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TMI Blog1977 (4) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and, therefore, falling squarely within the purview of section 2(1) of the Madhya Pradesh Sales of Motor Spirit and Lubricants Taxation Act, 1957, as it stood prior to May 31, 1961. It also appears that for the period April 1, 1957, to March 31, 1958, the tax was levied under the Madhya Bharat Sales of Motor Spirit Taxation Act, 1953. The appellant primarily carries on the business of manufacturing sugar and incidentally the business of selling high speed diesel oil, petrol and lubricants from the petrol pump installed by the appellant in the factory premises. The appellant entered into an agreement with the Caltex (India) Limited for supply of petrol and petroleum products to it on certain conditions. The relevant assessment years are April 1, 1957, to March 31, 1958; April 1, 1958, to March 31, 1959; April 1, 1959, to March 31, 1960; and April 1, 1960, to March 31, 1961. In the course of its business the appellant sold petrol to various trucks and other car owners and also consumed part of the petrol for its own purposes. In the instant appeals, we are only concerned with the consumption by the appellant of the quantity of petrol for its own purposes which has been, as we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency, the title to the property remained in the Caltex (India) Ltd. and if the appellant used the petrol for its own purposes as agent, then such a user would amount to a sale of the property of the company by the agent to itself so as to be exigible to sales tax. It is against the order of the Commissioner dated May 5, 1970, that the appellant has come up to this Court after obtaining special leave. We have heard counsel for the parties at very great length and we have also gone through the documents filed by the parties before the Commissioner and incorporated in the paper book. It seems to us that the only point for decision lies within a very narrow compass. The short point to be decided is whether at the time when the appellant was consuming the high speed diesel oil and petrol for its own purposes, was it doing so as owner of these articles or merely as an agent of the Caltex Company. In other words, if it is held that as a result of the agreement between the Caltex and the appellant and the transactions following thereupon the title to the diesel or petrol passed to the appellant by the delivery of these articles, then from that date the appellant became the owner of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cash or deferred payment; and (iii) that the transfer must not be in the nature of a mortgage, hypothecation, charge or pledge. Under explanation I, consumption of motor spirit by a dealer himself or on his behalf shall be deemed to be a sale. But this explanation has already been held to be ultra vires by this Court in the previous Bhopal Sugar Industries Ltd.'s case [1963] 14 S.T C. 406 (S.C.). Thus the essence of the matter is that in a contract of sale, title to the property passes on to the buyer on delivery of the goods for a price paid or promised. Once this happens the buyer becomes the owner of the property and the seller has no vestige of title left in the property. The concept of a sale has, however, undergone a revolutionary change, having regard to the complexities of the modern times and the expanding needs of the society, which has made a departure from the doctrine of laissez faire by including a transaction within the fold of a sale even though the seller may by virtue of an agreement impose a number of restrictions on the buyer, e.g., fixation of price, submission of accounts, selling in a particular area or territory and so on. These restrictions per se woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale. Learned counsel strongly relied on a decision of this Court in Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry [1968] 21 S.T.C. 312 at 316 (S.C.)., where this Court held the transaction to be a sale in almost similar circumstances. Speaking for the court, Ramaswami, J., observed as follows: "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 the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will therefore be liable to account for the sale proceeds." It is clear from the observations made by this Court that the true relationship of the parties in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in that case the court came to a finding of fact that there was no concluded contract at all and the agreement was merely an executory one and, therefore, the question of determining the relationship between the parties did not naturally arise. Similarly reliance was placed on Michelin Tyre Co. Ltd. v. Macfarlane (Glasgow) Ltd. (in liquidation) [1917] 2 Scots. L.T. 205.. Here also the question was decided on the peculiar terms of the agreement in question and this authority cannot be called into aid for the purpose of deciding the present case. Learned counsel for the respondent also relied on Financings Ltd. v. Stimson[1962] 3 All E.R. 386., but the facts in the aforesaid case appear to be quite different from the facts of the present case. Strong reliance was also placed by Mr. Panjwani, counsel for the respondent, on Willcox & Gibbs Sewing Machine Co. v. Daniel S. Ewing (1891) 141 U.S. 627; 35 Law Ed. 882. at 884-885.,where the court observed as follows: "'And it is agreed and understood that this appointment or agency is not salable or transferable by second party without obtaining the written consent of first party, but such consent is to be given providing the purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and that the cement delivered, despatched or consigned by the manufacturing companies to the Marketing Company or to its orders or in accordance with its directions was sold by the manufacturing companies to the Marketing Company.........." In view of the observations of this Court, therefore, the Kerala High Court decision' referred to above must be held to have been impliedly overruled. Having discussed the law on the subject, we shall now analyse the agreement in the present case and interpret the same in accordance with the principles laid down by the various authorities referred to above. To begin with, clauses 1 and 2 express in absolutely categorical terms that the nature of the agreement is to sell the property in question and nothing else. Clause 2 runs thus: "The company shall sell to the dealer and the dealer shall buy from the company the said products at the prices