SREELAL AGARWALLA Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE following two questions have been referred to this Court by the Member, Board of Revenue, Orissa, under section 24(1) of the Orissa Sales Tax Act :

(2.) DURING the year 1952-53 Messrs Orissa Cement Ltd., Rajgangpur, (hereinafter referred to as Orissa Cement) used to supply cement to Hirakud Dam Project Authorities (hereinafter referred to as the Project authorities) in gunny bags hearing the trade mark "Konarak Cement". With a view to secure uninterrupted supply of cement they entered into an agreement with the project authorities for the purchase of their old second-hand serviceable gunny bags so that fresh cement may be supplied in those bags also. The price of these serviceable second-hand gunny bags was originally fixed at Rs. 28 per hundred bags but subsequently it was reduced to Rs. 25 per hundred bags. The petitioner, one Sreelal Agarwalla (hereinafter referred to as Sreelal) who is a businessman of Sambalpur town was later engaged as a "middleman" (to use a neutral expression in view of the controversy regarding his status) by Orissa Cement to purchase serviceable second-hand gunny bags from the Project authorities and to deliver them at their factory premises at Rajgangpur. It was agreed between Sreelal and Orissa Cement that in addition to the contract price of Rs. 28 per hundred bags Sreelal would get an additional sum of Rs. 7 per hundred bags to cover all kinds of expenses, including commission. He was required to take delivery of the bags from the Project authorities after paying the price fixed and then to transport them to Rajgangpur by rail and deliver them to Orissa Cement, charging them at Rs. 7 per hundred bags over and above the price actually paid by him for the bags to the Project authorities. On the 24th July, 1952, Orissa Cement informed the Project authorities (vide exhibit K) that Sreelal was appointed their agent for the collection of second-hand gunny bags bearing the mark "Konarak Cement" and requesting them to afford all facilities to him. The terms of the agreement between Sreelal and Orissa Cement were reduced to writing as per exhibit C. As the disposal of this reference depends on the true construction of this agreement, I may quote the same in full :-

(3.) THE question thus depends on the true relationship between Sreelal and Orissa Cement, i.e., whether it was that of agent and principal or that of buyer and seller. This has to be ascertained from a proper construction of the agreement, exhibit C, and the surrounding circumstances. As pointed out in the well known case of In re Neville ((1870) L.R. 6 Ch. App. 397, 399.), too much importance need not be attached to the expressions "agent", "commission" etc. occurring in the document. "There is no magic in the word 'agency'. It is often used in commercial matters where the real relationship is that of vendor and purchaser". Here, apart from the fact that the parties were businessmen dealing with commercial matters there is the additional circumstance that there might be an attempt to conceal the real nature of the transaction with a view to evade payment of sales tax because both parties knew that sales tax would be payable if the transaction was really a sale. "The facts must speak for themselves and if those facts show a state of things different to a simple arrangement between principal and agent then the effect of those facts will not be altered simply because the language of agency has been used in a loose manner" : Per Lord Chancellor in Towle and Co. v. White and Others ((1873) 29 L.T. 78.).