Agency arrangement under a coal control order was not a taxable sale, so sales tax liability did not arise.

A statutory coal control order that confined purchase and despatch to Government-authorised channels meant the respondents could not be treated as purchasers from the colliery or as resellers to the Kathiawar Coal Distributing Co. The arrangement was characterised as a lawful agency structure, with the respondents acting as del credere agents and earning brokerage within permitted limits, rather than as effecting a taxable sale. On that basis, the transactions did not satisfy the legal incidents of a sale under the Bombay Sales Tax Act, 1946, and sales tax liability did not arise on the footing that the respondents had sold the coal.

---

---

Issues: Whether the transactions between the respondents and the Kathiawar Coal Distributing Co., or between the respondents and the mills and factories, amounted to sales within the meaning of the Bombay Sales Tax Act, 1946, and whether the respondents were liable to sales tax on that basis.

Analysis: The relevant control order regulated the sale and despatch of coal and prohibited purchase or acquisition of coal from a colliery except under Government authority. On the facts found, the respondents could not be treated as purchasers from the colliery so as to resell coal to the Kathiawar Coal Distributing Co. Equally, the arrangement could not lawfully be regarded as a sale by the respondents to that company, because the statutory scheme contemplated the respondents acting as del credere agents and receiving brokerage within the permissible limits. The transaction therefore fell within the lawful agency structure rather than a taxable sale by the respondents.

Conclusion: The answer to the first question was in the negative. The transactions were not sales by the respondents for the purpose of sales tax liability.

Final Conclusion: The reference succeeded only on the principal question of taxability, while the remaining questions were not answered for want of jurisdiction, so the respondents were not fastened with sales tax on the footing that they had sold the coal.

Ratio Decidendi: Where a statutory control order prohibits purchase and sale except under Government authority and the parties are operating within an agency and brokerage structure, the transaction cannot be treated as a taxable sale by the intermediary unless the legal incidents of a sale are shown to exist.

---