P. Subramonian Poti, J.
1. This revision is at the instance of the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam. It is against a decision of the Kerala Sales Tax Appellate Tribunal, holding that the assessee was not liable to pay tax on a turnover of Rs. 1,42,536 61, which was assessed by the Sales Tax Officer as the tax on escaped turnover for the year 1967-68. The controversy is whether the turnover sought to be assessed relates to sales to the respondents M/s. Alwaye Agencies, Alwaye (referred to as the 'distributor' in this judgment), by the Travancore-Cochin Chemicals Limited, Udyogamandal (referred to as the 'company'). The assessee had been appointed as distributor under an agreement entered into on 11th February, 1967, between the assessee and the company in regard to the sale of sodium hydrosulphite manufactured by the company in the area covered by the Kerala State. It is only the transactions subsequent to 1st September, 1967, that are disputed to be not sales. There is no dispute that the transactions up to that date are not taxable. According to the distributor, no purchase was made from the company of the goods covered by the agreement and supply was made by the company to the consumers direct, the distributor acting only as an agent. That plea did not succeed before the assessing authority or the Appellate Assistant Commissioner. The Sales Tax Appellate Tribunal by a majority, the departmental member dissenting, took the view that the transactions between the distributor and the company are only agency transactions and explanation (5) to Section 2(xxi) of the Kerala General Sales Tax Act, 1903, would not apply to the case. The questions raised in this revision are:
A. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that regarding the transactions impugned, the assessee was acting only as an agent?
B. Is the interpretation of the agreement dated 11th February, 1967, by the Appellate Tribunal correct? Is not the jural relationship between the assessee and T. C. C. Ltd., one of vendor and purchaser only?
C. Was the Appellate Tribunal justified in law in holding that the impugned assessment should be set aside for all or any of the reasons alleged?
2. The agreement between the parties is produced as annexure A to the petition. This agreement refers to the contracting parties as company and distributor. It is further stated in the preamble to the agreement that the term 'distributor' shall 'mean and include their successors, heirs, executors, administrators and assigns thereof'.
3. Clause 1 of the agreement refers to the appointment of M/s. Alwaye Agencies, Alwaye, as 'distributors for the sale of sodium hydrosulphite manufactured by the company' for the area covered by the Kerala State on the terms and conditions mentioned in the agreement.
4. Clause 2(a) specifies that the distributorship is on an exclusive basis giving the distributor the right of sale of the product within the above-mentioned area and it further provides that 'supplies will be made only direct to the distributor'. However, when, on the advice of the distributor, bulk supplies are effected in wagon-load or lorry-load lots, the company may effect supplies direct to the consumer, provided the distributor arranges the payment as per the relevant clause in the agreement and also takes the responsibility to bear entirely the effects and risks resulting from effecting such direct despatches. It is evident that the supplies are made by the company to the distributor, though in certain cases it may be sent to the address of the consumer on the advice of the distributor provided payment is arranged by the distributor himself and the distributor also takes the responsibility to bear risks arising from supply to the consumer on his advice.
5. In Clause 2(b) the right to effect the sale to anybody and anywhere in India is reserved with the company and for such sales it is provided that the distributor will not receive any commission.
6. The right to increase or reduce the area of operation of the distributor or terminate the distributorship without assigning any reasons is reserved in the company by clause 3.
7. The price payable by the distributor to the company for supply is specified as Rs. 7.50 per kilo, the goods being packed in steel drums with polythene lining with a net content of 75 kgms. ex factory. The sales tax at applicable rate is stated to be extra. If any other duty or levy is imposed either by the State, Central or local authority the same also will be charged. These stipulations are found in Clause 4(a) of the agreement.
8. Clause 4(b) provides that the distributor 'should sell the material to the clients or consumers at, the above price plus the cost incurred by him for getting supplies to his area. This cost should be worked out and must be got approved by the company'.
