Case: Alwaye Agencies Vs. Dy. Commissioner of Agricultural Income Tax and Sales Tax

or deferred as provided in the agreement, and even when the goods were destined directly to the customer, it was the distributor who had to guarantee to arrange the payment. Clause 8 makes it quite clear that the arrangement for effecting payment had to be made by the distributor either in case of by demand draft or by irrevocable letter of credit in the companys favour negotiable against R/R or other documents of despatch of goods. It is also significant that where there was some time lag between the sending of the goods and the payment, the goods were to be insured at the cost of the assessee. This circumstance, i n our opinion, clearly shows that in respect of the goods dispatched under orders placed by the distributors, the distributors really acted as purchasers of the goods which they in turn sold to the customers and did not merely act as agents of the sa id company. In respect of the goods in question which were despatched through public carriers, although the invoices were prepared in the names of the consumers of the goods, and the goods were consigned to the destination through public carrier booked to self, as pointed by the Tribunal and the bills were endorsed and handed over to the assessee. When considered in the light of the agreement, these circumstances clearly shows that in respect of these transactions the property in the goods dispatched passed to the distributor on the bills being endorsed and handed over to the distributors.Our attention was drawn by Shri Krishnamurthy Iyer, learned counsel for the assessee (appellant) to the decision of this Court in The Bhopal Sugar Industries Ltd. v. Sales Tax Officer, Bhopal, [1977] 3 S.C.C. p. 147 where the question was whether the contract was one of agency or sale. This Court held that the question will have to be determined having regard to the terms and recitals of the agreement, the intention of the parties as may be spelt out from the terms of the document and the surrounding circumstances and having regard to the course of dealings between the parties. While interpreting the terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the word agent or agency is used or the words buyer and seller are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. We are in complete agreement with the principles laid down in this decision. We may point out that although we have referred to the assessee being described in the agreement as "distributor" and not as "agent" and to the fact that what they got was described as "rebate" and not "commission", we have not treated these circumstances as in any manner decisive. In our view, however, these descriptions considered in the light of the general tenor of the agreement and the circumstances surrounding the transactions between the parties show that the assessee was not agent, but really a purchaser from the company in respect of the goods in question. 4. Learned counsel for the appellant also drew our attention to a passage in Pollack &Mullas Commentary on the Sale of Goods and Partnership Acts, (4th Edition at page 114) where the learned authors have cited with approval the statement of Lord Justice Cotton to the effect that when the vendor on shipment takes the bill of lading to his own order, he has the power of absolutely disposing of the cargo, and may prevent the purchaser from ever asserting any right of property therein. Lord Justice Cotton observed that in such cases the purchaser had no property in the goods, though he had offered to accept bills or had paid the price. These observations, however, in our view, have no application to the case before us, because in the case before us, although the goods were consigned to the self, the documents relating to the despatch of goods, namely R/R or other documents of title were endorsed in favour of the assessees and hand ed over to them on payment or were sent to the assessees through the bank for collection.We may mention that it was urged by learned counsel for the respondent, in the alternative, that, although sub-section 21 of Section 2 of the Kerala General Sales Tax Act defines sale in a manner similar to the definition of the said term under the Sale of Goods Act, Explanation 5 to sub-section 21 of Section 2 provides that two independent sales or purchases shall, for the purposes of that Act, be deemed to have taken place in the circumstances set out in that explanation. A perusal of the said explanation shows that such independent sales or purchases take place, inter-alia, where the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser. It was submitted by him that in view of this explanation, even if the appellant firm was merely the agent of the said company in respect of the transactions in question, there were two sales which must be deemed to have taken place in respect of each of the transactions for the purposes of the said Act; one from the said company to the appellant and the other from the appellant to the respective consumer; and that the sale from the said company to the appellant was liable to be included in the taxable turnover of the assessce. In ourview, it is not necessary to consider this submission, because, according to us, in view of the said agreement, considered in the light of the surrounding circumstances, the assesseeas distributor was not an agent of the said company in respect of the transaction in question, but was the purchaser and hence the transactions were liable to be included in the turnover of the assessee. 5.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This circumstance, i n our opinion, clearly shows that in respect of the goods dispatched under orders placed by the distributors, the distributors really acted as purchasers of the goods which they in turn sold to the customers and did not merely act as agents of the sa id company. In respect of the goods in question which were despatched through public carriers, although the invoices were prepared in the names of the consumers of the goods, and the goods were consigned to the destination through public carrier booked to self, as pointed by the Tribunal and the bills were endorsed and handed over to the assessee. When considered in the light of the agreement, these circumstances clearly shows that in respect of these transactions the property in the goods dispatched passed to the distributor on the bills being endorsed and handed over to the distributors.Our attention was drawn by Shri Krishnamurthy Iyer, learned counsel for the assessee (appellant) to the decision of this Court in TheBhopal Sugar Industries Ltd. v. Sales Tax Officer, Bhopal, [1977] 3 S.C.C. p. 147where the question was whether the contract was one of agency or sale. This Court held that the question will have to be determined having regard to the terms and recitals of the agreement, the intention of the parties as may be spelt out from the terms of the document and the surrounding circumstances and having regard to the course of dealings between the parties. While interpreting the terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the word agent or agency is used or the words buyer and seller are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. We are in complete agreement with the principles laid down in this decision. We may point out that although we have referred to the assessee being described in the agreement as "distributor" and not as "agent" and to the fact that what they got was described as "rebate" and not "commission", we have not treated these circumstances as in any manner decisive. In our view, however, these descriptions considered in the light of the general tenor of the agreement and the circumstances surrounding the transactions between the parties show that the assessee was not agent, but really a purchaser from the company in respect of the goods incounsel for the appellant also drew our attention to a passage in Pollack &Mullas Commentary on the Sale of Goods and Partnership Acts, (4th Edition at page 114) where the learned authors have cited with approval the statement of Lord Justice Cotton to the effect that when the vendor on shipment takes the bill of lading to his own order, he has the power of absolutely disposing of the cargo, and may prevent the purchaser from ever asserting any right of property therein. Lord Justice Cotton observed that in such cases the purchaser had no property in the goods, though he had offered to accept bills or had paid the price.These observations, however, in our view, have no application to the case before us, because in the case before us, although the goods were consigned to the self, the documents relating to the despatch of goods, namely R/R or other documents of title were endorsed in favour of the assessees and hand ed over to them on payment or were sent to the assessees through the bank for collection.We may mention that it was urged by learned counsel for the respondent, in the alternative, that, although sub-section 21 of Section 2 of the Kerala General Sales Tax Act defines sale in a manner similar to the definition of the said term under the Sale of Goods Act, Explanation 5 to sub-section 21 of Section 2 provides that two independent sales or purchases shall, for the purposes of that Act, be deemed to have taken place in the circumstances set out in that explanation. A perusal of the said explanation shows that such independent sales or purchases take place, inter-alia, where the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser. It was submitted by him that in view of this explanation, even if the appellant firm was merely the agent of the said company in respect of the transactions in question, there were two sales which must be deemed to have taken place in respect of each of the transactions for the purposes of the said Act; one from the said company to the appellant and the other from the appellant to the respective consumer; and that the sale from the said company to the appellant was liable to be included in the taxable turnover of the assessce. In ourview, it is not necessary to consider this submission, because, according to us, in view of the said agreement, considered in the light of the surrounding circumstances, the assesseeas distributor was not an agent of the said company in respect of the transaction in question, but was the purchaser and hence the transactions were liable to be included in the turnover of the assessee.