Salar Jung Sugar Nulls Ltd. Vs. State of
Mysore & Ors  INSC 299 (1 November 1971)
ROY, SUBIMAL CHANDRA PALEKAR, D.G.
SIKRI, S.M. (CJ) SHELAT, J.M.
CITATION: 1972 AIR 87 1972 SCR (2) 228 1970
SCC (2) 23
R 1976 SC2478 (12) APR 1978 SC 449 (46,52) F
1985 SC1199 (6)
Mysore Sales Tax Act, 1957 as amended by
Mysore Act 11 of 1961--Levy of purchase tax on sugarcane purchased by factories
from growers--Purchase and supply of sugarcane regulated by Central and State
Control Orders--Transactions whether amounted to sale within meaning of s. 2(f)
of Mysore Sales Tax Act--Mutual assent between purchaser and seller whether
Present--Factories whether dealer within meaning of s. 2(k) of Act--Different rates
of tax In different States whether violative of Art. 14 of Constitution.
By Mysore Act 11 of 1961 which came into
force on October 1, 1961 sugarcane was included at Serial No. 11-A in the Third
Schedule to the Mysore Sales Tax Act, 1957. As a result of the amendment the
appellants were subjected to levy of tax on purchase of sugarcane. Their writ
petitions challenging the levy were dismissed by the High Court. In appeals by
certificate the appellants contended before this Court that : (i) on account of
the Central & State Control Orders applicable to the transactions there was
no mutual assent by and between the appellants and the growers of sugarcane in
regard to supply of sugarcane by the growers and the acceptance by the
factories and therefore there was no purchase and sale of sugarcane-, (ii) the
appellants were not dealers within the meaning of s. 2(k) of the Mysore Sales
Tax Act; (iii) the levy of tax on purchase of sugarcane at different rates in
different States was discriminatory and in violation of Art. 14.
HELD : (i) The decisions relating to
'compulsory sales' establish that statutory orders regulating the supply and
distribution of goods by and between the parties under the Control Orders in a
State do not absolutely impinge on the freedom to enter into contract.
Legislative measures or statutory provisions fixing the price, delivery,
supply, restricting areas for transactions are all within the realm of planning
economic needs ensuring production and distribution of essential commodities
and basic necessities of community. The recent trends in these legal rules
delimit the variety of structure of rights and duties which individuals may
create by such acts and transactions. The complexity of modern activities and
the consequent difficulty of providing for every eventuality have shaken fervor
for freedom of contract as there was during the nineteenth century. The
economic environment has changed.
The individual freedom is to be reconciled
with adequate performance by the Government of its functions in a highly
organised society. Delimiting areas for transactions or parties or denoting
price for transaction are all within the area of individual freedom of contract
with limited choice by reason of ensuring the greatest good for the greatest
number by achieving proper supply at standard or fair prices to eliminate the
evils of hoarding and scarcity on the one hand and availability on the other.
[244 G-Z45 B] In the present case the Control Orders are to be kept in the
forefront for appreciating the true character of transactions. It is apparent
that the area is restricted.
The parties are' determined by the order. The
229 minimum price is fixed. The minimum quantity of supply is also regulated.
These features do not complete the picture.
The entire transaction indicates that the
parties agree to buy and sell. The parties choose the terms. of delivery..
The parties have choice with regard to
obtaining supply of a quantity higher than 95 per cent of the yield. The
parties can stipulate for a price higher than the minimum. The parties can have
terms for payment in advance as well in cash. A grower may not cultivate and
there may not be any yield. A factory may be closed or wound up and may not buy
sugarcane. A factory can reject goods after inspection.
Inspection and appropriation of goods, which
in the present case were unascertained goods indicates not only freedom in the
formation but also in the performance of contracts. The combination of all
these factors indicates that the parties entered into agreement with mutual
assent and with volition for transfer of goods in consideration of price. [248
B-E;, 247 B] The transactions accordingly amounted to sales within the meaning
of s. 2(t) of the Mysore Sales Tax Act.
Indian Steel & Wire Products Ltd. v.
State of Madras  1 S.C.R. 479, Andhra Sugars Ltd. & Anr. v. State of
Andhra Pradesh,  1 S.C.R. 706 and State of Rajasthan & Anr. v. M/s.
Karam Chand Thappar & Bros. Ltd.  1 S.C.R.
