Case Name:
ACT REFERRED:
Sales-tax-Statutory sale- If sale for the purposes of Sales-tax Acts.
Cement sold to holders of permits issued under the West Bengal Cement Control Act 1948-Sale, if exigible to tax.
Transactions between growers and procuring agents and rice miller and whole-sale agents under A. P. Paddy Procurement (Levy) Order-If exigible to sales-tax.
FACTS:
The Cement Control Order promulgated under the West Bengal Cement Control Act, 1948 prohibits storage for sale and sale by a seller and purchase by a consumer of cement except in accordance with the conditions specified in a licence issued by a designated officer. It also provides that no person shall sell cement at a higher than the notified price and no person to whom a written order has been issued shall refuse to sell cement “at a price not exceeding the notified price”. Any contravention of the order becomes punishable with imprisonment or fine or both.
Under the A.P. Procurement (Levy and Restriction on Sale) Order, 1967, (Civil Appeals Nos. 2488 to 2497 of 1972) every miller carrying on rice milling operation is required to sell to the agent or an officer duly authorised by the Government minimum quantities of rice fixed by the Government at the notified price, and no miller or other person who gets his paddy milled in any rice-mill can move or otherwise dispose of the rice recovered by milling at such rice mill except in accordance with the directions of the Collector. Breach of these provisions becomes punishable.
ISSUE RAISED:
It was contended in this Court on behalf of the appellants that the word ‘sale’ in the Bengal Finance Sales Tax Act, 1941, must receive the same meaning as in the Sale of Goods
Act, 1930 since the expression “sale of goods” was, at the time when the Government of India Act, 1935 was enacted, a term of well recognised legal import in the general law
relating to sale goods and in the legislative practice relating to that topic both in England and in India and (2) since under the Sale of Goods Act there can be no sale without a contract of sale and since the parties had no volition but were compelled by law to supply the goods at prices fixed under the Control Orders by the authorities the transactions were not sales and so were not exigible to tax.
JUDGMENT SUMMARY :
As Per curiam Sale of cement by the allottees to the permit-holders and the transactions between the growers and procuring agents as well as those between the rice millers on the one band and the wholesalers or retailers on the other, are sales exigible to sales-tax in the respective States.
Chief Justice Beg:
The transactions in the instant cases are sales and are exigible to tax.
The substance of the concept of a side itself disappears because the transaction is nothing more than the execution of an order.
Deprivation of property for a compensation called price does not amount to a sale when all that is done is to carry out an order so that the transaction is substantially a compulsory acquisition.
On the other hand, a merely regulatory law, even if it circumscribes the area of free choice, does not take away the basic character or core of sale from the transaction.
Such a law which governs a class obliges a seller to deal only with parties holding licences who may buy particular or allotted quantities of goods at specified prices, but an essential element of choice is still left to the parties between whom agreements take place. The agreement despite considerable compulsive elements regulating or restricting the area of his choice, may still retain the basic character of a transaction of sale.
In the former type of case, the binding character of the transaction arises from the order directed to particular parties asking them to deliver specified goods and not from a general order or law applicable to a class.
In the latter type of cases, the legal tie which binds the parties, to perform their obligations remains contractual. The regulatory law merely adds other obligations, such as the one to enter into such a tie between the parties. Although the regulatory law might specify the terms, such as price, the regulation is subsidiary to the essential character of the transaction which is consensual and contractual. The parties to the contract must agree upon the same thing in the same sense.
Agreement on mutuality of consideration, ordinarily arising from an offer and acceptance, imparts to it enforceability in courts of law. Mere regulation or restriction of the field of choice does not take away the contractual or essentially consensual binding core or character of the transaction.
As Per Justice Chandrachud, Bhagwati, Krishna Iyer, Untwalia, Murtaza Fazal Ali and Kailasam:
According to the definitions of “Sale” in the two Acts the transactions between the appellants and the allottees or nominees are patently sales because in one case the property in cement and in the other property in the paddy and rice was transferred for cash consideration by the appellants.
The conclusion which therefore emerges is that the transactions between the appellant, M/s. Vishnu Agencies (Pvt.) Ltd., and the allottees are sales within the meaning of section 2(g) of the Bengal Finance (Sales Tax) Act, 1941. For the same reasons, transactions between the growers and procuring agents as also those between the rice-millers on one hand and the wholesalers or retailers on the other are sales within the meaning of section 2(n) of the Andhra Pradesh General Sales Tax Act, 1957. The turnover is accordingly’exigible to sale tax or purchase tax as the case may be.
The appeals were accordingly dismissed with costs, with one hearing fee.