BHOPAL SUGAR INDUSTRIES LTD. versus SALES TAX OFFICER, BHOPAL

Citation: [1977] 3 S.C.R. 578 · Decided: 14-04-1977 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
578 
, 
BHOPAL SUGAR INDUSTRIES LTD. 
v. 
SALES TAX OFFICER, BHOPAL 
April 14, 1977 
[P. N. BHAGWATI, N. L. UNTWALIA, AND S. MURTAZA FAZAL ALI, JJ.J 
Sales Tax-Dealer consun1ing goods for his own purposes-If a sale exi-
tible to tax. 
The appellant. Vlas a manufacturer of sugar. 
It also ran in the mill pre-
mises a petrol pump selling high speed diesel oil, petrol and other lubricant 
oils of Caltex. 
A part of these oils was consumed by the appel1'l<lt for its 
own trucks and other vehicles. 
The Sales tax authorities 
assessed to tax 
C 
the petrol consumed by the appellaut for its own use as well. 
On appeal 
the Commissioner of Sales Tax held that since the appellant was an agent 
of Caltex, title to the property in the goods sold by it remained with the 
A 
principal and as such that part of the petrol and other oils consumed by it 
D 
E 
F 
G 
H 
was also a sale ·exigible to tax. 
Allowiag the appellant's 
~ppeal 
HELD : The petrol consumed by the appellant for its 
own 
purposes 
was not a sale exigible to tax. 
A conspectus of the terms of the agreement 
showed that after taking delivery, the appellaat became the owner of the goods 
and if it conc;umed the same for its own purposes, it was doing so not as 
an agent but as owaer. 
[592 El 
· 
!(a) In a contract of sale title to property in the goods passes on to the 
buyer on delivery of the goods for a price paid or promised. 
Once this 
happens the buyer becomes owner of the property and the seller has no 
vestige of title. left in the property. 
Having regard to the complexities of 
modem times the concept of sale has undergone a change and made a depar-
ture fron1 the old doctrine of laissez faire. 
Even if the seller, by an agree-
ment, imposed a number of restrictions on the buyer, such for example as, 
fixing of price, submission of statement of accounts, area. of sale and so On 
these resµ-ictions would not per se convert a contract of sale into one of 
agency. 
[581 HJ 
(b) A contract of agency differs from a contract of sale inasmuch as an 
agent, after taking delivery of the property, does not sen it a6 his ovm but 
selbi it as the prope1ty of the principal under his instructions and directiong. 
[582 Bl 
{c) While interpreting the terms of an .agreement, the Court has to look 
to the substance rather than the form of the agreement. 
Use of words like 
.. agentH or "agency", "buyer" and "seller" is not sufficient to lead to the in-
ference that the parties did in fact intend that the said status would be con-
ferred. In certain trades, the word "agent" is often used v:ithout any reference 
to the law of principal and agent. 
[582 F-G] 
Sri Tirtunala Venkates'lt·ara Tiniber and Ba111boo Finn v. Co111111ercial 
Tax Officer, Rajahmundry, 21 STC 313, 316 followed. 
IV. T. Lam and Sons v. Goring Brick Company Ltd. LR. [1932] 1 
KBD 710, 717, Gordon Woodroffe & Co. v. Sheikh M. A.. Ma/id & Co. 
[1966] Supp. SCR I, 3-4 and Daruvala Bros. (P) Ltd. v. Commissioner 
of Income-tax (Central) Bombay, 80 !TR 213 referred to. 
Foley v. Classigate Coaches Ltd. [1934] 2 K B D 1, 
Michelin 
Tyre 
Company Ltd. v. Macfarlane (Glasgow) Ltd. (in Liquidation), [1917] 
2 Scots. L.T. 205, Financings Ltd. v Stimson, [1962] 2 All. ll.R. 386, 
t 
BHOPAL SUGAR INDUSTRIES LTD. v. S.T.O. (Fazal Ali, J.) 5 79 
Willcox & Gibbs Sewing Machine Co111pany v. Daniel S. Ewing, 35 U.S. 
Law. Ed. 882, 884 held inapplicable. 
In the instant case, the evidence furnished by the agreement was sufficient 
to conclude (a) tha.t the goods were supplied not on consignment basis but 
by way of outright sale; (b) that the agreement was to sell petrol and other 
oils, after the dealer had bought the property from Ca1teX:, at price<J fiXed 
by that company; (c) that stipulation of sale price was to protect the company's 
A 
goodwill and to ensure quality of goods to be distributed-in fact stipulation 
B 
of price which is generally a common term in all agreements between mono· 
polistic companies &nd their distributors did not detract from the · freedom 
of contract of sale; (d) sale by the apellant to other customers did not dis· 
close that the property belonged to Caltex; (e) it was the appellant that bore 
losses due to leakage, driage and evaporation in storage and (f) reimbursen1ent 
by the company of transport charges and handling expenses and also reim-
bursement of supplies made by the appellant to certain designated custon1ers 
showed that the agreement was a contract of saJe and not 

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