861, relied on.
State of Madras v. Gannon Dunkerley & Co.
 S.C.R. 379, M/s. New India Sugar Mills
Ltd. v. Commissioner of Sales Tax, Bihar,  Supp. 2 S.C.R. 459, M/s.
Chitter Mal Narain Das v, Commissioner of Sales Tax,  1 S.C.R. 671,
Newcastle Breweries Ltd. v. Inland Revenue Commissioners (1927) 96 L.J.K.B.
735, Kirkness (Inspector of Taxes) v John Hudson & Co. Ltd.,  A.696
and Ridge Nominees Ltd. v. Inland Revenue Commissioners  Ch. 376,
(ii) If a person carries on the business of
buying or selling a commodity it is not necessary that he shall sell the same
commodity to become a dealer. The commodity may be converted into another
saleable commodity or it may be used as an ingredient in the manufacture of a
Therefore, the factories which bought
sugarcane could be said' to carry on the business of buying and selling
sugarcane and the factories were 'dealer' within the meaning of s. 2(k) of the
Mysore Sales Tax Act, [249 C] State of Andhra Pradesh v. Abdul Bakshi &
Bros. A.I.R. 1965 S.C. 531, relied on.
(iii) It was not disputed that all the
factories in Mysore had been treated equally. Different rates of purchase tax
in different States are applicable on various grounds. The quantity available,
the conditions of agriculturists, the number of factories will all have
Therefore there could be no infraction of
Art. 14 of the Constitution.[249 E] (iv) In view of the decision of this Court
in Tata Iron & Steel Co.'s case the appellants could not impeach the
imposition and levy of sale tax on the ground that the appellants could not
collect from the purchasers of sugar the purchase tax paid by the appellants on
purchase of Sugarcane. [249 G-H] Tata Iron & Steel Co. v. State of Bihar,
 S.C.R. 1355, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 2002 to 2005 and 2014 to 2017 of 1968.
Appeals from the judgment and order dated
April 16, 1968 of the Mysore High Court in Writ Petitions Nos. 2225 of 1967, 29
to 31, of 1968, 2208 of 1967 and 32 to 34 of 1969 respectively.
G.Vasanta Pai, G. L. Sanghi, P. C. Bhartari,
B. Datta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants
(in all the appeals).
V. S. Desai, S. S. Javali and R. B. A tar,
for the respondents (in all the appeals).
The Judgment of the Court was delivered by
Ray, J. These appeals are by certificate against the judgment and order dated
16 April, 1968 of the High Court of Mysore dismissing the applications of the
appellants under Article 226 of the Constitution for writs, orders and directions
prohibiting the respondent-State of Mysore and the Commissioner for Commercial
Taxes at Bangalore from levying or taking proceedings to levy any purchase tax
on purchase of sugarcane from the grower or from collecting or taking any
proceedings for recovery of any such tax with or without penalty from the
appellants. The appellants also asked for orders, writs and directions for
refund of several sums of money collected as and for purchase tax.
The appellants are the India Sugars and
Refineries Ltd. and the Salar Jung Mills Ltd. The India Sugars and Refineries
Ltd. is situated at Hospet in Bellary District in Mysore and the Salar Jung
Sugar Mills Ltd. is situated at Munirabad in Raichur District in Mysore.
The appellant, the India Sugars and Refineries
Ltd. in four applications now Civil Appeals No. 2015, 2016, 2017 and 2014 of
1968 impeached the demand and collection made against the appellant for large
sums of money as and for purchase tax and penalty on the purchase of sugarcane
from the growers for the period 1 April, 1962 to 30 June, 1967 and further
asked for refund of large sum of money collected as purchase tax.
The appellant Salar Jung Sugar Mills Ltd. in
four applications now Civil Appeals No. 2003, 2004, 2005, and 2002 of 1968
asked for similar orders and directions in respect of 'the period 1 July, 1963
to 30 June, 1967.
