Agency or sale turns on substance, property passing, and risk allocation in second-hand goods transactions.

An arrangement described as agency was treated as a sale where the contract, read as a whole, showed that property and risk remained with the supplier until the goods were inspected and accepted. The court emphasised the substance of the transaction over labels such as "agent" and "commission", and relied on clauses allowing rejection of unsatisfactory goods and requiring the supplier to remove rejected goods at his own risk. On that basis, the petitioner was regarded as carrying on dealer transactions, and the supply of second-hand gunny bags was held to be a sale liable to sales tax.

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Issues: (i) Whether the petitioner was a dealer within the meaning of section 2(c) of the Orissa Sales Tax Act, 1947 in respect of the supply of second-hand gunny bags. (ii) Whether the transaction between the petitioner and Orissa Cement amounted to a sale within the meaning of the Orissa Sales Tax Act, 1947 so as to attract sales tax liability.

Issue (i): Whether the petitioner was a dealer within the meaning of section 2(c) of the Orissa Sales Tax Act, 1947 in respect of the supply of second-hand gunny bags.

Analysis: The relationship between the petitioner and Orissa Cement had to be determined from the real substance of the agreement and surrounding circumstances. The use of words such as 'agent' and 'commission' was not , because commercial arrangements may adopt agency language even where the true relationship is that of vendor and purchaser. The decisive consideration was the allocation of property and risk, especially the clauses providing for examination of the bags at Rajgangpur, rejection of unsatisfactory bags, and the petitioner's obligation to remove rejected bags at his own risk. Those features were inconsistent with a true agency and indicated that the petitioner was dealing as a seller.

Conclusion: The petitioner was not merely an agent and was treated as a person carrying on transactions as a dealer. The answer to this issue was against the petitioner.

Issue (ii): Whether the transaction between the petitioner and Orissa Cement amounted to a sale within the meaning of the Orissa Sales Tax Act, 1947 so as to attract sales tax liability.

Analysis: The agreement showed that the property in the goods did not pass at Hirakud merely on the petitioner taking delivery from the Project authorities. The goods were to be sorted at Rajgangpur, and only accepted bags were to be paid for, while rejected bags remained at the petitioner's risk and had to be removed by him. These clauses were characteristic of a contract of sale of ascertained goods, where the buyer may inspect and reject goods not conforming to the contract. The arrangement therefore preserved title and risk in the petitioner until acceptance by Orissa Cement, making the later supply a resale rather than a mere agency delivery.

Conclusion: The transaction between the petitioner and Orissa Cement was a sale within the meaning of the Orissa Sales Tax Act, 1947. The answer to this issue was against the petitioner and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the petitioner was liable to sales tax on the transaction, since the arrangement was found to be one of sale and not of agency.

Ratio Decidendi: In determining whether an arrangement is one of agency or sale, the court will look to the substance of the contract, especially the passing of property, acceptance, and allocation of risk; where the supplier retains title and risk until the buyer accepts the goods, the transaction is a sale.

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