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TMI Blog1965 (12) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... into by them with the Government. They were assessed to sales tax as dealers on the turnover of the sale of foodgrains by them to their customers during the assessment year. The orders passed by the Sales Tax Officer were confirmed by the Judge (Appeals) Sales Tax. The assessees applied to the Judge (Revisions) to revise the orders of the Judge (Appeals) contending that they were not dealers and that the transactions entered into by them with their customers did not amount to sale. The Judge (Revisions) allowed the applications holding that the assessees were agents on behalf of the Government and that sales of the foodgrains by them to their customers were sales on behalf of the Government and they could not be made liable to pay sales tax on their turnover. In the statement he writes that he has not held the assessees to be not dealers and that he only held that the transactions between them and the Government by which they received the foodgrains sold to their customers were not sales because the property in them remained in the Government, that they sold them as agents of the Government and that consequently they were not liable to pay sales tax. "Sale" is defined in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amount to sales they are liable to pay the sales tax on the turnover of the sales. It is immaterial to their liability how they obtain the foodgrains. If they are dealers we are not concerned with the question whether the transactions between them and the Government are sales or not. Whether they are sales or not may have to be considered when deciding whether they are dealers or not but the real question is whether they are dealers or not and that is the question that should have been framed. Since "sale" means transfer of property we have to decide here whether the transactions that the assessees entered into with their customers involve transfer of property in the foodgrains to the customers or not. There cannot be any doubt about the answer; the customers become the owners of the foodgrains delivered to them by the assessees. The property in the goods is undoubtedly transferred to them, whether from the assessees or from the Government. So long as the property is transferred to them they are sales regardless of whether it is their property or the Government's property that is transferred. The question whether the assessees sold on their own account or as dealers is irreleva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is to transfer the property to them. On the other hand, they may be described as buyers or purchasers but if the intention is not to transfer the property to them they will be agents and not buyers. It is stated in 46 American Jurisprudence, "Sales", paragraph 17: "The primary test of whether a particular contract or transaction whereby goods are delivered or shipped by one party to another for sale by the latter creates the relation of buyer and seller or only a relation of principal and agent is the intention of the parties to be gathered from the whole scope and effect of the language used and mere verbal formulas, if inconsistent with the real intention, are to be disregarded. It does not matter by what name the parties chose to designate it. That does not determine its character. The courts look beyond mere names and within to see the real nature of the agreement, and determine from all its provisions taken together, and not from the name that has been given to it by the parties, or from some isolated provision, its legal character and effect." In Hafiz Din Mohammad Haji Abdulla v. State of Maharashtra[1962] 13 S.T.C. 292., Shah, J., speaking for the Court said at page 293: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment controlled foodgrains; this does not necessarily make them agents. Under clause 2 the assessees are required to establish a retail shop in a certain place and display a notice that Government controlled foodgrains are sold there at such and such rates. Under clause 3 they are required to obtain foodgrains from the Government and to sell them to the public at prices fixed by the authorities and according to their instructions. The conditions that they should display a notice and sell at a certain price do not necessarily make them agents; they do not prevent the transfer of property in the foodgrains to them. There is nothing in these clauses to suggest that they were to sell the foodgrains as agents, or on behalf of the Government and not as their own property. By clause 4 they are required to obtain foodgrains from the Government and deposit their price at the rates fixed by the authorities from time to time; the payment of the price at the time of obtaining foodgrains shows that they are buying them and not taking delivery of them as agents. It is stated in 46 American Jurisprudence, "Sales", paragraph 18: "One of the most material considerations in determining whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are liable to pay sales tax when they sell them to their customers. By clause 15 the assessees are forbidden to sell any other foodgrains; this does not make them agents as such a restriction is quite consistent with the relation of buyer and seller. By clause 18 the assessees are forbidden to sublet or assign the benefit of the agreement. By clause 19 they have to give security. By clause 20 the agreement is made liable to be terminated for any breach by them of its terms and conditions. These provisions are also of a neutral nature. Clause 21 is to the effect that the assessees would be liable to be prosecuted for criminal breach of trust under the Penal Code for short weighment, mixing inferior foodgrains, charging higher prices from customers, showing fictitious sales in their registers and refusing to sell foodgrains. The offence of criminal breach of trust is committed when a person is entrusted with dominion over a property. It is not committed by the owner of the property. So it was argued vehemently that the assessees by being made liable for criminal breach of trust were assigned the status of agents and did not become owners. But this was only a threat by the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintain the established retail prices of the manufacturer and was to see that its own sub-vendors and agents were to do likewise, it was not to solicit trade in the territory of other contractors and was to purchase produce worth at least a certain amount, the benefit of the agreement was not salable or transferable by the contractor and the contractor was to devote its time, attention and abilities primarily to the interest of the manufacturer. None of these material circumstances exists in the instant case. The State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.[1958] 9 S.T.C. 353. simply distinguished between a contract of sale and a contract of work and is irrelevant. In Messrs. Cement Ltd. v. The State of Orissa[1961] 12 S.T.C. 205. , Narasimham, C.J., and Das, J., merely followed the case of Gannon Dunkerley Co.(3) In Goverdhan Hathibhai Company's case[1961] 12 S.T.C. 464., the agreement was with a fair-price shopkeeper and it was held to be an agreement of agency. That agreement was different from the instant agreements. The learned Judges dissented from Rohtas Industries Ltd. v. State of Bihar[1958] 9 S.T.C. 248. but the Supreme Court in 12 S.T.C. 615 affirmed Roh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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