In the fifties practically all the States in
which sugarcane was grown for the purpose of manufacturing sugar used to levy
cess on sugarcane brought into the premises of sugar factories. This 231 Court
in Diamond Sugar Mills v. State of U.P. (1)  3 S.C.R. 242 held that
section 3 of the U.P. Sugarcane Cess Act, 1956 which empowered the Governor of
the State to impose cess on entry of sugarcane into the premises of a factory
did not fall within Entry 52 of List II and as there was no entry in the State
List or in the Concurrent List in which the said Act could fall, it was beyond
the legislative competence of the State Legislature. The decision of this Court
was given on 13 December, 1960. The Sugarcane Cess (Validation) Act, 1961 was
passed by Parliament validating the imposition of collection of cess on
sugarcane under several State enactments before the commencement of the
Validation Act of 1961, The Mysore State Legislature imposed tax on purchase of
sugarcane purchased by sugar factories. By Mysore Act No. 11 of 1961 which came
into force on 1 October, 1961 sugarcane was included at Serial No. 11-A in the
Third Schedule to the Mysore Sales Tax Act, 1957. The relevant provision in the
Mysore Act is as follows "11-A Sugarcane--Purchased by the last dealer in
the State liable to tax under this Act.-Fifteen per cent".
As a result of the amendment the appellants
were subjected to levy of tax on purchase of sugarcane.
The appellants raised three principal
contentions. First, there was no mutual assent by and between the appellants
and the growers of sugarcane in regard to supply of sugarcane by the growers
and the acceptance by the factories and therefore there was no purchase and
sale of sugarcane.
Secondly, the appellants are not dealers
within the meaning of section 2(k) of the Mysore Sales Tax Act. Third, the levy
of tax on purchase of sugarcane at different rates in different States was
discriminatory and in violation of Article 14.
In order to appreciate the rival contentions
on the first ground as to whether there was a purchase or sale of sugarcane the
relevant legislation has to be looked into and facts and circumstances have to
be ascertained for finding out as to what the actual transaction was.
In exercise of the powers conferred by
section 3 of the Essential Commodities Act, 1955 the Central Government on 27
August, 1955 made the Sugarcane Control Order, 1955. The Central Government was
empowered by clause 3 of the Sugarcane Control Order, 1955 to fix the minimum
price of sugarcane to be paid by purchasers of sugar. Sale or purchase of
sugarcane at a price lower than the price fixed under section 3 was prohibit232
ed. The Central Government, however, could fix an additional price under
certain circumstances and contingencies. Clause 4 of the Order of 1955 gave the
Government power to prohibit or restrict or otherwise regulate export of
sugarcane from any area for supply to different factories and also to direct
that no jaggery or sugar shall be manufactured from sugarcane except under and
in accordance with the conditions specified in a licence issued in that behalf.
On 4 October, 1963 in exercise of the powers
conferred by section 3 of the Defence of India Act, 1962 the Central Government
introduced Rule 125-B to the Defence of India Rules. Rule 125-B inter alia
stated that if the Central Government was of opinion that it was necessary or
expedient for regulating or increasing the supply of sugarcane or for securing
the equitable distribution of sugarcane the Central Government could pass
orders to reserve areas where sugarcane was grown for a factory; determine the
quantity of sugarcane which a factory would require for crushing during a year;
fix with respect to any specified sugarcane grower in a reserved area the
quantity or percentage of sugarcane grown by such grower for supply to the
require a factory to enter into an agreement
with the grower to purchase the quantity of sugarcane so determined; and
further direct that no sugarcane shall be exported from a reserved area except
under and in accordance with a permit issued by the Central Government.
On 26 September, 1963 sugar was notified
under Rule 125-B of the Defence of India Rules as a thing essential to the life
of the community. On 7 October, 1963 the Central Government directed that the
powers conferred by Rule 125-B of the Defence of India Rules shall be exercised
by the State Government.
In this background the Mysore Government on
14 November, 1963 in exercise of the powers conferred by Rule 125-B of the
Defence of India Rules brought into existence the Mysore Sugarcane (Regulation
of Supply) Order, 1963. In Schedule I of the Order factories were specified and
reserved areas were enumerated in the said Schedule for supply of sugarcane to
the specified factory and the sugarcane growers in the reserved areas were to
supply 95 per cent of sugarcane grown to the factory concerned. Every factory
to which supply of sugarcane was to be made was required to enter into an
agreement with each sugarcane _grower to purchase the quantity of sugarcane
determined. Purchase of sugarcane by power crusher or for manufacture of gur,
shakkar, gul, jaggery, rab or khandsari sugar was prohibited. Export of
sugarcane from 233 a reserved area was also prohibited except under permit.
