TMI Blog1989 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... athan, JJ. [Judgment per : Sabyasachi Mukharji, J]. - This is an appeal under Section 35-L(b) of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') from the judgment and order of the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Tribunal') dated the 20th January, 1984. 2. The appellants are the manufacturers of 'Supercem Waterproof Cement Paint', hereinafter called as the 'Product', and other allied products in their factory at Madras. They manufacture and market this product throughout India. It is stated that the appellants are a small manufacturing firm with no branches and/or sales offices in any other State, city or town. In these circumstances, an agreement for sale described as an 'agreement of sale' dated 1st May, 1962 was entered into with Gillanders Arbuthnot Co. Ltd., of Calcutta, hereinafter called 'Gillanders'. The said company has a very big sales organisation having its offices located at all important places in the territory of Union of India and they market goods of all types, not only of the appellants herein, but also of several other reputed manufacturers through their well staffed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product for the purpose of sale thereafter. The manufacturer however agreed to accept return of all stocks held by the selling agents for a period of more than two years and replace such stocks free of all charges, provided the lids of the containers were intact and sealed. The agreement further stated that all consignments would be despatched by the manufacturer at Railway risk. In case there was any damage or shortage in transit the selling agents would lodge a claim on the Railways, provided, however, that the manufacturer should take all suitable actions for recovery of the damages from the Railway authorities and should reimburse the selling agents all losses and damages that they might suffer in the premises. It was further agreed that in consideration of the premises, the manufacturer should pay the selling agents a discount, namely, 17-1/2% on the transfer prices of all materials supplied against the orders received from the selling agents from its offices at Calcutta, Kanpur, Delhi and Bombay; 18% on the transfer prices of all materials supplied against the orders received from the selling agents from its Madras Office. It also provided for an additional cash discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execute and despatch orders to all dealers outside the State of Madras, provided firm instructions were received to that effect from the selling agents, to eliminate unnecessary handling charges. The agreement provided that in such cases, the manufacturer would credit the selling agents with their usual commission after deducting therefrom any discounts which might be allowed to the dealer on the specific instructions of the selling agents. The manufacturer further agreed to execute such orders against the guarantee of the selling agents. In the case of direct orders to dealers outside the State of Madras, the selling agents might quote either F.O.R. station of despatch or destination terms. If the goods supplied by the manufacturer were found to be sub-standard goods or inferior in quality the manufacturer should at his own cost take back the goods and replace the goods of satisfactory marketable quality at its own cost. The manufacturer should not be responsible for failure to deliver or for any delay in delivery if such failure or delay was due to act of God or enemies of the State, wars, revolution, embargo, riots, civil or political disturbances, strikes, lockouts declared du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illanders. The Tribunal also referred to the clause which provided that on termination of the agreement by either party, unsold stocks lying with the Gillanders were to be returned to the appellants. On an analysis of the aforesaid aspects of the clauses, the Tribunal came to the conclusion that the title to and ownership of goods, continued with the appellants and did not pass to the Gillanders. In order to be sale, the title should pass from the seller to the purchaser for a price. If it is not so, the Tribunal noted, then it was not sale. The Tribunal came to the conclusion that it was an agreement for sole selling agency and not an agreement for sale. The question is whether the Tribunal was right on this aspect. 6. On behalf of the appellants, Shri P.P. Rao contended that it has to be emphasised that there was no flow back of the profit to the manufacturer and that was absent in the instant case. He also referred to the fact that there were two prices - transfer price and selling price and there was good deal of difference between these prices. He submitted that read in the proper perspective, there was no agency. He emphasised that there was stipulation for payment of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various builders and contractors. Lord Justice Slesser was of the view that the agreement in the present case was somewhat difficult to understand, because in one and the same document the same parties were described as 'merchants' and as 'sole selling agents', the first being a correct, but the second one an incorrect description, according to the Lord Justice. It was held that the agreement was one of vendor