9. The right to revise the price consequent upon the increase or decrease of price of raw materials, electricity charges, wages, etc., is reserved with the company and it is not to be questioned by the distributor. This is the provision in clause 5.
10. Three per cent on the ex factory selling price is to be accounted to the distributor during the end of the month when a statement of accounts will be sent to the distributor and after confirmation from the distributor the settlement will be made. This is provided for in clause 6.
11. The minimum off-take per mensem is guaranteed by the distributor and a security of Rs. 5,000 is offered in fulfilment of the guarantee [Clause 7(a)].
12. The company may permit the distributor to lift the quantity monthly or during longer period. If there is any' shortfall or difficulty in lifting the goods as per the above clause the reasons for the delay in off-take should be intimated to the company, and if the company is satisfied of the delay, it may allow a period of one month or it may insist upon lifting it immediately [Clause 7(b)].
13. The company is not bound to supply the guaranteed minimum off-take [clause 7(c)].
14. Clause 8 of the agreement relates to the terms of payment. That on placing the order for supplies with the company the distributor shall make arrangements for effecting payment either in cash or by a demand draft payable either at Alwaye, Ernakulam or Cochin is the stipulation therein. Alternatively, the distributor should open an irrevocable letter of credit in the company's favour negotiable against R/R or other documents of despatch of goods pursuant to the order, in full or in part. Alternatively, it is open to the distributor to remit 10 per cent of the full value by demand draft on placing the order whereupon the company will despatch the goods and negotiate the R/R and other documents through bank for collection of the balance amount. The documents so presented through bank should be retired by the distributor promptly or at any rate within a maximum period of 15 days from the date of despatch of the goods by the company. If this last method is adopted by the distributor the consignment will be insured by the company towards transit risks and the insurance charges will have to be borne by the distributor. Essentially, this provision is intended to cover any loss that may be caused to the company during the period of the delay in payment by insuring the goods at the cost of the distributor. When prompt payment is made and goods are appropriated to the order, it necessarily means the risk thereafter is taken by the distributor and the question whether it should be insured or not is one within the discretion of the distributor. There is a further provision in Clause 8 that when supplies are taken ex factory or lorry-load, payment in advance either in cash or by demand draft payable at par at Alwaye, Ernakulam or Cochin is compulsory and payment in accordance with the alternatives specified under the clause will not be acceptable. Clause 8 thus appears to be an important clause relevant in the matter of construction of the agreement to determine the true nature of the relationship between the parties. The stipulations in this clause indicate without any possibility of doubt that, for the goods, payment is to be made by the distributor and that is his responsibility. The company looks up to him only for such payment. He should normally make such payment and take delivery of the goods, and, in cases where it is to be consigned, though the distributor pays only 10 per cent, he undertakes to honour the documents of title when presented through the bank and for the period during which the goods remain without reaching the distributor any loss or risk will have to be covered by Insurance, the cost of which will be debited to the distributor.
15. Clause 9 relates to the right of the company to make available the goods to be supplied in smaller packings.
16. The distributor has an obligation to send a copy of his invoices to the company duly signed by the client or consumer to whom the distributor makes the goods available and also report to the company the extent of future development of consumption within his area sufficiently in advance. The company can call for the original invoice book for inspection. Apparently, the idea is that the company is interested in seeing that the goods are not sold at whatever price the distributor could obtain, brat only at the price fixed in the agreement and to genuine consumers (Clause 10).
17. Clause 11 refers to the undertaking by the distributor not to sell the material beyond his territory.
18. The period of the agreement, unless it is terminated earlier at the option of either side, would be 18 months (Clause 12).
19. That the distributor will not deal in the same material otherwise than with the company is the undertaking contained in Clause 13.
20. The minimum off-take guaranteed by the distributor could be increased and this is the, provision in Clause 14.
21. Clause 15 is the arbitration clause. The final clause, namely, clause 16, reserves the right in the company to waive any non-performance by the distributor.