Contravention of the Mysore Sugarcane Control
Order was made punishable by forfeiture of property in respect of which there
was a contravention. The Mysore Sugarcane Control Order, 1963 specified the
India Sugars and Refineries Ltd.
as the factory and enumerated the areas
reserved for supply of sugarcane to the specified factory. It may be stated
here that the Salar Jung Sugar Mills Ltd. was also specified in the Schedule
and it remained specified until 1965 when the Mysore Sugarcane Munirabad Order,
1965 was made as specially applicable to Salar Jung Sugar Mills Ltd.
On 14 February, 1964 in exercise of the
powers conferred by section 3 of the Essential Commodities Act, the Central
Government amended the Sugarcane Control Order, 1955.
Clause 4 of the Sugarcane Control Order, 1955
was amended and substituted by a new clause. The new clause 4 conferred powers
on the Central Government to reserve areas where sugarcane was grown for a
factory, determine the quantity of sugarcane which the factory would require
for crushing during the year, fix with respect to any specified sugarcane
grower in a reserved area the quantity or percentage of sugarcane grown by such
grower which such grower would supply to the factory concerned; require the
sugarcane grower and the factory to enter into an agreement for supply and
purchase of the quantity of sugarcane so determined.
Clause 4 as amended further provided that
every sugarcane grower or factory to whom the order applied would be bound to
supply or purchase the quantity of sugar covered by the agreement entered into
and wilful failure on the part of anyone would constitute a breach of the
provisions of the said Order.
On 20 February, 1964 in exercise of the
powers conferred by clause 6 of the Sugarcane (Control) Order, 1955, the
Central Government directed that the powers conferred on the Central Government
by clause 4 of the said Order, shall be exercisable by the State Governments of
Andhra Pradesh, Assam, Bihar, Gujarat, Kerala, Madhya Pradesh, Madras,
Maharashtra, Mysore, Orissa, Punjab, Rajasthan, Uttar Pradesh and West Bengal
and the Chief Commissioner of Pondicherry.
On 15 January, 1965 the Mysore Government in
exercise of the Powers conferred by clause 4 of the Sugarcane Control Order,
1955 as amended and read with the notification dated 20 February, 1964 made the
Mysore Sugarcane (Regulation of Supply) (Munirabad) Order, 1965. The Mysore
Sugarcane (Munirabad) Order of 1965 in clause 2(c) defined factory to mean the
premises of the appellant Salar Jung Sugar Mills Ltd. at Munirabad. In Schedule
I of the Mysore Sugarcane (Regulation of Supply) (Munira234 bad) Order, 1965
the area reserved for supply of sugarcane to the factory was enumerated setting
out the names of the villages. The Mysore Sugarcane Order, 1955 determined the
crushing capacity of the appellant Salar Jung Sugar Mills Ltd. to be 1000 tons
per day and the quantity of sugarcane required by the factory during the crushing
season to be 1,50,000 tons. The Order further stated that the factory was to
secure the quantity of sugarcane from the area specified in Schedule I and the
quantity of sugarcane to be, supplied by each grower was fixed at 95 per cent
of the sugarcane grown by the grower. Every sugarcane grower and the factory'
concerned were required to enter into an agreement to supply or purchase the
quantity of sugarcane determined under clause 4. Export of sugarcane from
reserved area was prohibited. The Sugarcane (Regulation of Supply) Order, 1963
in so far as it related to matters provided for in the Mysore Sugarcane
(Munirabad) Order, 1965 was repealed. Thereafter, the Mysore Sugarcane
(Regulation of Supply) Order, 1963 applied to the India Sugar and Refineries Ltd.
and the Mysore Sugarcane (Regulation of Supply) (Munirabad) Order, 1965 applied
to the Salar Jung.
Sugar Mills Ltd.
On 16 July, 1966 in exercise of the powers
conferred by section 3 of the Essential Commodities Act, 1955 the Central
Government made the Sugarcane (Control) Order, 1966 and repealed the Sugarcane
(Control) Order, 1955. Under the Sugarcane (Control) Order, 1966 'factory'
means any premises including the precincts thereof in any part of which sugar
is manufactured by vacuum pan process, 'price' means the price or the minimum
price fixed by the Central Government from time to time delivered at the gate
of the factory or sugarcane purchasing centre and reserved area' means any area
where sugarcane is grown and reserved for a factory in terms of the Order.
