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TMI Blog1958 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ion before the Board of Revenue, Bihar, by a petition filed on 20th August, 1952. The petition before the Board is enclosed (Exhibit D). The Board, after hearing the parties, rejected the petition with the observation that it is open to the petitioner to approach Government for such ex gratia relief as Government may deem fit to give. The Board's order dated 29th August, 1953, is enclosed (Exhibit E). 5.. The assessee then came up to the Board with a petition for reference to the High Court on the following three points of law: (i) Whether in the circumstances of the case and on a proper construction of the materials on record, the transactions between the assessee, Rohtas Industries Ltd., and the Cement Marketing Co., of India Ltd., were sales to the latter within the meaning of the Bihar Sales Tax Act, 1944? (ii) Whether in the circumstances of the case the assessee (Rohtas Industries Ltd.) is entitled to get deduction in computing its taxable turnover of the sum of Rs. 7,17,622-1-0 under section 5(2)(a)(v) of the Bihar Sales Tax Act, 1944? and (ii) Whether in view of the later decisions the assessee is required to afford any further proof or proofs for the purpose of getting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir cement during the period of the agreement" and it was stipulated that they will not themselves directly or indirectly sell or export cement to any customer. It appears that on the 1st of October, 1944, the Bihar Sales Tax Act, 1944, came into operation and the assessee was registered as a dealer under that Act in the Shahabad Circle. In respect of assessments of sales tax for the six quarters ending on the 30th of June, 1947, the assessee claimed deductions under the various clauses of section 5(2)(a) of the Bihar Sales Tax Act, 1944. The claim was disallowed by the Commissioner of Sales Tax on the ground that the sales to third parties were not the sales of the assessee but were the sales of the Marketing Company. It was contended on behalf of the assessee that the Marketing Company was not an independent entity but was a selling organization of the Manufacturing Companies, including the assessee. The argument was rejected by the Commissioner of Sales Tax on the ground that under the agreement of the 4th of June, 1942, there was no contract of agency but there was contract of sale between the Manufacturing Companies and the Marketing Company. The assessee took the matter in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to by any of the Manufacturing Companies prior to first January one thousand nine hundred and forty one so far as the same have to be carried out during the period of this agreement. Each of the Manufacturing Companies has delivered to the Marketing Company all contracts for sale of cement entered into prior to first January one thousand nine hundred and forty one and declares that the contracts so disclosed are the only contracts for sale or supply of cement outstanding on first January one thousand nine hundred and forty one." It is clear from clauses 2 and 3 of the agreement that the Manufacturing Companies have no power to sell cement to third parties and the right of sale is exclusively vested in the Marketing Company. In other words, the assessee cannot sell or deliver cement to any body except to the Marketing Company or to its order and direction. This is one of the important points of consideration in judging the true nature of the contract. Clause 5 of the agreement is in the following terms: "5. Each of the said Manufacturing Companies shall be paid by the Marketing Company a uniform basic payment of Rs. 24 per ton, free on rail or free on board or free on truck or lorry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates that the Marketing Company shall make the uniform basic payment together with the additional sum, if any, for special cement or special packing, within two months from the date of despatch by such company. Clause 6 of the agreement is also important and is in the following terms: "6. The Marketing Company shall sell the said cement at such price or prices and on such terms as they may in their discretion think fit and may enter into such contracts for the sale or supply of cement or rapid hardening cement or coloured cement or special cement and on such terms and conditions as they may think fit. Ordinarily the Cement Marketing Company in fixing the selling prices shall have regard to the cost of production provided however that whenever or wherever the Marketing Company has to start competition against or to sell in competition against any competing selling organisation or manufacturer or body of manufacturers the Marketing Company shall be free to fix prices even below cost. Under this clause the Marketing Company is empowered to fix the selling prices for the cement in its discretion. The Marketing Company is also authorised to enter into such contracts for the sale and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing Companies in proportion to the quantity of cement supplied by the Manufacturing Company to the order of the Marketing Company. Clause 24 is to the following effect: "24. The Marketing Company agrees that if after all payments whether by way of basic payment or otherwise to the Manufacturing Companies pursuant to the clauses hereinabove contained and after providing for all operating and working expenses and other payments, charges and disbursements of the Marketing Company including all advertisement and propaganda charges and expenses and including the expenses of the