1956 (7) TMI 39 - HC - VAT and Sales Tax

Issues Involved:
1. Nature of the transactions between the assessees and their customers.
2. Whether the supply of goods by the assessees to their customers constitutes a sale under the Sale of Goods Act.
3. The legal character of the relationship between the assessees and their customers.
4. The applicability of case law to determine the nature of the transactions.

Detailed Analysis:

1. Nature of the Transactions Between the Assessees and Their Customers:
The assessees, a firm of commission agents, were assessed to a tax on a turnover for a specific period. They contended that their business involved purchasing goods on behalf of their customers and supplying these goods to them, which should not be treated as sales. The Sales Tax Officer and the Revising Authority, however, considered these supplies as sales and assessed the assessees to tax, concluding that two sales had taken place: one from the sellers to the assessees and the other from the assessees to their customers.

2. Whether the Supply of Goods by the Assessees to Their Customers Constitutes a Sale Under the Sale of Goods Act:
The primary question referred to the court was whether the transactions amounted to a sale by the assessees to their principals as defined in the Sale of Goods Act. The court examined the legal character of the transactions, emphasizing that the property in the goods must pass from the seller to the buyer for a transaction to be considered a sale. The court found that the assessees did not disclose the names of their customers to the sellers, resulting in no privity of contract between the sellers and the customers. Thus, the assessees were the purchasers and were liable for the price of the goods. The subsequent transfer of goods to their customers was not a sale but an act done in discharge of their duty as agents.

3. The Legal Character of the Relationship Between the Assessees and Their Customers:
The court analyzed the relationship between the assessees and their customers, concluding that it was one of agency rather than a vendor-purchaser relationship. The assessees acted as commission agents, purchasing goods on behalf of their customers and supplying them as part of their agency duty. The court referred to several cases, including Cassaboglou v. Gibb and Bhagwandas Parasram v. Burjorji Ruttonji Bomanji, to support the view that the relationship was that of principal and agent.

4. The Applicability of Case Law to Determine the Nature of the Transactions:
The court referred to various precedents to determine the nature of the transactions. In Cassaboglou v. Gibb, the court held that the relationship between the parties was that of principal and agent, not vendor and purchaser. Similarly, in Bhagwandas Parasram v. Burjorji Ruttonji Bomanji, the court recognized the status of a commission agent and held that the transactions were not sales. The court also considered Feise v. Wray, which established that a commission agent who purchases goods without disclosing the principal's name has the right to stop goods in transitu, similar to an unpaid vendor. However, this right did not change the nature of the relationship from agency to vendor-purchaser.

Conclusion:
The court concluded that the transactions between the assessees and their customers were not sales within the meaning of the Sale of Goods Act. The relationship was one of agency, and the supply of goods by the assessees to their customers was an act done in discharge of their duty as agents. Therefore, the question referred to the court was answered in the negative, and the assessees were entitled to their costs.

Costs:
The applicants succeeded and were entitled to their costs, assessed at Rs. 200. The fee of the learned standing counsel was fixed at the same amount.

Final Judgment:
Reference answered in the negative.

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