FAZAL ALI, J. - (1.) THESE appeals by special leave are directed against the order of the Commissioner of Sales Tax dated 5/05/1970, rejecting the revision filed by the appellant before him against the order of the Appellate Assistant Commissioner, Sales Tax, imposing sales tax for the period April 1, 195 8/03/1959 on consumption of motor spirit by the appellant for its own purposes which was treated by the Sales Tax Authorities as a sale to the appellant, and therefore falling squarely within the purview of S. 2 (1) of the Madhya Pradesh Sales of Motor Spirit and Lubricants Taxation, Act, 1957 as it stood prior to 31/05/1961. It also appears that for the period April 1, 195 7/03/1958 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 Caltex (India) Limited for supply of petrol and petroleum products to it on certain conditions. The relevant assessment years are 1-4-1957 to 31-3-1958; 1-4-1958 to 3-3-1959; 1-4-1959 to 31-3-1960 and 1-4-1960 to 31-3-1961. 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 have indicated, treated as a sale and therefore exigible to sales tax.
(2.) THE appellant filed an appeal against the order of the respondent - Sales Tax Officer - to the Appellate Authority under the Madhya Pradesh Sales of Motor Spirit and Taxation Act, 1957 - hereinafter referred to as 'the Act' - and pari passu filed a petition under Art. 226 of the Constitution in the High Court of Madhya Pradesh challenging the constitutionality of the Act and the assessments made in pursuance thereof. THE High Court, by its judgment dated 25/01/1961, dismissed the petition of the appellant. THE appellant then approached this Court through a special leave petition and also a petition under Art. 32 of the Constitution but without any success. This Court by its judgment dated 21/12/1962, held that the High Court had erred in assuming jurisdiction in deciding disputed questions involved in the petition and should have insisted on the appellant to move the Appellate Authority provided under the Act. THE petition under Art. 32, however, was allowed by this Court and a part of the definition of "sale" in S. 2 (1) of the Act was declared ultra vires. In the instant case, however, we are not concerned with this aspect of the matter. In compliance with the order of this Court, the appellant filed an appeal before the Appellate Assistant Commissioner of Sales Tax which was allowed by his order dated 6/03/1963, and the case was remanded to the Sales Tax Officer for fresh assessment after making necessary enquiries. Thereafter the respondent afresh by his order dated 20/10/1963, and made similar assessments for the other periods. Against this order the appellant moved this Court again, but ultimately withdrew the petition and filed a revision petition under S. 28 of the Act to the Commissioner of Sales Tax, Madhya Pradesh. The Commissioner, after hearing the arguments of both the parties, invited further documents and after making further queries upheld the order of the Appellate Assistant Commissioner of Sales Tax holding that the appellant was liable to pay sales tax inasmuch as the contract which was entered into between the appellant and Caltex (India) Ltd., was a pure and simple contract of agency and not a contract of sale. The Commissioner opined that as the contract was one of agency, 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 5/05/1970, 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 Caltex Company? In other words, if it is held that as a result of the agreement between 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 owner of these articles and was entitled to use them as he liked, because he had already paid the price of the diesel and petrol received by it. If this be the position, then it is manifestly clear that the user by the appellant for its own purposes may not amount to a sale which had already taken place at a point of time when the goods were delivered by the Caltex Company to the appellant. On the other hand, if it is held that the appellant was a mere agent under the agreement and was selling the articles on behalf of its principal - the Caltex Company - then any user of these articles or properties may amount to a sale so as to be exigible to sales tax. We may add that even then it was contended for the appellant that it would not amount to sale, but it did not press this contention later.
(3.) THE question, therefore' 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 documents and the surrounding circumstances and having regard to the course of dealings between the parties. In all the Sales Tax statutes as also the definition of "sale" in the Act in this case, the definition given in the Sale of Goods Act has been bodily lifted from that Act and inserted in the Tax Statutes. In the instant case under the Madhya Pradesh Sales of Motor Spirit Taxation Act, 1957, "sale" is defined thus : "Sale" with all its grammatical variations and cognate expressions means transfer of motor spirit for cash or deferred payment or for other valuable consideration and includes transfer of motor spirit by a society or club or any association to its members, but does not include a mortgage, hypothecation, charge or pledge; Explanation I. - Consumption of motor spirit by a dealer himself or on his behalf shall be deemed to be a "sale"; Explanation II. - A sale of motor spirit deemed to be a sale inside the State within the meaning of sub-s. (2) of S. 4 of the Central Sales Tax Act, 1956 (74 of 1956), shall also be deemed to be sale inside the State for the purposes of this clause." Thus it would appear that in order to satisfy the conditions of "sale" under the definition of the Act, the following conditions must be satisfied : (i) that there should be a transfer of motor spirit from the seller to the buyer; (ii) that the transfer must be for valuable consideration which may be either 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. 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 would not convert a contract of sale into one of agency, because in spite of these restrictions the transaction would still be a sale and subject to all the incidents of a sale. A contract of agency, however, differs essentially from a contract of a sale inasmuch as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal. This is yet another dominant factor which distinguishes an agent from a buyer - pure and simple. In Halsbury's Law of England, Vol. 1, 4th Edn., in para 807 at p. 485, the following observations are made : "THE relation of principal and agent raises by implication a contract on the part of the principal to reimburse the agent in respect of all expenses, and to indemnify him against all liabilities, incurred in the reasonable performance of the agency, provided that such implication is not excluded by the express terms of the contract between them, and provided that such expenses and liabilities are in fact occasioned by his employment." We have mentioned this fact, particularly because under the agreement between the Caltex Company and the appellant the loss sustained by the buyer has to be borne by it after delivery of the goods and the seller is not responsible for the same. Such a special arrangement between the parties is a factor which taken along with other circumstances points towards the agreement being one of sale. It is well settled that 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. Thus the mere formal description of a person as an agent or buyer is not conclusive, unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent. Learned Counsel for the appellant relied on several circumstances to show that on a proper construction of the agreement it could not, but be, held to be a contract of a sale. Learned counsel strongly relied on a decision of this Court in Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry, 21 STC 313 at p. 316 = ( AIR 1968 SC 784 at p. 787) where this Court held that transaction to be a sale in almost similar circumstances. Speaking for the Court, Ramasawami, 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. The essence of a contract of sale is the transfer of title to the goods for a prince 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 tht the true relationship of the parties in such a case has to be gathered from the nature of the contract, its terms and conditions, and the terminology used by the parties is not decisive of the said relationship. This Court relied on a decision in W.T. Lamb and Sons v. Coring Brick Company Ltd, (1932) 1 KB 710 at p. 717 where despite the fact that the buyer was designed as sole seeling agent, the Court held that it was a constact of sale. Lord Scrutton, with whom other Lords agreed, observed as follows : "Now it is well known that the certain trades the word "agent" is often used without any reference to the law of principal and agent. The motor trade offers an obvious example, where persons described as "agents" are not agents in respect of any principal, but are purchasers who buy from manufacturerers and sell independently of them; and many difficulties have arisen from this habit of describing a purchaser sometimes a purchaser upon terms, as an agent." ;