Clause 3 of the 1966 Sugarcane Control Order dealt with minimum price of
sugarcane fixed by the Central Government having regard to (a) cost of,
production of sugarcane, (b) the return to the grower from alternative crops on
the general trend of prices of agricultural commodities, (c) availability of
sugar to the consumer at a fair price, (d) the price at which sugar produced
from sugarcane is sold by producers' of sugar, and (e) the recovery of sugar
from sugarcane. Purchase and sale of sugarcane at a price lower than that fixed
was prohibited. The price of sugarcane became-payable 14 days from the date of
Additional price for sugarcane could also be
fixed under clause 5. Under clause 6 of the Order the Central Government could
reserve area where sugarcane is grown for the factory having regard to the
crushing capacity of the-, factory, the availability of sugarcane in the
reserved area and the 235 need for production of sugar and also determine the
quantity of sugarcane required by the factory for crushing during any year and
fix the quantity to be supplied by a grower to the factory. The grower and the
factory were required to enter into an agreement for supply or purchase of
Export of sugarcane from any reserved area
In exercise of the powers conferred by clause
6 of the Sugarcane (Control) Order, 1966 the Mysore Sugarcane (Regulation of
Distribution) (Munirabad) Order, 1966 was made by the Government of Mysore
repealing the Mysore Sugarcane (Regulation of Supply) (Munirabad) Order, 1965.
The 1966 Sugarcane (Munirabad) Order was in
relation to the appellants Salar Jung Sugar Mills Ltd. Clause 3 of the Order
dealt with the crushing capacity of the factory being 1000 tons per day and the
quantity of sugarcane required for the factory during the year was determined
to be 1,50,000 tons. The appellant's factory was to secure the quantity of
sugarcane determined under clause 3(2) from the areas specified in Schedule I
being the reserved areas for supply of sugarcane to the factory. The sugarcane
growers in the reserved area were to supply 95 per cent of the sugarcane grown
by them to the factory. The sugarcane grower and the factory were required to
enter into an agreement for supply and purchase of sugarcane.
Counsel on behalf of the appellants contended
that there was no sale and purchase of sugarcane by reason of want of mutual
assent and further that the entire transaction was only by operation of
statutes, and at no stage there was any element of freedom to buy or sell. It
was said that under the statutes these consequences emerged. First, the price
was fixed. Secondly, the sugarcane grower was required to deliver sugarcane and
the factory was required to receive supply only from the sugarcane grower in
the reserved area.
Thirdly, the quantity of supply by the
sugarcane grower, namely, 95 per cent of the produce was fixed. Fourthly, the
quantity of sugarcane required by the factory was fixed at 1,50,000 tons a
year. Fifthly, the grower in the reserved area could not export sugarcane to
any place or person outside the area. Sixthly, it was said that entering into
agreement between the grower and the factory for supply and purchase of
sugarcane was under the statute.
Counsel for the State on the other hand
contended that the transaction was in essence and substance purchase and sale
and there was mutual assent between the parties as to the transactions. It was
said that a grower after he had grown sugarcane at the commencement of the
cultivation season might bargain for a price higher than the minimum price.
Again, if the factory did not L500Sup.CI/72
236 agree to pay higher price the grower might not elect to grow sugarcane or
even allow his land to lie fallow. The factory might agree to pay a price
higher than the minimum price in order to provide sufficient inducement to
growers for higher yield. Strong reliance was placed by counsel for the State
on the agreement entered into between the growers and the factory as decisive
of purchase and sale. As to the agreement it was said on behalf of the State
that to ensure a well phased supply of sugarcane to the factory the latter
might enter into an agreement with the growers even before they would plant
sugarcane. The dates of delivery were to be agreed upon between the parties.
The growers according to the State might ask for advance payment of price in
cash or in the form of seedlings, fertilisers and the like.
Factories could ask for more than 95 per cent
of the yield.
At all relevant times sugarcane was declared
to be an essential commodity. The various orders were made for regulating the
supply of sugarcane to the factories having regard to the crushing capacity of
the factory, the availability of sugarcane in the area and the need for
production of sugarcane. This co-ordination between production and distribution
of sugarcane on the one hand and production and distribution of sugar on the
other hung together as complementary to each other in regard to the
requirements of basic ingredient. The carving out of areas for production and
distribution of sugarcane is necessary to preserve continuity of supply and to
prevent shortage and defective distribution. The regulation of supply of
sugarcane by fixing the minimum price is an application of the principle of
utilitarianism which receives the approbation and goodwill of both the grower
and the factory so that the grower is assured of an economic competitive return
and the factory is also assured of not being scared by soaring and fluctuating
price to thwart and impede production and manufacture of sugar.
