection of the proceeds of sale. The agent would be entitled to a fixed stipulated commission in consideration of the guarantee, the agent would give for collection of sale prices. If the ultimate purchaser failed to pay the price, for the goods supplied, the manufacturer agreed to authorise the agent to sue in the name of the manufacturer to realise the same. The above clauses indicate that the agreement in the instant case is an agreement as between a principal and an agent and not an agreement between a vendor and a purchaser. The decision in the case of Bagal Kot Cement Co.[1976] 37 S.T.C. 73 (S.C.); A.I.R. 1976 S.C. 357. is of little assistance to the sales tax authorities in the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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