Sambasiva Rao, J.
1. The only question that was raised and argued in the three cases is whether the petitioner is entitled to a deduction from his total turnover under Section 2(s)(ii) of the Andhra Pradesh General Sales Tax Act (hereinafter referred to as the Act) and Rule 6(1 )(a) of the Andhra Pradesh General Sales Tax Rules (hereinafter referred to as the Rules).
2. The Hyderabad Chemicals and Fertilizers Limited, Hyderabad, which is a manufacturer of chemical fertilizers, is the petitioner in all the three revision cases. T.R.C. No. 30 of 1966 relates to the assessment year 1960-61 while T.R.C. No. 17 of 1965 relates to the assessment year 1961-62 and T.R.C. No. 28 of 1966 to the assessment year 1962-63. The petitioner entered into an agreement with M/s. Khan Bahadur Ahmed Alladin & Co. (hereinafter referred to as Alladin & Co.) dated 15th October, 1959, under which the latter was appointed as the sole selling agent of the former. Varying rates of commission (as it is called in the agreement itself) ranging from 2| per cent, to 6J per cent, were paid by the petitioner to Alladin & Co. on its sales. The petitioner claimed before the assessing authority that these amounts were liable to be deducted from his total turnover, under Section 2(s)(ii) and Rule 6(1)(a) contending that the amounts so paid to Alladin & Co. were in the nature of discount. The assessing authority as well as the first appellate authority and the Sales Tax Appellate Tribunal in second appeal did not uphold this claim of the petitioner. They unanimously held that they were not discounts within the meaning of the said provisions. According to them, the amounts paid to Alladin & Co. were in the nature of commission. Aggrieved by the rejection of its claim, the petitioner has filed these three tax revision cases. Though other deductions were claimed before the lower authorities, these revision cases are confined only to the amounts paid by the petitioner to Alladin & Co.
3. In order to appreciate the contention of the petitioner it is necessary to understand the scope of Section 2(s)(ii) and Rule 6(I)(a). They are in the following terms :
Section 2(s) : 'Turnover' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof.
* * * *Explanation.-Subject to such conditions and restrictions, if any as may be prescribed in this behalf-
(i)* * * *(ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by the customers shall not be included in the turnover ;... ... ... ...
4. Rule 6(1) : The tax or taxes under Sections 5, 6, or notified under Section 9(1) shall be levied on the net turnover of a dealer. In determining the net turnover, the amounts specified in clauses (a) to (i) shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer-
(a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount...
5. The word 'discount' is not defined in the Act. But, generally speaking it can be taken as an abatement of price. But, it is not every abatement of price that is permitted to be deducted from the total turnover, under the two provisions extracted above. Only the discount or abatement of price that is allowed in respect of any sale, can be deducted from the total turnover of a dealer. Therefore, in order to claim deduction of an amount as a discount, a dealer must show that such discount has been paid on a sale.
6. What is sale is denned in the Act under Section 2(n) which reads as follows :
(n) 'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash, or for deferred payment, or for any other valuable consideration ; and includes a transfer of property in goods involved in the execution of a works contract 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.
7. The explanations to that definition are not material for the present discussion. We have already noticed that Section 2(s) defined the word 'turnover' as the total amount set out in the bill of sale as the consideration for the sale or purchase of goods. It is thus clear that the existence of a sale is essential in order to enable a dealer to claim deduction of a discount from his total turnover.
8. Now, the question is whether the transactions between the petitioner and Alladin & Co. were sales. The petitioner contends that they were so. On the other hand, the department contends that they were not sales and that the relationship between the petitioner and Alladin & Co. was only that of a principal and agent and that what was paid to the latter was commission. According to the department the petitioner did not sell its fertilizers to Alladin & Co. On the other hand, Alladin & Co. was selling fertilizers manufactured by the petitioner as the latter's agent.
9. Therefore, the commission paid to Alladin & Co. is not discount within the meaning of Section 2(s)(ii) and Rule 6(1)(a).
10. It has therefore to be examined which of the above contentions is right. There is no dispute that there is an agreement between the petitioner and Alladin & Co. It is dated 15th October, 1959. It is this agreement that really governs the relationship between the parties. We will now examine and see what exactly is the nature of the relationship between the parties, that is contemplated and prescribed by this agreement.
