Sales tax on commission agency transactions depends on real transfer of ownership, not mere possession under agency form.

Explanation III to the sales-tax definition could not be read as expanding "sale" beyond a transfer of property in goods. It applied only where a principal-agent arrangement was in substance a concealed transfer of ownership intended to evade tax. On the stated facts, the amounts collected towards dharmam, kolagaram, valtar and sales tax were not part of the price and were not collected on behalf of the principals; the agents had accounted only for the jaggery price. As jaggery was taxable at the first sale and no prior sale was shown, the first taxable sale was by the commission agents, and sales-tax liability was properly fastened on the assessee.

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Issues: Whether, on a proper construction of section 2(n) and Explanation III, the delivery of jaggery by principals to commission agents for sale constituted a sale attracting sales tax at the first point.

Analysis: The statutory definition of sale requires a transfer of property in goods, and Explanation III cannot be read as enlarging that concept into a mere transfer of possession. The explanation was intended to reach transactions where, under the guise of agency, ownership in goods is in substance transferred so as to evade tax. Its language and structure, including the listed indicia in sub-clauses (i) to (iv), show that it applies only where the agency arrangement conceals a real sale or purchase. The Court applied harmonious construction and the presumption against construing an explanation so as to make the main provision inconsistent or unconstitutional. On the facts, the amounts collected towards dharmam, kolagaram, valtar and sales tax were not part of the price and were not collections made on behalf of the principals; the commission agents had accounted to the principals for the price of the jaggery itself. Section 5(3)(a) made jaggery taxable only at the first sale, and no prior sale was shown.

Conclusion: Explanation III did not apply on the facts, and the first taxable sale was by the commission agents. Liability to sales tax was therefore correctly fastened on the respondents, against the assessee.

Ratio Decidendi: An explanation to a taxing definition cannot be construed to enlarge the concept of sale beyond transfer of property in goods, and a principal-agent arrangement attracts tax only where it is in substance a transfer of ownership amounting to the first sale.

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