GULATI, J. - (1.)M /s. Tata Oil Mills Co. Ltd. is the sole selling agent for India in respect of the products of M/s. Tata Chemicals Limited, Bombay, which has a factory at Mithapur in Gujarat for the manufacture of washing soap, soda ash, glycerine, toilet goods, etc. Tata Oil Mills Co. Ltd., Allahabad (hereinafter referred to as the assessee) is a branch office of Tata Oil Mills Co. Ltd., Bombay. The assessment year involved is 1958-59. There is no dispute with regard to the period from 1st April, 1958, to 30th September, 1958. The dispute relates to the period 1st October, 1958, to 31st March, 1959. The turnover for this period is Rs. 6,75,890.17. There is no dispute about the quantum of turnover. The dispute is as to whether the turnover in question represents inter-State sales and whether the assessee is liable to Central sales tax thereon. The assessee's contention is that it acted as the selling agent of the Mithapur Works, Gujarat, (hereinafter referred to as the manufacturers) and the turnover in dispute does not represent inter-State sales. The assessee, therefore, denies its liability for the Central sales tax. The sales tax department, on the other hand, contends that the assessee purchased goods from the manufactures and then sold them to buyers in Uttar Pradesh by transfer of documents while the goods were still in transit from the factory to the various destinations in Uttar Pradesh. According to the department, the assessee is liable to Central sales tax on such sales. The Sales Tax officer did not accept the assessee's contention and levied tax upon it. The assessee did not succeed before the appellate authority but on revision, the revising authority held that the assessee was not liable to Central sales tax. The Commissioner of Sales Tax is aggrieved and has brought this reference for the decision of this court on the following two questions of law :
"(1) Whether, under the facts and the circumstances of this case, the turnover of Rs. 6,75,890.17 from 1st October, 1958, to 31st March, 1959, in respect of the goods despatched from Mithapur Works, Gujarat, represented sales by the opposite party in the course of inter-State trade and commerce ? (2) Whether the opposite party was liable to pay tax under the Central Sales Tax Act on the aforesaid amount of Rs. 6,75,890.17 ?"

(2.)THE relationship between the manufacturers and the assessee is governed by written terms and conditions which are embodies in a letter, which the manufacturers wrote to the assessee on 14th May, 1952. These terms and conditions are as follows :
"(1) That you will sell, under our direction, the undernoted products : (a) Soda ash, (b) Sodium bicarbonate, (c) Caustic soda, (d) Bleaching powder, (e) Zinc chloride, (f) Liquid chlorine, (g) Hydrochloric acid, (h) Magnesium chloride, (i) Epsom salt and (j) Bromine. (2) That the entire output of our above products, whether for sale to industrial consumers or to bazar dealers, will be disposed of through you. However, we shall not be precluded from selling to other Tata concerns or, in special cases, to other important consumers and public bodies. (3) That if during the pendency of this agreement we manufacture any new product which has neither a restricted nor a specialized market, we shall give you the option to handle its sales upon the same terms and conditions as are herein mentioned. (4) That you will continue to sell our products through your existing sales depots in important centres in India and for the purpose of effecting the sales you will engage the necessary personnel trained and experienced in the sale of heavy chemicals. With a view to explaining the utility of our products to the consumers, as also the handling of complaints, you will have at least two qualified technical assistants at your head office; one for the northern depots and another for the southern depots. They should be qualified chemists and we shall be glad to send them to our works at Mithapur for further training, if required. (5) That you will assume all del credere risks, except on sales to Tata concerns or direct sales made by us. (6) That you will appoint distributors for the sale of our products. These distributors should have been in the chemical business for some time and have sufficient knowledge and experience in the handling of industrial chemicals. (7) That in the distribution of some of our products like hydrochloric acid and liquid chlorine where free delivery at the buyer's warehouse and collection of the empties is permitted under the trade custom you will deliver and collect the empties free of charge to the buyers, without any extra cost to us, within city limits in your port-town depots like Bombay, Madras, Calcutta and Cochin. For outside city limits, you may recover a reasonable delivery charge from the buyers. As for the inland depots, you may arrange for the delivery and return of the empties also at a reasonable delivery charge which may be recovered from the buyers. (8) That we shall fix the price at which our products will be sold from time to time as also make our own arrangements fro their publicity. However, in the fixation of prices, as also in the matter of publicity, we shall continue to consult you. (9) Agency commission :- That you will be paid commission on the gross realisations calculated at the following slab rates : Rate of commission (a) For the first slab of sales up to 3% Rs. 25 lakhs (b) For the second slab of sales exceeding Rs. 25 lakhs but not exceeding Rs. 50 lakhs. 2 1/2% (c) For the third slab of sales exceeding Rs. 50 lakhs but not exceeding Rs. 75 lakhs. 2% (d) For all sales over Rs. 75 lakhs. 1 3/4% No commission will be allowed to you on sales to other Tata concerns and, where sales are made direct by us to large industrial concerns and public bodies, you will be allowed commission at half the prescribed rates. (10) Besides the commission payable to you, we shall allow a discount of 3 per cent. on the sales of our soda ash and caustic soda and of 3 1/2 per cent. on our other products. These discounts shall in turn be passed on by you to the distributors specially appointed by you for the sales of our products. For the year 1952-53, the rate of commission payable to your distributors in respect of our products, other than soda ash and caustic soda, will come into effect on 1st May. (11) We shall bear all expenses incurred by you in respect of the following items :- (i) Rebates, if any. (ii) Insurance charges on our products stored either by you or sales depots in their respective warehouses for sales on consignment account. (iii) Leakage, wastage, etc. (iv) Freight and forwarding charges. (v) Customs and clearing charges.