and purchaser. Referring to some of the contract terms in the instant case, Shri Rao submitted that in this case also, the terms referred to by the Tribunal and emphasised before us by Shri Mahajan, learned counsel for the respondent, were merely indicative of the fact that the parties described a 'purchase upon terms' as "sole selling agent". It was an agreement whereby the purchaser upon terms was described as "sole selling agent", submitted Shri Rao. 8. This Court had occasion to consider this aspect in Gordon Woodroffe Co. v. Sheikh M.A. Majid Co. (1966 SCR Supp. 1). In that case, the respondent was a trader in hides and skins and the appellant was an exporter. During the period January to August, 1949, there were several contracts between them. The contracts menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract was not one of agency for sale but was an agreement of sale. The appellant purchased the goods from the respondent at 2-1/2% less and sold them to the London purchasers at the full price so that the 2-1/2% was its margin of profit and not its agency commission. This point was emphasised by Shri Rao as a point similar to the instant case. This Court held therein that the fact that the goods were sent with the respondent's mark, that the premium was paid outside the terms of the contract, that the appellant considered it fair and just to pay the whole of the premium to the respondent or to share it with him, and that additional burden with respect to weight and quality was thrown on the respondent, had no significance in deciding the nature of the contract. This Court was also of the opinion that the clause with regard to lien was consistent with the transaction being an outright sale, because the appellant was acting as creditor of the respondent and charged interest on advances only till the date of shipment of the goods when it became the purchaser of the goods from the respondent. It was held that an agent could become a purchaser when the agent paid the price to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person called an 'agent' was entitled to alter the goods, manipulate them, to sell them at any price that he thought fit after these had been so manipulated, and was still only liable to pay them at a price fixed beforehand, without any reference to the price at which he sold them, it was impossible to say that the produce of the goods so sold was the money of the consignors, or that the relation of principal and agent existed, according to this Court in that case. 9. Reliance was also placed on Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry [1968 (2) SCR 476], where the concept of 'sale' in the background of the Andhra Pradesh General Sales Tax Act, 1957 was considered. At page 480 of the report, this Court observed that as a matter of law, there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 4(4)(c) of the Act. He submitted that the concept of 'having interest directly or indirectly in the business of each other' has to be judged independently of the transaction in question. He drew our attention to the various authorities for the proposition that the purpose of introduction of definition of 'a related person' by the Central Excises and Salt (Amendment) Act, 1973 to contend that the distributors have to be related and that such relationship ought to be found out independently of the transaction in question. Our attention was drawn to the observations of this Court in A.K. Roy v. Voltas Ltd. - 1977 (1) E.L.T. (J 177) = 1973 (2) SCR 1089, where at page 1093 of the report, this Court noted that the appellants had contended that the agreements with the wholesale dealers conferred certain extra-commercial advantages upon them, and so, the sales to them were not sales to independent purchasers. Our attention was also drawn to the observations of this Court that decisions cited before this Court in the above case were correct insofar as these held that the price of sales to wholesale dealers would not represent the 'wholesale cash price' for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that we have come to the conclusion that the Tribunal was right in holding that the transaction with the Gillanders was not a transaction of sale but an agreement for agency, there was, therefore, no sale in favour of Gillanders as contended for by the appellants. If that is the position, then the first sale was by the Gillanders to the customers of the market. Then the price of that sale would be the assessable value under Section 4 in this case. The decision of the Tribunal is, therefore, right in any view of the matter, and this other aspect of the matter referred to by the Tribunal is not necessary for us to determine to dispose of this appeal. In that view of the matter, the decision of the Tribunal must be upheld. 14. Shri Rao, however, further submitted that there were certain other claims like cost of transportation and other permissible deductions such as duty of excise and sales tax, which should have been deducted from the value subject to proof by the appellants. Shri Rao submitted that apart from this, there were other permissible deductions as envisaged by this Court in Assistant Collector of Central Excise and Others, etc. v. Madras Rubber Factory Ltd. - 1987 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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