Sale versus agency analysis confirms dealer ownership on delivery, making self-consumption of goods non-taxable as a sale.

Title to petrol and Hispeedol passed to the dealer on delivery under the distribution agreement, because the substance of the contract and the parties' dealings showed outright purchase rather than agency. The agreement fixed sale and purchase at specified prices, billing was in the dealer's own name, payments were made as buyer, and the dealer bore storage and handling losses without reimbursement. Clauses on record-keeping, territory limits, commission, and security were treated as ancillary and insufficient to alter the real character of the transaction. On that basis, the dealer's own consumption of the goods was not a sale, and sales tax could not be levied on such consumption.

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Issues: Whether the petrol and Hispeedol supplied to the appellant were purchased as owner or held merely as agent of the supplier, and whether the appellant's own consumption of those goods amounted to a sale exigible to sales tax.

Analysis: The governing test was whether, on a true construction of the agreement and surrounding dealings, title passed to the appellant on delivery or whether the appellant merely held and sold the goods on behalf of the supplier. The Court applied the settled principle that the real nature of the transaction must be gathered from the substance of the contract, its terms, and the course of dealing, and that labels such as "agent" or "buyer" are not conclusive. The agreement itself stated that the company shall sell and the dealer shall buy the products at fixed prices. The correspondence and accounts showed outright purchase, immediate payment, billing in the appellant's own name, and sales to customers as owner. The appellant also bore storage and handling losses without reimbursement, which was inconsistent with agency and consistent with ownership. Clauses relied upon by the revenue, such as record-keeping, territory restrictions, commission, and security, were held insufficient to convert a sale into agency.

Conclusion: The appellant was the owner of the goods after delivery, and its own consumption of the petrol and Hispeedol was not a sale; the levy of sales tax on such consumption was unsustainable.

Ratio Decidendi: Where an agreement for distribution shows transfer of goods for price with title passing on delivery and the dealer deals with the goods as owner, ancillary restrictions, commission, or record-keeping clauses do not displace the character of the transaction as a sale, and self-consumption of the goods by the owner is not exigible as a sale.

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