Sale versus agency turns on contractual substance; cement supplies under the marketing agreement were taxable sales.

The legal character of the 4 June 1942 agreement was determined from its covenants and surrounding circumstances, not the parties' label. The Cement Marketing Company was made the sole purchaser and sole seller of cement, fixed sale prices, contracted in its own name, appointed agents and stockists, and controlled sales terms, while manufacturers could deliver only under its orders. The profit-sharing clause did not create principal-and-agent relations because it did not operate on individual sales or impose loss-sharing liability. The arrangement was therefore one of buyer and seller, and cement supplied by the assessee to the Marketing Company constituted a sale included in taxable turnover under the Bihar Sales Tax Act, 1944.

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Issues: Whether, on a true construction of the agreement dated 4 June 1942, the cement supplied by the assessee to the Cement Marketing Company was sold to that company so as to be included in the assessee's taxable turnover under the Bihar Sales Tax Act, 1944.

Analysis: The legal character of the transaction had to be determined from the covenants of the agreement and the surrounding circumstances, not from the label used by the parties. The agreement made the Marketing Company the sole purchaser and sole seller of cement, prohibited direct or indirect sales by the manufacturing companies otherwise than through it, and required the manufacturers to deliver goods only in accordance with its orders. The Marketing Company fixed the sale price in its own discretion, contracted in its own name, appointed its own agents and stockists, and controlled the terms on which the cement was sold. The provision for sharing overall net profits did not make the arrangement one of principal and agent, because it did not relate to individual sales or impose liability for losses, and merely regulated the parties' rights to the overall proceeds.

Conclusion: The agreement created a relationship of seller and buyer, not principal and agent, and the cement supplied by the assessee to the Marketing Company was a sale liable to sales tax under the Bihar Sales Tax Act, 1944.

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