Principal-agent supply is not a separate sale where title stays with the principal; tax applies only on final buyer sale.

In a genuine principal-agent arrangement under the Madhya Pradesh VAT Act, mere delivery of goods by the principal to a carrying and forwarding agent does not amount to an independent sale unless title passes to the agent. Explanation (c) to section 2(u) applies only where the transaction reflects a transfer of property in goods or two independent sales or purchases; here, the agent was authorised only to supply goods on commission and did not acquire ownership. The goods continued to belong to the principal until sale to the ultimate buyer, so the movement to the agent was not separately taxable. Tax could be levied only on the final sale, and the petition succeeded in favour of the assessee.

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Issues: Whether goods supplied by the principal to its carrying and forwarding agent could be treated as an independent sale liable to tax under Explanation (c) of section 2(u) of the Madhya Pradesh Value Added Tax Act, 2002.

Analysis: Section 2(u) defines "sale" as a transfer of property in goods for consideration, and Explanation (c) deems two independent sales or purchases where goods move from a principal to a selling agent and then to the purchaser. The decisive inquiry is whether the arrangement is a true contract of agency or a transfer of title amounting to a sale. On the facts, the agent was only authorised to supply the goods to distributors or buyers on commission and did not acquire ownership of the goods. The goods continued to belong to the principal until sale to the ultimate buyer, so the movement of goods to the agent did not create a separate taxable sale.

Conclusion: The delivery of goods by the principal to its agent was not a taxable independent sale, and tax could be levied only on the sale to the ultimate purchaser. The petition was therefore decided in favour of the assessee.

Ratio Decidendi: In a genuine principal-agent arrangement, mere delivery of goods to the agent does not constitute a sale unless title to the goods passes; a deemed-sale provision cannot be applied to tax a transaction that remains one of agency.

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