TaxTMI 
TaxTMI 
1988 (5) TMI 329
X X X X Extracts X X X X
X X X X Extracts X X X X
....was appointed as distributor by the Travancore Cochin Chemicals Ltd. (referred to hereinafter as the "said company") to effect the sale of sodium hydrosulphite manufactured by the said company in the area covered by the Kerala State under an agreement entered into on 11th February, 1967. The dispute pertains to the transactions which took place between 1st September, 1967 and 20th December, 1968, since it is undisputed that the transactions up to the former date are not taxable. It is common ground that the relations between the parties were governed throughout by the said agreement and that the parties adhered to the terms of the said agreement. In view of this it would be desirable to examine that agreement at this stage. As aforesaid, the agreement is dated 11th February, 1967. Under the agreement, the assessee-firm was appointed as distributor for the aforesaid product manufactured by the company for the area covered by the Kerala State. Clause 2 of the agreement provides that the distributorship was on an exclusive basis giving the distributor the right of sale of the product within the aforementioned area and that supplies would be made only direct to the distributor. Sub-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t per annum. The clause also makes it clear that if the second mode of payment is adopted by the assessee, consignments would be insured by the said company against transit risk and the insurance charges would have to be borne by the assessee. It may be noted at this stage that the Tribunal has found as a fact that in respect of the said transactions from 1st September, 1967 to 20th December, 1968, the invoices were prepared by the said company in the names of the consumers of goods and the goods were consigned to the destinations through public carriers booked "self". The transport bills were endorsed and handed over by the said company to the assessee. From 20th December, 1968, goods were consigned to the destination showing the assessee as consignor. But we are not concerned with the period from 20th December, 1968. In the assessment of the assessee for the period 1967-68 under the Kerala General Sales Tax Act, 1963, the final assessment was initially completed on 27th September, 1968 and a turnover of Rs. 70,952.61 as reported by the assessee was accepted and tax levied on that basis. Thereafter, it was alleged by the assessing authority that the transactions in the aforesai....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., or the documents of title were endorsed in favour of the distributor and sent through the banks to be honoured by the distributor by payment. In such cases, where there was some time-lag between the despatch of goods and the entrustment of documents of title on receiving payment through the bank, care was taken to stipulate that the risk would be covered by insurance which would be at the cost of the distributor. The Division Bench further pointed out that in the said agreement, the distributor had not been referred to as "agent" but as "distributor" and that this was also significant although not conclusive. It was on the basis of these conclusions that the High Court reversed the decision of the Tribunal and allowed the revision application. In our opinion, since both the parties have proceeded on the the footing that the transactions in question were effected pursuant to the said agreement, the primary task to which we must address ourselves is to examine whether under the agreement the assessee-firm was an agent of the said company, or whether the assessee-firm was really a purchaser of the goods which were booked by it. In this connection, it must be noticed that under su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the Tribunal, and the bills were endorsed and handed over to the assessee. When considered in the light of the agreement, these circumstances clearly show that in respect of these transactions the property in the goods despatched passed to the distributor on the bills being endorsed and handed over to the distributor. Our attention was drawn by Shri Krishnamoorthy lyer, learned counsel for the assessee (appellant), to the decision of this Court in Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 40 STC 42; [1977] 3 SCC 147, where the question was whether the contract was one of agency or sale. This Court held that the question will have to be determined having regard to the terms and recitals of the agreement, the intention of the parties as may be spelt out from the terms of the document and the surrounding circumstances and having regard to the course of dealings between the parties. While interpreting the terms of the agreement, the court has to look to the substance rather than the form of it. The mere fact that the word "agent" or "agency" is used or the words "buyer" and "seller" are used to describe the status of the parties concerned is not sufficient....