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TMI Blog1971 (9) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... ------ The judgment of the court was delivered by HEGDE, J.- This is an appeal by special leave. It arises from the decision of the High Court of Gujarat in a reference under section 61(1) of the Bombay Sales Tax Act, 1959. That reference was made by the Gujarat Sales Tax Tribunal at Ahmedabad. After stating the case, the Tribunal submitted the question: "Whether on the facts and in the circumstances of the case, the transactions are purchases of cotton by the society from its members." to the High Court for its opinion. The High Court has answered that question in the affirmative. Aggrieved by that decision, the assessee has brought this appeal. The material facts are these: The assessee is a co-operative society registered under the Bombay Co-operative Societies Act, 1925 (to be hereinafter referred to as the Act). The assessee will hereinafter be referred to as the "society". It carries on the business of ginning and pressing cotton brought by its members. During the assessment period, viz., November 1, 1960, to October 31, 1961, the assessee received large quantity of cotton from its members and the same was sold by it either after ginning and pressing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty in the goods passed to the assessee in return for price and whether the assessee sold those goods as its own. Bearing in mind these principles, we shall now proceed to examine the provisions of the Act as well as the relevant bye-laws which take the place of agreement between the parties. It is not the case of the State that the society had in any manner acted in contravention of the bye-laws. Therefore, all that we have to find out is the true effect of the bye-laws. In this case we are dealing with a case of a "producers' society". "Producers' society" is defined in section 3(h)(2) of the Act. That definition reads: "'Producers' society' means a society formed with the object of producing and disposing of goods as the collective property of its members and includes a society formed with the object of the collective disposal of the labour of the members of such society." The society with which we are concerned in this case was evidently formed primarily with the object of selling the produce of its members as their collective produce. The preamble to that Act says: "Whereas it is expedient further to facilitate the formation and working of co-operative societies for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions, it is clear that the object of the society is not to purchase or sell any cotton or cotton seeds on its own behalf. The membership of the society is confined to farmers of the villages mentioned in bye-law 7(a) and to co-operative societies of the taluks mentioned therein. Bye-law 37 deals with the powers of the managing committee. For our present purpose only clauses (7), (14), (16) and (18) of that bye-law are relevant. Clause (7) says: "To fix the rates for ginning, pressing and for other work that may be carried out according to the regulations and resolutions and to sell, purchase and get baled goods other than unginned cotton according to the instructions that may be given and to give facilities of every other kind." Clause (14) reads: "To lend money against the security of goods come in possession of the society according to the convenience and if possible subject to the rules." Clause (16) reads: "To get goods managed through the society and the machinery, building etc. of the society insured." Clause (18) says: "To arrange to sell agricultural produce other than cotton, unginned cotton and cotton seeds of the members and produce of village ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers to goods to be sold through the society and not to sale of the society's goods. Bye-law 48 is extremely important. That bye-law says: "The goods of all the members will be gathered together either by grading according to the grades fixed by the general body or without grading and then sold either ginned or unginned. At the end of the season after making up the accounts the society will pay in full to all the members according to average rates gradewise or if grades are not made then generally after deducting the dues of the society and the charges for ginning, pressing the goods and expenses for sale etc." This bye-law refers to the goods of the members of the society and not to the goods of the society. Because of that bye-law the members of the society, who are bound by that bye-law, must be deemed to have authorised the society to pool their goods, grade them, if necessary, and sell them either after ginning or without ginning. That bye-law also prescribes the mode in which the price fetched should be distributed amongst the persons whose goods are sold. The society is the agent of all its members. Its principals are many. Because of the various bye-laws, the several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than ten per cent. on machinery and not less than five per cent. on other depreciating property will be carried to depreciation fund, (4) if there be no balance in profit fund then the written off dues sanctioned by the managing committee, (5) loss. The amount remaining over after deducting all the above-mentioned amounts will be considered as net profit." Bye-law 73 provides for the distribution of the net profits. Both bye- laws 72 and 73 deal with the profits of the society and not any profits arising by the sale of goods entrusted to it by its members. The society has got its own sources of income. It charges for ginning and pressing. It has also other sources of income. It is that income that is dealt with in bye- laws 72 and 73. Our attention has not been drawn to any other bye-law from which we could conclude that the society had purchased either cotton or cotton seeds from its members. We have earlier seen that the Tribunal had placed reliance on bye-laws 37(7), 37(18), 37(19), 48, 49, 52, 53 and 55 for arriving at the conclusion that the society had purchased cotton and cotton seeds from its members. We have already examined bye-laws 37(7), 37(18), 48 and 52. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular agreement is an agreement of sale or an agreement of agency has to be decided on the basis of the terms of that agreement. Decisions rendered on the basis of other agreements may be useful for finding out the principles to be applied in finding out the true character of an agreement but those decisions cannot conclude the question before the court as no two agreements are likely to be similar. The nature of each agreement has to be decided on its own terms. The Tribunal, the High Court as well as the counsel for the State have placed great deal of reliance on the decision of this court in Rohtas Industries Ltd.'s case [1961] 12 S.T.C. 615 (S.C.). Therein the assessee was a limited liability company manufacturing cement. The assessee and some other cement manufacturing companies entered into an agreement with the Cement Marketing Company of India Ltd., whereby the marketing company was appointed as the "sole and exclusive sales manager" for the sale of cement manufactured by the manufacturing companies and the manufacturing companies agreed not to sell directly or indirectly any cement to any person save and except through the marketing company. The manufacturing companies w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , does not support the contention of the State. Therein this court on an examination of various clauses in the agreement held that the relationship between the assessee and its representatives was that of agent and principal and not of vendors and purchasers. Therefore the State can seek no assistance from that decision. Counsel for the State relied on the decision of the High Court of Madhya Pradesh in Ramachandra Rathore and Bros. v. Commissioner of Sales Tax, Madhya Pradesh [1957] 8 S.T.C. 845., and the decision of the Bombay High Court in Versova Koli Sahakari Vahatuk Sangh Ltd. v. State of Maharashtra [1968] 22 S.T.C. 116, in support of the State's case. In our opinion the agreements considered in those decisions are wholly different in nature than the bye-laws with which we are concerned in this case. For the reasons mentioned above, we allow this appeal, set aside the judgment of the High Court and discharge the answer given by the High Court and answer the question referred to the High Court in the negative and in favour of the assessee. The appellant-assessee is entitled to its costs both in this court as well as in the High Court. Appeal allowed. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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