22. For the period up to 1st September, 1967, the company invoiced the goods in the name of the distributor. But, from 1st September, 1867, to 20th December, 1968, at the request of the distributor the invoices were prepared by the company in the names of the consumers of the goods and consigned to the destination through public carrier booked 'self' under advice by the distributor. The transport, way bills were endorsed in the name of the distributor and handed over to the distributor after receiving payments. From 20th December, 1968, it is said that, the goods were being consigned under advice by the distributor to the destination showing the consignor as the distributor and the documents are delivered to the distributor. In paragraph 5(a) of the reply to the notice issued by the assessing authority prior to the reassessment, the assessee has stated that till 24th August, 1967, the company was selling the goods to the assessee and in turn it sold the goods to small parties at the price fixed by the company. These transactions are said to be independent sales and are said to have been included in the turnover shown in the return filed. There is no case that the agreement has been superseded. The instructions by the distributor to draw up the invoices in the name of the customers or despatch the goods to the destination may not materially affect the terms of the agreement since agreeing to act according to such instructions need not mean that any terms of the agreement have been contravened or altered. We are particularly referring to this aspect of the case because it is not as if the change effected in the mode of supply and invoicing under instructions from the distributor would necessitate overlooking of the terms of the agreement.
23. Learned counsel for the revenue, Sri Paripoornan, challenges the Tribunal's order as being the result of an erroneous approach to the question of the nature of the dealings between the parties. The assessing authority has, according to counsel, indicated unequivocally that it is not by reason of the application of explanation (5) to Section 2(xxi) of the Sales Tax Act, 1963, that the company is deemed to have sold the goods to the distributor. Explanation (5) reads:
Explanation (5).--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--
(a) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser, or
(b) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid--
(i) to have sold the goods at one rate and to have passed on the sale proceeds to his principal at another rate, or
(ii) to have purchased the goods at one rate and to have passed them on to his principal at. another rate, or
(iii) not to have accounted to his principal for the entire collections or deductions made by him in the sales or purchases effected by him on behalf of his principal; or
(iv) to have acted for a fictitious or non-existent principal:
Provided that the deduction or addition, as the case may be, of the commission agreed upon and specified in the accounts and incidental charges incurred by the agent which are specified in the accounts and which the assessing authority considers legitimate shall not be deemed to be a difference in the rates referred to in Sub-clauses (i) and (ii).'
24. A transaction will be deemed to be a sale within the meaning of that explanation only if certain conditions are shown to exist. It is not attempted to be shown by the department that such conditions exist in regard to the transactions between the company and the distributor. On the other hand, the case, as is quite evident from the assessment order, is that if, independent of the explanation, the transaction could be found to be really one of sale to the distributor by the company that may be assessed to tax. The Sales Tax Officer finds that, on a consideration of the terms of the agreement and the nature of the dealings between the parties it mast be held that even after 1st September, 1967, the company was selling its goods to the distributor who was making independent sales to his customers. Therefore, counsel Sri Paripooman is quite well-founded in his contention that in so far as the Tribunal assumed that the assessing authority relied on explanation (5) to Section 2(xxi) of the General Sales Tax Act, 1963, to find that there are sales, the Tribunal was wrong. This is rightly pointed out in the dissenting order of the departmental member of the Tribunal.