11. The agreement itself refers to Alladin & Co., as the sole selling agent. The preamble states that Alladin & Co. offered to take up the sole selling agency of the goods of the petitioner and the petitioner accepted the said offer. Clause (ii) says that Alladin & Co. shall have the exclusive right to sell the fertilizers manufactured by the petitioner subject to a few reservations. The few exceptions are that the petitioner can directly sell its goods to the Government or quasi-Governmental bodies or to the Nizam Sugar Factory. When the petitioner sells to these three bodies alone the sole selling agent is not entitled to any commission. On all other transactions of the petitioner the sole selling agent is entitled to payment of commission, varying from 2J per cent, to 6J per cent. It is also significant to note that what is payable to the sole selling agent is named as 'commission' under the agreement. It. is also very material that under Clause (iii)(b) the sole 'selling agent is entitled to commission even on retail sales directly effected by ' the petitioner at its factories. The same clause also provides for deducting the commission earned by the sole selling agent, from the bills raised on them either for supply of goods or by issue of credit notes. Under Clause (iv) the sole selling agent has undertaken to sell the goods only at the prices fixed by the petitioner. Alladin & Co. is not therefore entitled to sell the goods at whatever rates it likes. The entire price list is regulated by the petitioner-company itself, subject of course to the requirements of the Fertilizers Control Orders and other similar orders. Similarly the petitioner reserved to itself the right to revise the rates of commission at the end of each year. The sole selling agent has guaranteed under Clause (vi) a minimum business of 5 thousand tons per annum. This is another circumstance which is consistent with a relationship of agency, rather than with outright sale. As per Clause (vii) as and when the goods are consigned by the petitioner, the sole selling agent has to take delivery by paying the full value. Payment of full value on the delivery of goods need not necessarily be repugnant to the idea of agency. The receipt of goods on payment of full value for them is equally consistent with a relationship of agency. But, more significant is Clause (viii) whereunder the sole selling agent has undertaken to deposit Rs. 10,000 as security and to furnish guarantees for the prompt payment of all the dues. Equally meaningful is Clause (ix), which provides for a lien or charge upon the goods in the possession or custody of the sole selling agent for all the moneys due and payable to the petitioner. This shows that even though the sole selling agent makes the full payment of the value of the goods which he receives, the petitioner continues to have lien or charge over these goods for all amounts due and payable to it by the sole selling agent. According to Clause (x) the sole selling agent has to employ sufficient staff as may be adequate to sell the company's products. It is the duty of the sole selling agent to keep proper accounts of the goods received and sold and to make those accounts available for inspection to the petitioner's officials. There is no doubt that this provision can exist only in the case of an agency and has no place whatever if it were outright sale. Again the agent has undertaken the task of actively promoting the sale of the products of the petitioner. Clause (xiv) is another important provision of the agreement. According to that clause, it is the duty of the agent to obey and observe all reasonable directions and instructions, which may be given to him by the petitioner, concerning the sale or disposal of the goods. In fact this clause refers to the relationship of 'agency' because it states that the agent shall abide by the directions of the petitioner, which relate to the business of his 'agency'. According to Clause (xvi) the agency is not transferable without the consent of the petitioner. It is significant to note that nowhere the word 'sale' occurs in the agreement. On the other hand, the agreement repeatedly uses the words 'agency', 'sole selling agent' and 'commission'. According to the terms of the agreement, the commission due to the agent has to be periodically calculated and paid. In view of the terms of the agreement above referred to, we have no doubt that the agreement between the parties envisages only a relationship of agency and not that of vendor and purchaser.
12. This is conceded by Sri Anantha Babu the learned counsel for the petitioner. He agrees that the agreement does evidence a relationship of agency. He however argues that the parties to the agreement practically gave a go-by to the agreement and to the relationship envisaged by it and have been adopting only the method of outright sale. According to him the petitioner was selling its manufactured goods to Alladin & Co. straightaway and receiving the prices therefor from them.
13. It is difficult to uphold this argument of the learned counsel. There is no evidence on record which shows that the parties have given up the agreement and started a new relationship between themselves. In fact, the evidence discloses that all the material terms of the agreement were being enforced and implemented during the relevant period. Alladin & Co. continued to be the sole selling agent of the petitioner and excepting in a few cases detailed in the agreement, all the sales of the petitioner's goods were being made by Alladin & Co. itself. There is no evidence on record that the parties entered into another agreement. It is not the case of the petitioner that there is another such agreement. At any rate there is no such written agreement. When a large and responsible manufacturing enterprise like the petitioner does its business, it is not possible to assume that it would conduct its transactions contrary to or otherwise than the terms of a solemn agreement it entered into with the sole selling agent.