Concrete Association of India at present owned by the Associated but which will now be taken up by the Marketing Company and after setting aside such sums as the Marketing Company may think fit for depreciation and for employees provident fund any surplus is left, the Marketing Company will, after paying a dividend not exceeding 6 per cent per annum on its paid up capital, divide the balance of the surplus among the Manufacturing Companies in proportion to the number of tons of cement of every variety and kind supplied by such Manufacturing Company to the order of the Marketing Company." It is important to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agency between the assessee and the Marketing Company and that their relationship is one of seller and purchaser in the legal sense. Learned counsel on behalf of the assessee referred to clause 24 of the agreement which provides that surplus profits made by the Marketing Company shall be divisible among the Manufacturing Companies in proportion to the quantity of cement supplied. I do not think that clause 24 qualified the legal effect of the other important clauses of the agreement. In the eye of law the Marketing Company has a distinct legal personality and an independent legal existence from that of the assessee and I am satisfied, for the reasons already given, that the cement delivered, despatched or consigned by the assessee to the Marketing Company or to its order or in accordance with its directions were sales by the assessee to the Marketing Company and so liable to be taked under the Bihar Sales Tax Act (Bihar Act VI of 1944). The view that I have taken is borne out by a decision of the Court of Appeal in Ex parte White, In re NevillL.R. 6 Ch. App. 397. In that case T. Company were in the habit of sending goods for sale to N, who was a partner in the firm of N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sell to his customers at that price, and to receive payment from them at that time, then the course of dealing would be consistent with his being merely a del credere agent, because I apprehend that a del credere agent, like any other agent, is to sell according to the instructions of his principal, and to make such contracts as he is authorised to make for this principal; and he is distinguished from other agents simply in this, that he guarantees that those persons to whom he sells shall perform the contracts which he makes with them; and therefore, if he sells at the price at which he is authorized by his principal to sell, and upon the credit which he is authorized by his principal to give, and the customer pays him according to his contract, then, no doubt, he is bound, like any other agent, as soon as he receives the money, to hand it over to the principal. But if the consignee is at liberty, according to the contract between him and his consignor, to sell at any price he likes, and receive payment at any time he likes, but is to be bound, if he sells the goods, to pay the consignor for them at a fixed price and a fixed time-in my opinion, whatever the parties may think, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Act 11 of 1863. At page 310 Sir Robert P. Collier, who delivered the opinion of the Board, has stated as follows: "The declaration in the action contained two counts respectively relying upon these two clauses of the Act; but with respect to the second count no question now arises. The question arises solely upon the first count, which relies upon the second section of the Act; and the question is whether there was or was not a sale of a certain property from Ekstein to Lippert. The law of the Cape with respect to the contract of sale is thus stated by the Chief Justice: 'Under our law, as under the Roman law, a sale may be defined as a contract in which one person promises to deliver a thing to another, who on his part promises to pay a certain price'. In Van Leeuwen cap. 17, section 1, is this passage: 'The purchase is understood to be accomplished as soon as the price and the mutual condition has been fixed, although the money had not been paid, nor the delivery of the article made, unless a real misunderstanding had taken place in the articles sold'. Mr. Justice Blackburn, in his treatise on the Contract of Sale, at p. 177, quotes Pothier thus: 'In general a contract of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which made an agreement with a German Company, whereby the latter were to act as the appellant's "selling agents". The agreement provided that the appellants were to be paid not what their goods realised on being sold by the German Company but an arranged price. Under that agreement the appellants shipped a quantity of pig lead to the German Company, and it was seized as prize. In this state of facts it was held by the Privy Council that before the seizure the appellants had parted with the property in the goods to the German Company and therefore the goods must be condemned. Therefore, for the reasons I have expressed, I hold that upon a proper construction of the agreement dated the 4th June, 1942, between the assessee and the Marketing Company, the cement delivered, despatched or consigned by the assessee to the Marketing Company, or to its order, or in accordance with its direction, are sales to the latter within the meaning of the Bihar Sales Tax Act (Bihar Act VI of 1944), and the question of law referred to the High Court by the Board of Revenue must be answered against the assessee and in favour of the State of Bihar. The assessee must pay the costs of this reference. Hear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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