25. We have necessarily to consider the distinction between a contract of sale and a contract of agency. In the supply of goods by way of sale there is a transfer of property in the goods whereas there is none in the supply of goods to an agent. If there be a sale the obligation of a purchaser is to pay the price of the goods. That of an agent to whom the goods are supplied by the principal is to account for the proceeds of the sale which he may effect. The property continues to be that of the principal till he sells the goods supplied to him. If there be a sale the seller has no interest in the goods sold once it is transferred to the purchaser who is free to deal with it as he likes. But in the interests of business and for other reasons the seller may enter into stipulations with the purchaser in regard to the disposal by him of such goods. Such stipulations are quite common in ordinary commerce particularly in recent times. Merely because the freedom of the purchaser to deal with the goods as he pleases is restrained by stipulations, the transactions cannot be read as one of agency. Such stipulations are quite consistent with sales also. Fixing the maximum or sometimes the minimum price at which the goods are to be sold may be expedient. The maximum prices are quite often fixed. There may be such stipulations in transactions by the manufacturers with the distributors in goods such as drugs and Pharmaceuticals. The minimum prices may be fixed by the manufacturer so as to maintain the prestigious position of the goods in the market. By agreement the parties may fix the area in which the purchaser may sell the goods. This is especially common when the right to sell within different areas are given to different distributors. The right to sell only to particular class of customers, as for example, to retail shop owners, may also be stipulated. The restriction may again be that such sales shall be only on production of permits or authorities. Living as we do amidst multifarious controls and regulations in very many spheres of activity such restrictions need no longer appear to be strange. We are afraid that there is not much relevance in, the plea that the assessee in this case was not a free agent to sell the goods as he liked to whomsoever he desired at whatever price he deemed fit to fix and that must by itself be determinative of his relationship with the company. That may not, in the circumstances of the case, be a test to decide whether the supply to the assessee was by way of sale or supply to an agent. The crucial question, according to us, will be whether title in the goods had passed to the assessee before the supply was made to the persons whose orders were booked by him.
26. The distinction between the supply under a sale and supply to an agent may be best expressed by reference to the following passage In T. V. T. & B. Firm v. Commercial Tax Officer  21 S.T.C. 312 (S.C), wherein Ramaswami, J., said:
As a matter of law there is a distinction between 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 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 contract, its terms and conditions, and the terminology used by the parties is not decisive of the legal relationship.
The same learned Judge said thus in Gordon Woodroffe & Co. v. Sk. M.A. Majid & Co. A.I.R. 1967 S.C. 181, considering the same question, as follows:
The essence of sale is the transfer of the title to the goods for price paid or to be paid. The transferee in such a case becomes liable to the transferor of the goods as a debtor for the price to be paid and not as agent for the proceeds of the sale. On the other hand, 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 who is therefore liable to account for the proceeds.
27. In Bowstead on Agency, at page 5, the learned author has considered the distinction between an agent and a buyer:
A retailer is often described as being the agent for a manufacturer or manufacturers of goods which he sells. Though it may be that he is an agent in the legal sense, it is more likely that he is as regards the manufacturer a buyer, and as regards the consumer a seller. The question turns on whether he acts for himself for a profit, or accounts to the seller in return for commission or remuneration of some other sort.
28. A number of decisions were placed before us by Sri Paripooman, learned counsel for the revenue, and Sri S. Easwara Iyer, learned counsel for the assessee. The decisions relating to the construction of agreements in particular cases may not be of material assistance is construing the agreement in this case, for, ultimately the question whether an agency is to be read in the circumstances or whether the relationship between the parties should be found to be that of buyer and seller would depend upon an overall appreciation of the facts and circumstances of the case. All the same we think reference may be made to some decisions which have a bearing in the construction of the agreement in this case.
