Case: Peninsular Traders, Perumbavoor and Another Vs. Dy. Commissioner, Sales Tax (Law), Kerala

70 the appellant M/s Peninsular Traders (now referred to as "the firm") entered into an agreement with the appellant M/s Indian Rare Earth Ltd. (now referred to as "the company") for the "distributorship of trisodium phosphate". For the Assessment Years74 the firm was treated as the agent of the company and assessments were finalised accordingly. Onthe Deputy Commissioner issued notices under Section 35 of the Kerala General Sales Tax Act setting aside the aforesaid assessments and remanding the matters to the assessing authority for fresh assessment upon the basis that the firm was not the agent of the company but the purchaser of the said chemicals from the company. The Kerala Sales Tax Appellate Tribunal, approached by the appellants, reversed the order of the Deputy Commissioner. The tax revision cases were filed by the Sales Tax authorities before the High Court and the High Court, by the judgment and order under challenge, allowed the tax reference cases. Hence these appeals

Reasoning: 9. The stress by learned counsel for the Sales Tax authorities on the judgment of this Court in Alwaye Agencies v. Dy. Commr. of Agricultural Income Tax and Sales Tax would appear to be somewhat misplaced for what the distributor got under the agreement that was construed in that case was a rebate and not a commission. It was also pointed out that supplies were made to the distributor against payment, either immediate or deferred, and even when the goods were lifted directly by customers it was the distributor who had to guarantee their payment. These circumstances showed that in respect of such transactions the property in those goods passed to the distributor when the bills were endorsed and handed over to it. The agreement before us does not contain suchThe overall effect the agreement produced on our mind is that it is an agreement of agency and that there is no transfer of the said chemicals from the company to the firm. As is clear from several clauses in the agreement, particularly clauses (6) and (10), a running account was to be maintained by the company of its dealings with the firm and that the value of the said chemicals was to be debited to the firms account only when sold by the firm. Clause (4), when it required payment to be made of the quantity lifted by the firm by the end of the month or be charged interest at the rate of 9%, therefore, suggests that the firms account would be debited only in the event that payment for all the chemicals lifted delivery during the month had not been sold by theThere is nothing in it which indicates that the property in the unsold chemicals would pass to the firm at theClause (5) does not carry the matter further. Clause (7) is not an unusual clause, of the agent being responsible for the solvency of purchasers from itself; so also clause (8), the terms whereof are not an unusual obligation undertaken by an agent8. The view that we take is supported by the observations of the Tribunal made in regard to the books of account of the company.