1960 (8) TMI 74 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the agreement dated 1st June, 1952, between the assessee and Caltex (India) Limited constitutes the petitioner as a purchaser or a commission agent.
2. Whether the respondent is precluded from levying and collecting sales tax on the disputed turnover due to the licence granted under section 9 of the Sales Tax Act.
3. Whether the order of the Sales Tax Appellate Tribunal is sustainable in view of its failure to decide the question of law.

Issue-Wise Detailed Analysis:

1. Nature of the Agreement:
The primary issue is whether the agreement dated 1st June, 1952, constitutes the petitioner as a purchaser or a commission agent. The court examined the terms of the agreement, which contains 42 clauses, and grouped them under two heads: rights and liabilities during the agreement and after its termination. Key clauses include:

- Clause 2: The company can notify the minimum quantity of kerosene the petitioner must order each month.
- Clause 5: The company can change prices without notice.
- Clause 8: The petitioner must not represent himself as the selling agent.
- Clause 12: The petitioner bears the risk of loss or damage.
- Clause 17: The company fixes the resale price.
- Clause 34: On termination, the petitioner must deliver the company's properties and stock of kerosene.

The court concluded that the agreement's terms indicate a principal-agent relationship rather than a buyer-seller relationship. The petitioner lacks freedom of control, sufficiency of profit, and liberty of action, suggesting that the business is conducted on behalf of the company.

2. Exemption Under Section 9:
The second issue is whether the petitioner is exempt from sales tax due to the licence granted under section 9 of the Sales Tax Act. The court noted that the petitioner must not only prove his status as an agent but also demonstrate compliance with the terms of the licence. The court found no findings by the taxing authorities or the Appellate Tribunal on the terms of the licences renewed for the relevant assessment years.

3. Sustainability of the Tribunal's Order:
The third issue is the sustainability of the Sales Tax Appellate Tribunal's order, given its failure to decide the question of law. The court found that the Tribunal had wrongly interpreted the agreement as a sale rather than an agency. The court emphasized that the petitioner's entitlement to exemption depends on whether he conducted his business according to the renewed licences under section 9 after the taxing authorities had reviewed the agreement of 1st June, 1952.

Conclusion:
The court concluded that the agreement between the petitioner and Caltex (India) Limited constitutes an agency relationship. The petitioner is entitled to exemption under section 9, provided he complied with the terms of the licence. The cases were remanded to the Appellate Tribunal to determine the terms of the licence and whether the petitioner adhered to them. The revision petitions were allowed, earlier judgments vacated, and the cases remanded for fresh adjudication. Costs will abide by the final result.