The payment of rebate, if any, to dealers shall always be subject to our previous approval. Wherever octroi is levied it should be recovered from the buyers in the case of direct sales. However, in the case of sales on consignment basis where octroi is levied, the same may be paid on our account but it should be ultimately recovered from the buyers and our account credited in respect of the same.

(12) Where goods are despatched directly from our books at Mithapur, we undertake no responsibility for leakage, wastage, etc., in transit after a clear despatch document has been obtained by us, but, in case where we have fixed an f.o.r. destination price, we shall accept all responsibilities for leakage, wastage, etc., unless it is proved that this has been due to lack of proper supervision or care on your part in which case you will be held responsible. In no case, however, complaints not lodged within one month from the date of the receipt of the goods at the destination will be entertained and, in all such cases, whilst certifying the complaint your sales depot should verify the date of receipt of the goods from the railway register. In the absence of such certification from your sales depots, the complaints shall not be entertained. (13) That you will submit to us every month the market reports from all centres where your depots are situated. (14) That you will render us a progressive sales statement every week, showing sales made in the week together with a remittance of 75 per cent. of the actual sale, and shall settle the final account for a particular month by the 20th day of the following month. (15) That you will also forward to us : (i) a weekly statement showing the quantity sold during the week, and (ii) a monthly statement showing the sales effected during the month and the stocks held at the end of each month. (16) The above agreement shall terminate on 31st March, 1954, but at any time after one year by giving six months notice to the other."

(3.)HIS agreement was operative in the assessment year 1958-59. The working method of the assessee has been set out in an affidavit filed on its behalf before the Sales Tax Officer on 18th February, 1963. The material facts are contained in paragraphs 5, 6, 7, 9, 11 and 13 of the affidavit, which are reproduced below :
"(5) That the deponent sales office secured orders on behalf of M/s. Tata Chemicals Ltd., Mithapur, from the respective dealers and the intimations were sent accordingly to the manufacturers for the supply of the goods direct from Mithapur to the destination of the buyers under their instructions. (6) That goods were consigned from Mithapur to the respective destinations under self R/R and were forwarded to the respective bankers for collection of the amount along with the copy of the pro forma invoice (chalan). (7) That the deponent sales office prepared the invoices on receipt of the pro forma invoices (chalans) from the manufacturers and collected the 'C' forms and the payments from the respective banks. (8) That during the period 1st October, 1958, to 31st March, 1959, the deponent sales office had forwarded the 'C' forms on the net taxable goods of Rs. 6,75,890.17 and Rs. 40,504.90 to Sewri Mills, Bombay, and of Rs. 1,25,557.09 to Calcutta sales office. (9) That the deponent sales office have already passed on all 'C' forms and Central sales tax realised on their behalf between the period 1st October, 1958, to 31st March, 1959, to Sewri Mills, Bombay, and Calcutta sales office, and they have deposited the Central sales tax to their respective sales tax authorities. (10) That the deponent sales office is not liable to pay any sales tax on the transactions effected in the course of inter-State trade between the period from 1st October, 1958, to 31st March, 1959."