29. The case that came up before the Supreme Court in Bayyana Bhimayya v. Government of Andhra Pradesh  12 S.T.C. 147 (S.C.) may be of assistance in this context. The appellants in that case were dealers in gunnies. They had entered into contracts with two mills agreeing to purchase gunnies for future delivery and the mills undertook to deliver the goods to third parties on the advice of the appellants. They, it owner, did not treat the third parties as persons with whom they were dealing. Before the deliveries to the third parties were made the appellants had entered into agreements with them and handed over to them delivery orders on the strength of which the mills delivered the goods to such parties along with the invoices. The appellants disputed their liability to pay tax as, according to them, there was only one sale and that was by the mills to the third parties, the appellants acting as agents bringing together those parties. Dealing with this the Supreme Court said:
To begin with, the mills had made clear in their agreements that they were not recognising the third parties as contracting parties having privity with them, and that delivery would be given against the kutcha delivery orders to the third parties as agents of the appellants. The mills, therefore, recognised only the appellants as contracting parties, and there was thus a sale to the appellants from the mills, on which sales tax was correctly demanded and was paid. In so far as the third parties were concerned, they had purchased the goods by payment of an extra price, and the transaction must, in law and in fact, be considered a fresh transaction of sale between the appellants and the third parties. A delivery order is a document of title to goods [vide Section 2(4) of the Sale of Goods Act], and the possessor of such a document has the right not only to receive the goods but also to transfer it to another by endorsement or delivery. At the moment of delivery by the mills to the third parties, there were, in effect, two deliveries, one by the mills to the appellants, represented, in so far as the mills were concerned, by the appellants' agents, the third parties, and the other, by the appellants to the third parties as buyers from the appellants. These two deliveries might synchronise in point of time, but were separate, in point of fact and in the eye of law. If a dispute arose as to the goods delivered under the kutcha delivery order to the third parties against the mills, action could lie at the instance of the appellants. The third parties could proceed on breach of contract, only against the appellants and not against the mills. In our opinion, there being two separate transactions of sale, tax was payable at both the points, as has been correctly pointed out by the tax authorities and the High Court.
30. Normally when supply is made by a principal to his agent for effecting sales, the obligation of the agent is to sell the goods to the customers and account for the price. There is no necessity normally to fix a price at which the goods are being supplied to the agent and the price at which he is to sell to the customer. No doubt, the principal may stipulate the latter as he may not want the agent to sell at a price higher or lower than what is so fixed. There need not be a fixation in such a case of a price at which the goods are supplied to the agent unless it be that the parties intend that irrespective of any sale by the so-called agent to his customer he is liable for the price of the goods and, therefore, such price must necessarily be specified. It is evident from the agreement relating to the transactions with which we are concerned in this case that there is a particular stipulation not only as to the price at which the goods are to be sold by the distributor to his customers, but the price at which the goods are sold by the company to the distributor. The Supreme Court in the decision in Gordon Woodroffe & Co. v. Sk. M.A. Majid & Co. A.I.R. 1967 S.C. 181, to which we have already adverted, referred to the relevancy of the fixation of price at which goods are sold under a contract in the construction of the character of the agreement. At paragraph 5 of the judgment the court said:
Another important feature in this case is that there is a definite price fixed in the contract for the plaintiff's goods. According to the plaintiff the rates fixed in the contract were the ones at which the goods were sold to London purchaser and not a different rate and the defendants were agents who were obtaining for him only the price at which the goods were sold at London. It is true that the defendants admit that before fixing the price as between themselves and the plaintiff they used to ascertain the London price by cable. It is also true that the plaintiff was debited in the statement of account with the expenses of the cable. Even so, if the defendants were simply acting as agents for the sale there was no need at all to fix the price in the contract as between them and the plaintiff. It was contended for the plaintiff that according to the contracts the prices fixed are c. i. f. less 2 1/2 per cent and discount of 2 1/2 per cent was the commission for the defendants as agents. There is no use of the word 'commission' in the contracts and we see no reason to hold that 2 1/2 per cent should be taken as commission and not as a margin of profit. The important point is that if the contract was one of agency there was no need to mention the price at all as between the plaintiff and the defendants.