Counsel for the appellants extracted the
famous dictum of Sir Henry Maine and submitted that the orders in the present
case were retrograde step and the clock was put back by reversing the
historical evolution from status to contract.
What was emphasized by counsel for the
appellants was as follows: The various Orders had the effect of bringing into
existence the status of delivery by the growers and acceptance by the factory
of sugarcane as a result of the statutory orders and there was no area of
bargain. There was no element of will. There was no aspect of assent. The
entire transaction was nothing but a regimentation of pattern of automatic
supply and acceptance. The grower was bound to deliver. The factory was bound
to accept. Neither party could move out of the apron strings of the statutes.
237 This Court in State of Madras v. Gannon
Dunkerley & Co. (Madras) Ltd.  S.C.R. 379 in dealing with the
assessment of Gannon Dunkerley & Co. to sales tax on the value of the
materials used in the execution of building contracts within the taxable
turnover of the company held that the building contract was one entire and
indivisible transaction and there was no separate individual sale of the
building materials comprised in the construction. It was said by this Court
that in a building contract the agreement between the parties was that the
contractor should construct the building according to the specifications
contained in the agreement,and in consideration there for receive payment as
provided therein, and in such an agreement there was ,neither a contract to
sell the materials used in the construction nor did the property pass therein
The reason why counsel for the appellants
relied on the decision in Gannon Dunkerley & Co. was in support of the
proposition that the word 'sale' occurring in Entry 54 in List II was to be
interpreted in the sense in which the word 'sale' is used in the Indian Sale of
Goods Act. This Court in Gannon Dunkerley & Co. referred to the meaning of
the word 'sale' in various treatises like Blackstone's Commentary, Ben amin on
Sale, Halsbury's Laws of England and held relying on the meaning given by
Benjamin on Sale that the four elements required in a sale were; first, that
the parties must 'be competent to contract; secondly, there should be mutual
assent; thirdly, property in the thing is to be transferred; and, fourthly, the
price in money is to be paid. Counsel for the appellants contended that the
element of mutual assent was lacking in the present cases.
In M/s New India Sugar Mills Ltd. v. The
Commissioner of Sales Tax, Bihar  Suppl. 2 S.C.R. 459 a question arose as
to whether the despatches of sugar to the Province of Madras by dealers in
accordance with the directions issued by the Controller under the Sugar and
Sugar Products Control Order, 1946 was liable to be taxed as a sale. This Court
in the majority opinion held that the despatches of sugar under the directions
of the Controller were not the result of any contract of sale because there was
no offer by the dealers to the State and no acceptance by the State. The dealer
was held to be compelled to carry out the directions of the Controller and
there was no volition. Intimation by the State of its requirement of sugar to
the Controller or communication of the allotment order to the dealer assessee
was held not to amount to an offer. The minority view in that case was that
there was a sale of sugar and consent could be express or implied and as long
as the parties carried on trade under controls at fixed price they must be
deemed to have agreed to such a price; there must be an amplied contract with
an implied offer and an implied acceptance. The decision of this Court in the
case of Gannon 238 Dunkerley & Co. (supra) was referred to in the New India
Sugar Mills (supra) case for the meaning of the word 'sale).
The majority view in the case of New India
Sugar Mills Ltd. was on the reasoning that the prerequisite to a sale was a
contract of sale which was to be had between the parties.
The Province of Madras intimated its
requirements to the Controller. The Controller called upon the manufacturing
units to supply sugar to the Province. It was held that the Controller did not
act as an a,-lent of the Province to purchase goods but that he acted in
exercise of his statutory authority. Therefore, there was no offer by the
Province to purchase sugar and there was no acceptance of offer by the
manufacturer. The ratio was that there was no privity between the manufacturer
and the Province. The minority view in that case was that there might be
compulsion in both buying and selling but a compelled sale might nevertheless
be a sale. Hidayatullah, J. for the minority view said "the affairs of the
world are very complicated and sales are not always in their elementary forms.
Due to short supply or mal distribution of goods, controls have to be imposed.
