( 1. ) THIS is a reference by the Board of Revenue, Madhya Pradesh, under Section 23 (1) of the C. P. and Berar Sales Tax Act, 1947, hereinafter called the Act.

( 2. ) THE reference has arisen out of an order of assessment of sales tax on the bidis of the value of Rs. 3,39,949 despatched by Ramchandra Rathore and Bros, of Saugar, the assessee-company, to one Kanhaiyalal Pradhan at Bareilly in Uttar Pradesh in the year ending 31st December, 1949. The despatches were made in pursuance of an agreement executed on 1st April, 1937, by the assessee-company on the one hand and the predecessor-in-title of Kanhaiyalal Pradhan on the other. The terms of the agreement are reproduced below : - (

(i) The agent shall stock for sale sufficient stock of Cannon Brand bidi, our own make, and shall not stock bidi from any other source of Saugar or of Saugar side. (ii) The rates for sales shall be fixed by the company. The agent is bound to adhere to these rates, any reduction or increase in which shall be made whenever desirable by the company. (iii) Out of the commission allowed to the agent as per para, (xi) below, the agent will pay to the wholesale dealer a commission of Re. 0-0-3 Per thousand bidis sold. (iv) The company will not be responsible for any shortage in transit. (v) The company undertakes to take back any stock found inferior in quality. (vi) The packing materials (excepting the crate) supplied will be returned to the company who will pay for its freight. (vii) The agent will always keep an adequate stock of the Cannon Brand bidi to meet the local requirements and will keep the company always informed of the conditions, as to increase or fall in demand. (viii) In the event of breach on the part of the agent of any of the conditions mentioned above, the company reserves to it the right instantly to cancel the agreement and to stop supply. Normally this agreement will be terminated as laid down in para, (xii) below. (ix) The agent will deposit with the company a sum of Rs. 50 (rupees fifty only) as security for conducting the business honestly and according to the conditions cited above. The agent will forfeit to the company this sum or part of it as the company may decide in the event of any adulteration in the companys goods having been made by the agent being discovered or in the event of any such act on the part of the agent that tends to disrepute the good name of the company. (x) It will be incumbent on the agent promptly to submit to the company every month true and accurate account of stock received and sold and the balance on hand at the end of every month so that the company is in a position to know the situation of the business. (xi) The company agrees -to supply the goods as reqiaired from time to time. The despatch will be made freight prepaid and the money will be realised through the Allahabad Bank to whom the documents will be addressed or through V. P. P. to pay to the agent a commission at Re. 0-0-9 (pies nine only) per thousand bidis on receipt every quarter of the claim from the agent showing the amount due and how it is arrived at. (xii) This agreement can be terminated by 60 days notice on either side, showing sufficient reasons. The company will not be responsible to receive any unsold stock.

( 3. ) APART from the agreement, there was also a statement made on solemn affirmation before the Assistant Commissioner of Sales Tax by the representative of the assessee-company. It is reproduced below :

. . . He (the consignee at Bareilly) is our sole agent and we pay a fixed commission of Re. 0-2-0 per 1,000 bidis which he is allowed to charge over and above the billed amounts. . . . Goods are despatched by post parcel or trains. The R/rs. and bills are sent by post. . . . At page 61 we have got the personal accounts of the dealer Kanhaiyalal Pradhan. All despatches as per bills are debited to his accounts showing the value, bill and the date. On the credit we note the receipts giving details of the amounts rec