31. Though the test to determine whether there is a sale or not is to find out whether there is transfer of property, that is only to state the same thing in another way. The question whether there has been transfer of property must necessarily depend upon an appreciation of the rights and obligations of the parties under the contract. If property is transferred, unless there is a specific stipulation to the contrary, any risk of loss or injury to the goods would, after the transfer, be not in the seller but in the buyer. That may not be so in the case of an agent unless it be there are special stipulations. We have pointed out that in the agreement between the company and the distributor in this case the company was looking up to the distributor to pay the price and take delivery. Such delivery may be either to the distributor himself or to his nominee, that being the person whose orders are booked by the distributor. Payment of price to the company is never dependent upon payment by the consumer to the distributor. Even when goods are destined to the address of such customers the documents of title are not delivered to them. They are handed over to the distributor on receipt of the price or they are endorsed in favour of the distributor and sent through the banks to be honoured by the distributor on payment. In such cases, where there is some time-lag between the despatch of the goods and the entrustment of documents of title on receiving payment through the bank, care is taken to stipulate that the risk will be covered by insurance, the cost of which would be that of the distributor. It is evident therefore that the parties intended that no risk will be taken by the company from the moment the goods are ready for despatch and available to be appropriated to the sale. The question as to who is to bear the risk or loss may be relevant in deciding the question whether the property has passed. In Patnaik and Company v. State of Orissa  16 S.T.C. 364 at 376 (S.C.), the Supreme Court said:
Suppose a fire were to take place on the premises of the appellant and before delivery the bus bodies were destroyed or spoilt. On whom would the loss fall? There can only be one answer to this question and that is that the loss would fall on the appellant. Clause 1 of the agreement provides for insurance of the. chassis but there is no provision regarding insurance of bus bodies. Therefore, it follows that till the delivery is made, the bus bodies remain the property of the appellant.
32. The function of an agent is really to bring together the contracting parties. Despite him in the scene there is privity of contract between the principal and the customer who is brought in by the agent to deal with the principal. If he is acting only as an agent it cannot be that the principal does not recognise the third party at all and has no legal obligation whatsoever in regard to the third parties. The agent would only be exiting as the conduit pipe between the real contracting parties. In Halsbury's Laws of England, Third Edition, Volume I, at page 146, the true nature of relationship in agency is stated thus:
An agent primarily means a person employed for the purpose of placing the principal in contractual or other relations with a third party and it is essential to an agency of this character that a third party should be in existence or contemplated. The essence of such an agent's position is that he shall be but a conduit pipe connecting two other parties.
33. On a true construction of agreement in this case it is difficult to envisage any mutual obligations between the customers whose orders are booked by the distributor and the company who supplies the goods. It could easily be seen that particular care has been taken to express beyond doubt the intention that the company's obligations arise only by way of supply to the distributor and it is only with the distributor that the company deals. It is open to any buyer to stipulate that the seller should agree to consign the goods to the nominee of the buyer. In regard to certain types of sales, namely, sales effected in wagon-load or lorry-load lots, the company has, in the agreement, agreed to effect supplies direct to the consumer. What is stated as having been done in modification or in addition to the terms of the original agreement is that this arrangement was agreed to be extended to all consumers. But that does not in any way, according to us, affect the nature of the transactions because the mere fact that the company agreed to send the goods to destinations indicated by the distributor as the addresses of the consumers will not make any difference in the legal relationship between the parties so long as the obligation to pay the price, the time at which such price was to be paid and the risk in the goods remained the same.
34. We do not also think that the condition that the names of the consumers to whom the goods were to be supplied were to be furnished to the company before the goods were despatched to them and the company should be satisfied that the prices realised by the distributor were the prices fixed in the agreement does in any way affect the character or nature of the transaction. It is open to the contracting parties to agree to such terms. The goods which are the subject-matter of the agreement are such as may be in considerable demand and may be in short supply at times and the agent may be obliged under the terms of the contract to make sales only to genuine consumers and at prices which the company has fixed.
35. It may not be out of place to notice that the agreement refers to the assesses as distributor and not, as an agent. Not that this should be conclusive. But 'agent' is a term normally used in such contracts and is the one which defines the relationship in more precise terms than that of a 'distributor'. The distributor need not be an agent and very often distributors take up work of sales in particular areas on their own responsibility. Normally an agency terminates with the death of a man. But, the agreement refers to 'distributor' as meaning and including his successors,, heirs, executors, administrators and assigns thereof.
