TaxTMI 
TaxTMI 
2013 (1) TMI 711
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....e VAT Act. The company is in the business of purchase and sale of allopathic medicines particularly life saving drugs within the State of M.P. and outside the State. The petitioner entered into an agreement with M/s. Rahul Pharma and appointed the aforesaid firm as carry and forward agent. In accordance with the terms of the agreement, the agent has to supply the goods to the authorized distributors or dealers appointed by the company. The petitioner was assessed for tax under the provisions of the VAT Act for the assessment year 2006-07. In view of Explanation (c) of section 2(u) of the VAT Act, the authorities have held that when the petitioner supplied the goods to its agent, M/s. Rahul Pharma, this transaction is first sale and tax is ....
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....for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and purchase of those goods by the person to whom such transfer, delivery or supply is made, but does not include a mortgage, hypothecation, charge or pledge;" There is Explanation of this section and clause (c) of the aforesaid Explanation is important, which is as under: "(c) Notwithstanding anything to the contrary contained in this Act or any other law for the time being in force, two independent sales or purchases shall, for the purposes of this Act, be deemed to have taken place,- (i) when the goods are transferred from a pri....
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.... the contract for the transfer of such materials can be separated from the contract for the services and the work done, although the two contracts are embodied in a single document) or in the supply or distribution of goods by a society (including a co-operative society), club, firm or association to its members, but does not include a mortgage, hypothecation or pledge of, or a charge on goods; Note.-By Amendment Act 26 of 1961, the bracketed words were substituted for the words 'and includes a transfer of property in goods involved in the execution of a works contract.' In our opinion the real object of the Explanation is to prevent the misuse by the assessee of the relationship of principal and agent for the purpose of evading t....
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.... Explanation enlarges the scope of the main section. It was pointed out by this court in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 STC 353 (SC), that the expression 'sale of goods' in entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935, cannot be construed in its popular sense but must be interpreted in its legal sense and should be given the same meaning which it has in the Sale of Goods Act, 1930. It is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In other words, it is necessary for constituting a sale that there should be an agreement between the parties for the purpose of transf....
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.... the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will therefore be liable to account for the sale proceeds. The true relationship of the parties in each case has to be gathered from the nature of the contracts, its terms and conditions, and the terminology used by the parties is not decisive of the legal relationship. . ." The aforesaid judgment of the honourable Supreme Court has covered the controversy. The same principle has specifically been followed in the case of State of Rajasthan v. Rajasthan Chemists Association reported in [2006] 147 STC 542 (SC); [2006] 7 RC 368; [2006]....