Real substance of the agreement showed sale, not agency, making the assessee liable for sales tax on foodgrains turnover.

The agreement was construed by reference to its real substance, not its labels, and the clauses requiring immediate payment, barring return of the foodgrains, fixing sales tax liability on the assessee, and allowing resale to the public at controlled rates were treated as consistent with a purchase arrangement. Restrictions on retail sale, account-keeping obligations, and the possibility of criminal breach of trust did not convert the transaction into agency. On that reading, the assessee became owner of the foodgrains, fell within the definition of dealer, and was liable to sales tax on turnover from sales to customers.

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Issues: Whether the agreement between the Government and the assessee created the relationship of buyer and seller or of principal and agent, and whether the assessee was liable to sales tax on the turnover arising from the sale of foodgrains to customers.

Analysis: The definition of sale under the Sales Tax Act turns on transfer of property in goods for consideration, and dealer includes a person carrying on the business of buying or selling goods. The character of the transaction depends on the true intention of the parties gathered from the whole agreement, not from the labels used. The clauses requiring the assessee to pay the price at the time of obtaining the foodgrains, prohibiting return of the goods, fixing liability for sales tax on the assessee, and permitting sale to the public at controlled rates were treated as consistent with purchase and ownership rather than agency. Restrictions on retail sale, maintenance of accounts, and the threat of criminal breach of trust were held not to alter the real nature of the arrangement. The agreement was compared with other authorities and found to differ from cases where agency was established by retention of control, commission structure, or return of unsold stock.

Conclusion: The agreement created the relationship of buyer and seller. The assessee became the owner of the foodgrains, was a dealer, and was liable to sales tax on the turnover of sales made to customers.

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