36. Clause 2(a) in the agreement is pertinent in that it mentions 'supplies will be made only direct to the distributor'. It, also mentions about, the responsibility of the distributor to bear entirely the resultant losses and risks,
37. Sri S. Easwara Iyer, counsel for the assessee, relies on a decision of this; court repotted in Goverdhan Hathibhai & Co. v. Appellate Assistant Commissioner  12 S.T.C. 464, wherein according to counsel, a similar agreement was construed as only an agency agreement. It is true that this court held so. Possibly there may be some terms in the agreement which arose for construction in that case which may have relevance to the present case. But it is not necessary to go into it because, the decision, though not on the same point, was reversed by the Supreme Court in State of Kerala v. Goverdhan Hathibhai and Co.  15 S.T.C. 314 (S.C.), in the appeal against the decision. The question of liability to tax was ultimately decided by the Supreme Court not on the basis of construction of the nature of the relationship between the parties but because it was found that even if there was agency, that would not, in the circumstances of the case, be material, as other conditions to justify exemption were not satisfied. It is more relevant to notice that this court disapproved the decision in Rohtas Industries Ltd. v. State of Bihar  9 S.T.C. 248, where a different view had been taken by the High Court of Patna in its approach to a similar problem. This court differed from the view taken by the Patna High Court. But that decision went up in appeal to the Supreme Court and in Rohtas Industries Ltd. v. State of Bihar  12 S.T.C. 615 (S.C), the decision of the Patna High Court was affirmed by the Supreme Court. The transactions which were contended to be by way of agency were held to be by way of sales. Therefore, we do not think that the decision of this court in Goverdhan Hathibhai & Co. v. Appellate Assistant Commissioner  12 S.T.C. 464 relied on. by the counsel would be of any assistance to him. Reliance is also placed by the counsel on the decision of the High Court of Andhra Pradesh reported in Hyderabad C. & F. Ltd. v. State of A.P.  22 S.T.C. 298. The question there was whether one Alladin & Company appointed as the sole selling agents of the goods of the petitioner were to be considered as agents only or whether they were purchasing goods. The court considered the several terms of the agreement which arose for consideration in that case and ultimately held:
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.
We do not think that this may be of any assistance to the counsel. But this decision is adverted to because, according to the counsel, one of the clauses in that agreement, namely, Clause (vii), provided that:.as and when the goods are consigned by the petitioner, the sole selling agent has to take delivery by paying the full value.' The court observed that: 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.
It may not be safe to be guided by the construction of any particular term of another contract independent of its context and setting. It must be noticed here that the agreement, which was construed by the High Court of Andhra Pradesh, styled the relationship of the parties as one of sole selling agent and there were very many other terms which had a bearing on the question of construction of the agreement the court was considering in that case.
38. Counsel Sri Easwara Iyer also referred to the decision in State of Bombay v. Ratilal Vadilal & Bros  12 S.T.C. 18 (S.C.) That was in support of his argument that mere guarantee for payment does not promote the construction that the transaction is a sale. The agency arrangement may also envisage the agents guaranteeing payment of value of goods by the customers who were canvassed by the agent and that need not lend to the construction that the transactions are sales. We are afraid that this may not have any material relevancy to the case before us since the distributor in this case was not undertaking to guarantee any payment by the consumers but was directly taking up the responsibility for payment of the price irrespective of any payment by the consumer. In fact no payment by the consumer to the company was ever contemplated under the terms of the contract here.
39. We think, in the light of the discussion, we will be right in holding that there has been a transfer of property in the goods from the company to the distributor and the subsequent supply to the consumers was by way of sale by the distributor to such consumers. The Tribunal was, therefore, wrong in its approach to the question. The assessing authority has rightly dealt with the matter. We find that the Tribunal was not right in holding that the assessee was acting only as an agent and that in the transaction between the company and the distributor sales were not involved. There was no justification to set aside the assessment for any of the reasons stated in the order of the Tribunal.
In the result, the revision by the revenue is allowed as above. But, in the circumstances, we direct, the parties to suffer costs in the revision.