14. But, the learned counsel relies upon certain cash memos. issued by the petitioner and Alladin & Co. to contend that the transactions were purely sales. However an examination of the memos. would not support such an inference. As an illustrative case, we take two cash memos. both dated 8th October, 1960. The first of them bears the number 139 and was issued by the petitioner. It is addressed to Alladin & Co. and also to a purchaser by name Green Fester & Co., Bodhan. It recites that in compliance with an order personally placed, a quantity of 84 bags of standard fertilizer mixture No. 1 of the value of Rs. 2,493.06 was delivered. All these details were repeated in the second cash memo, of the same date. The second memo, was however issued by Alladin & Co. it referred to the cash memo, issued by the petitioner-company by its number. But Alladin & Co. addressed this cash memo, to the purchasers Messrs Green Fester & Co., Bodhan. These two cash memos. would clearly show that as and when purchasers placed their orders for certain quantities of fertilizers, the petitioners supplied the required quantities to the purchasers through Alladin & Co. After these transactions were over and the value of the goods was received, evidently the commission earned by the agent, Alladin & Co., was credited to the agent's account in the petitioner's books. Far from showing a sale by the petitioner to Alladin & Co. these cash memos., in our view, would only show a sale to the consumer of the fertilizers by the petitioner through Alladin & Co. Moreover drawing of cash memos. by the petitioner in favour of Alladin & Co. is not inconsistent with the terms of the agreement. It is to be noted that Clause (iii)(b) provides for payment of commission to the agent even on direct sales made by the petitioner at its factory. As we have already observed, there is nothing on record to support the contention of the learned counsel for the petitioner, that the parties have given a go-by to the agreement of agency and have been, on the other hand, entering into outright sale transactions. The cash memos. and other evidence would show that the agreement was given effect to by the petitioner and its agent. We are not therefore inclined to agree with the learned counsel for the petitioner in this contention.
15. Sri Anantha Babu also argues that the essence of the transaction is in the passing of the property in the goods and that the cash memos. and other evidence would show, that on payment of money by the agent to the petitioner, the property in the goods supplied passes from the petitioner to the agent. In support of his contention he has relied upon a number of decisions which are Hope Prudhomme and Co. v. Hamel and Horley Ltd. (1925) I.L.R. 49 Mad. 1, Rohtas Industries Ltd. v. The State of Bihar  9 S.T.C. 248 and a decision of the Supreme Court in Rohtas Industries Ltd. v. The State of Bihar  12 S.T.C. 615 (which is an appeal against the decision of the Patna High Court in Rohtas Industries Ltd. v. The State of Bihar  9 S.T.C. 248).
16. The principle that was laid down by the Supreme Court in Rohtas Industries Ltd. v. The State of Bihar  12 S.T.C. 615 and the other decisions as well is that if property in the goods passed on payment, of price it is sale. The crux of the problem therefore is whether the property in the goods passed to the agent on payment of the value.
17. It is to be noticed that even in the case in Hope Prudhomme and Co. v. Hamel and Horley Ltd. (1925) I.L.R. 49 Mad. 1, the Privy Council found, in the circumstances of that case, that the relationship was one of agency and that there was no outright sale. We have already referred to the agreement in detail and also to the cash memos. that were issued by the petitioner as well as by Alladin & Co., and we have found that all those would lead to only one conclusion that there was no sale by the petitioner to Alladin & Co. and the relationship between them inter se was only that of agency. In view of this conclusion, the decisions cited by the learned counsel for the petitioner do not come to his aid.
18. There is thus no force in the contentions of the learned counsel for the petitioner. From the circumstances of the case the conclusion is inescapable that there were no sales effected by the petitioner to Alladin & Co, So the amounts the petitioner paid to Alladin & Co. were not discounts within the meaning of Section 2(s)(ii) of the Act and Rule 6(1)(a.) of the Rules. For that reason the petitioner is not entitled to deductions of those amounts from its total turnovers of the relevant assessment years. The concurrent decisions of the lower authorities are right. The tax revision cases therefore fail and are dismissed with costs of the department. Advocate's fee in each case Rs. 100.