pre-established by the company therefor, and which are in effect on the date on which the diesel oil is despatched/or delivered by the company." Clause 2 expressly states that Hispeedol was to be sold and the dealer was buying the property from the company at prices to be fixed by the company. The term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by way of outright sale. It appears from the documents produced by the appellant before the Commissioner that on inquiries made from the seller, namely, the Caltex Company, they confirmed the fact that the goods were sent to the buyer on the basis of outright sale. In this connection, the relevant portions of the letter read thus: "We refer to the discussion your Mr. Mody had this forenoon with our M/s. G. H. Sani and M. R. Patankar.......... In this connection we would like to confirm as under: 1.. Since the inception of your dealership, clause No. 4 of our Standard Petrol Dealer Agreement does not apply to you. 2.. Supplies of petroleum products ex Bombay or ex our depots in Madhya Pradesh have been made to you on the basis of outright sale." This letter also shows that clause 4 of the Standard Petrol Dealer Agreement did not apply to the appellant. Similarly another letter at page 167 of the paper book written by the manager of the appellant to the Commissioner of Sales Tax clarified the position that the appellant had purchased the goods on outright basis. The relevant portion of this letter may be extracted thus: "M/s. Caltex (India) Ltd., never supplied goods, i.e., p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of the property and sold it not as the property of the company but as its own property. This fact is clearly proved by the cash memos and credit vouchers produced by the appellant at pages 195-197 of the paper book. The cash memo describes the Bhopal Sugar Industries Ltd. as the owner of the goods and so does the credit voucher. This, therefore, conclusively shows that the agreement could not have been an agreement of agency because the essential distinction between an agreement of sale and an agreement of agency is that in the former case the property is sold by the seller as his own property and in the latter case the property is sold by the agent not as his own property but as the property of his principal and on his behalf. Another important circumstance which indicates that the goods were sold to the appellant is that the appellant in his letters produced on further queries made by the Commissioner of Sales Tax made a clear statement that the appellant had borne the losses due to leakage, driage, evaporation, etc., during the course of storage at the pumps of the appellant and the seller-Caltex Company did not reimburse the appellant for such losses. The relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property supplied belonged to the principal and was delivered to certain persons on the instructions of the principal. This clause, therefore, is yet another important factor which shows that the agreement was intended to be a contract of sale rather than a contract of agency. Furthermore, the agreement contains a clear and unequivocal declaration by the seller-company that the status of the appellant would not be that of an agent. In this connection, clause 15 of the agreement runs thus: "Nothing in this agreement contained shall in any way operate by implication or otherwise to constitute the dealer as agent of the company in any respect and for any purpose whatsoever, and the dealer shall have no right or authority to assume or create any obligation of any kind express or implied on behalf of the company in any other respect whatsoever." This clear declaration on the part of the parties leaves no room for doubt that the agreement was intended to be a contract for sale and that the appellant was not only not regarded as an agent but was expressly excluded from the category of an agent. The cumulative effect of the circumstances mentioned above leads to the inescapable conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statements called for were required only for a very limited purpose, viz., to prevent the appellant from misusing his privileges and thereby jeopardising or harming the reputation of the company. In these circumstances, therefore, the argument based on this clause appears to be of no assistance to the counsel for the respondent. Clause 8 of the agreement clearly shows that the appellant had been loaned properties belonging to the company like petrol pumps and their accessories, etc., and it was in respect of these properties which had been given to the dealer for working the petrol pumps that the statements of account were called for from the appellant. This appears to be the modus operandi adopted by the seller-company in respect of all its distributors. There is no stipulation in the agreement which requires or enjoins on the appellant to submit accounts of the Hispeedol or petrol which he may have sold to various customers, after having taken delivery of the same from the company. In these circumstances, therefore, this argument of the learned counsel for the respondent must be overruled. Another circumstance relied upon by the respondent was the fact that the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "It comes to this that all the documents show on the face of them a contract between principals. The mere mention of commission in the contract as signed is not in any way, as pointed by the learned Judges of the Court of Appeal, inconsistent with the relation being between principal and principal." This decision was followed by the Calcutta High Court in Ganesh Export and Import Company v. Mahadeolal Nathmal [1955] 25 Comp. Cas. 357; A.I.R. 1956 Cal. 188., and we find ourselves in complete agreement with the view taken by the Calcutta High Court. For these reasons, therefore, the argument by the learned counsel for the respondent is not tenable in law. Finally, reliance was placed on clause 18 of the agreement appearing at page 126 of the paper book, which requires the dealer to furnish security for the due observance and performance of the stipulations contained therein. Such a stipulation also does not by itself show that the agreement was one of agency. The present agreement undoubtedly contains some elements of agency also, but the main question which has to be determined in this case is whether or not at the point of time when the appellant was consuming the Hispeedol or p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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