TaxTMI 
TaxTMI 
1989 (4) TMI 81
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.... into with Gillanders Arbuthnot & Co. Ltd., of Calcutta, hereinafter called 'Gillanders'. The said company has a very big sales organisation having its offices located at all important places in the territory of Union of India and they market goods of all types, not only of the appellants herein, but also of several other reputed manufacturers through their well staffed offices in all the States of India. The appellants vide their letters dated 23rd April, 1979 and 15th May, 1980 to the Excise authorities, had claimed a refund of Rs. 2,39,153.63 on account of excess excise duty paid on the assessable value on the basis of price at which the Gillanders had sold the products to its customers, during the period July, 1977 to March, 1979. Both the Assistant Collector by his order dated 29th May, 1980 and the Collector by his order dated 24th March, 1981 rejected the contention of the appellants and held that the assessable value is the price at which Gillanders sold the goods. The Tribunal in its order dated 20th January, 1984 referred to relevant clauses in the said agreement dated 1st May, 1962 and came to the conclusion that it was abundantly clear from the conditions that the ti....
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.... selling agents a discount, namely, 17-1/2% on the transfer prices of all materials supplied against the orders received from the selling agents from its offices at Calcutta, Kanpur, Delhi and Bombay; 18% on the transfer prices of all materials supplied against the orders received from the selling agents from its Madras Office. It also provided for an additional cash discount of 1-1/2% on the net transfer price, that is to say, transfer price less the discount specified above provided the selling agents paid the price of the goods supplied by the manufacturer within 30 days from the date of the bills by the manufacturer in respect of orders placed by the selling agents from its offices at Calcutta, Bombay, Madras and Delhi and within 45 days from the date of the bill by the manufacturer in respect of orders placed by the selling agents from its Kanpur office. It also provided for an additional turnover discount of 1% on the transfer prices over and above the discount specified above provided the total sales calculated at the selling prices exceeded Rs. 4 lakhs per annum and 1-1/2% on the transfer prices on such amount exceeding Rs. 4 lakhs per annum. In calculation of the turnover ....
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....ould at his own cost take back the goods and replace the goods of satisfactory marketable quality at its own cost. The manufacturer should not be responsible for failure to deliver or for any delay in delivery if such failure or delay was due to act of God or enemies of the State, wars, revolution, embargo, riots, civil or political disturbances, strikes, lockouts declared due to circumstances beyond the control of the manufacturer, shortage of labour, cut or failure of power supply or service, force majeure or any other cause beyond their control. The agreement, it was stipulated by clause 19 thereof, would remain in force for one year from the date of the agreement. But the parties had the right to terminate the agreement by giving three months notice in writing to either side. It was further stipulated that if the agreement was terminated whether by the manufacturer or by the selling agents, the manufacturer should accept return of all unsold stocks lying with the selling agents at their various branches and to reimburse the selling agents with the net value of such stocks at the transfer prices in force on the date of the termination of the agreement. There was arbitration clau....
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....here was no flow back of the profit to the manufacturer and that was absent in the instant case. He also referred to the fact that there were two prices - transfer price and selling price and there was good deal of difference between these prices. He submitted that read in the proper perspective, there was no agency. He emphasised that there was stipulation for payment of sales tax and these were separately specified - one was described as selling agent and the second one the real purchaser. 7. It is well settled that in a situation like this, whether there was an agreement for sale or an agreement of agency, must depend upon the facts and the circumstances and the terms of each case. Such facts and terms must be judged in the background of the totality of the circumstances. All the terms and conditions should be properly appreciated. It is also correct that though the appellants described the Gillanders as selling agent, but that is not conclusive. And it is also correct to state that the difference of the prices between the transfer and the selling prices is suggestive of an outright sale. In W.T. Lamb and Sons. v. Goring Brick Company Ltd. (1932 (1) KB 710), by an agreement i....
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....escribed as "sole selling agent", submitted Shri Rao. 8. This Court had occasion to consider this aspect in Gordon Woodroffe & Co. v. Sheikh M.A. Majid & Co. (1966 SCR Supp. 1). In that case, the respondent was a trader in hides and skins and the appellant was an exporter. During the period January to August, 1949, there were several contracts between them. The contracts mentioned that the appellant was buying the goods for resale in U.K. The price quoted was C.I.F. less 2-1/2%. The contracts also provided that time should be the essence of the contract, that the sale tax was on respondent's account, that the respondent was answerable for weight as well as quality, that there should be a lien on the goods for moneys advanced by the appellant, and that any dispute regarding quality should be settled by arbitration according to the customs of the trade in the U.K. The course of dealing between them showed that before the goods were shipped these were subjected to a process of trimming and reassortment in the godowns of the appellant with a view to make these conforming to London standards, that the goods were marked with the respondent's mark and that premiums were paid to the res....
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....e clause with regard to lien was consistent with the transaction being an outright sale, because the appellant was acting as creditor of the respondent and charged interest on advances only till the date of shipment of the goods when it became the purchaser of the goods from the respondent. It was held that an agent could become a purchaser when the agent paid the price to the principal on his own responsibility. This was another aspect which was emphasised in the facts of the present case by Shri Rao. In that case, however, before the goods were shipped to London, these were subjected to a process of trimming and reassortment in the godowns of the appellant with a view to make them conform to London standards. In that process, the defendants often called upon the plaintiff to replace the pieces found defective. If the defendants were merely acting as agents, this Court observed, the process of trimming and reassorting in the godowns to make the goods conform to London standards and specifications would be unnecessary, for in that case the defendants were merely bound to ship the goods as these were delivered to them. Another important feature of the transaction was that in several....
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....tween a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell these, 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 contract, its terms and conditions, and the terminology used by the parties is not decisive of the legal relationship. Shri Mahajan, learned counsel appearing for the respondent, drew our attention to Section 182 of the Indian Contract Act, and submitted and in the circumstances of this case, the clauses emphasised by the Tribunal clearly established that this was an agreement of agency and not ....
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....rred certain extra-commercial advantages upon them, and so, the sales to them were not sales to independent purchasers. Our attention was also drawn to the observations of this Court that decisions cited before this Court in the above case were correct insofar as these held that the price of sales to wholesale dealers would not represent the 'wholesale cash price' for the purpose of Section 4(a) of the Act merely because the manufacturer had entered into agreements with them stipulating for commercial advantages. It was laid down that if a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the 'wholesale cash price' for the purpose of Section 4(a) of the Act if the agreements were made at arms length and in the usual course of business. This, however, Mr. Rao related only in explaining the state of law before the Amendment Act 22 of 1973. 12. Our attention was also drawn to the observations of this Court in Union of India and Others v. Bombay Tyre International Ltd. -1983 E.L.T. 1896 (S.C.) = 1984 (1) SCR 347 where....