ROHTAS INDUSTRIES LTD Vs. STATE OF BIHAR

JUDGEMENT

(1.) In this case the assessee, Messrs. Rohtas Industries Limited, is a public limited company incorporated under the Indian Companies Act and manufactures various commodities including cement. On 4th of June 1942, an agreement, which was to be valid for ten years, was entered into between the assessee and some other cement manufacturing companies, namely, the Associated Cement Companies Limited, the Patiala Cement Company Limited and Dalmia Cement Company Limited (hereinafter called the Manufacturing Companies) on the one hand and the Cement Marketing Company of India Limited (hereinafter called the Maria ting Company) on the other hand, whereby all the Manufacturing Companies appointed the Marketing Company to be "the sole and exclusive sales managers for the sale of their cement during the period of the agreement" and it was stipulated that they will not themselves directly or indirectly sell or export cement to any customer. It appears that on 1st of October 1944, the Bihar Sales Tax Act, 1944, came into operation and the assessee was registered as a dealer under that Act in the Shahabad circle. In respect of assessments of sales tax for the six quarters ending on 30th of June 1947, the assessee claimed deductions under the various clauses of Section 5 (2) (a), Bihar Sales Tax Act, 1944. The claim was disallowed by the Commissioner of Sales Tax on the ground that the sales to third parties were not the sales of the assessee but were the sales of the Marketing Company. It was contended on behalf of the assessee that the Marketing Company was not an independent entity but was a selling organization of the Manufacturing Companies, including the assessee. The argument was rejected by the Commissioner of Sales Tax on the ground that under the agreement of 4th of June 1942, there was no contract of agency but there was contract of sale between the Manufacturing Companies and the Marketing Company. The assessee took the matter in revision to the Board of Revenue, but the revision application was dismissed and the Board of Revenue affirmed the order of the Commissioner of Sales Tax, holding that the petitioner could not be regarded as seller of cement to dealers and consumers but the petitioner was seller of cement to the Marketing Company.

(2.) Under Section 21 (1) of the Bihar Sales Tax Act of 1944 the Board of Revenue has submitted a case for the opinion of the High Court on the following question of law :

(3.) In order to find out what is the true legal relationship between the parties it is necessary to analyse the various clauses of the agreement dated 4-6-1942 between the assessee and the other manufacturing companies and the Marketing Company. Under Clause 2 of the agreement the manufacturing Companies "do and each of them doth hereby appoint the Marketing Company to be the sole and exclusive sales managers for the sale of their cement during the period of the agreement." Clause 3 of the agreement is very important and it is necessary to reproduce it in full :