There are permits, price controls, rationing and shops which are licensed. Can
it be said that there was no sale because mutuality is lost on one account or
another ? It was not said in the case of Tata Iron and Steel Co. Ltd. v. The
State of Bihar  S.C.R.
1355 which was a case of control, that there
was no sale.
The entry should be interpreted in a liberal
spirit and not cut down by narrow technical considerations. The entry in other
words should not be shorn of all its content to leave a mere husk of
legislative power. For the purposes of legislation such as on sales lax it is
only necessary to see whether there, is a sale express or implied. Such a sale
was not found in forward contracts and in respect of materials used in building
contracts. I am of opinion that in these transactions there was a sale of sugar
for a price and the tax was payable".
Could a company which supplied steel products
to various persons in the State of Madras at the instance of the Steel
Controller exercising powers under the Iron and Steel (Control) of Production
and Distribution Order, 1941 be assessed to sales tax oil those transactions.
This was the question in. Indian Steel & Wire Products Ltd. v. State of
Madras  1 S.C.R. 479. Clause 5 of the Order in the Madras case stated
that "no producer or stockholder shall dispose of or agree to dispose of
or export or agree to export from British India any iron or steel except in
accordance with the conditions contained or incorporated in a general or
special written order of the Controller".
Clause 10-B of the Order stated that
"the Controller may, by a written order require any person holding stock
of iron and steel, acquired by 239 him otherwise than in accordance with the
provisions of Clause 4 to sell the whole or any part of the stock to such
person or class of persons and on such terms and conditions as may be specified
in the Order". Clause 4 of the Order dealt with acquisition and stated
that "no person shall acquire or agree to acquire any iron or steel from a
producer or a stockholder except under the authority of and in accordance with
the conditions contained or incorporated in a general or special written order
of the Controller".
The company contended that the parties to
whom the goods were to be supplied, the price which was to be paid, the manner
in which goods were to be transported and the mode in which payment was to be
made were all determined by the Controller and therefore the transfers were not
sales because of compulsion and lack of agreement. Hegde, J.
speaking for the Court referred to the
observations in Cheshire and Fifoot Law of Contract (6th Ed.) at p. 22 and said
"Law invariably imposed some restrictions on freedom of contract' But due
to change in political outlook and as a result of economic compulsions, the
freedom of contract is now being confined gradually to narrower and narrower
limits. It would be incorrect to contend that because law imposes some
restrictions on freedom to contract, there is no contract at all. So long as
mutual assent is not completely excluded in any dealing, in law it is a
contract". The transactions were held to be sales because the date for
supply of goods', the time for payment and the independent arrangement between
the parties for transport predicated the basis of mutual assent.
The Andhra Pradesh Sugarcane (Regulation of
Supply and Purchase) Act, 1961 came up for consideration before this Court in
Andhra Sugars Ltd. & Anr. etc. v. State of Andhra Pradesh & Ors. 
1 S.C.R. 706. A sugar factory had to buy sugarcane from cane growers in
conformity with the directions of the Cane commissioner. The State Government
by notification had power to tax purchases of sugarcane for use, consumption or
sale in a sugar factory. The sugar factories challenged the validity of the Act
empowering the Government to tax purchases of sugarcane in those instances
because the factories were compelled to buy cane from the sugarcane growers and
they were bound to enter into agreements in prescribed terms and conditions and
to buy sugarcane in conformity with instructions issued by the Cane
Commissioner under the Act and areas were declared as the factory zone for
supply of cane to a factory, the factory was bound to purchase quantity of cane
grown in that area and offered for sale as might be determined by the Cane
Commissioner, the cane growers were prohibited from supplying or selling cane
to any factory or person otherwise than in accordance with the provisions of
This Court on reading the provisions of the
Act and the Rules framed there under found that a cane-grower in a factory zone
was 240 free to sell or not to sell his sugarcane to the factory.
The contention of the factories was that if
the grower offered to sell the factory was bound to enter into agreement on
prescribed terms and conditions and therefore the factories were compelled by
law to buy cane from the growers and the purchases were not made under
Bachawat, J. speaking for the Court in the
Andhra Sugars case said that the decision in the New India Sugar Mills Ltd. was
not to be treated as an authority for the proposition that there can be no
contract of sale under compulsion of a statute. The offer of a cane grower to
sell was a free consent and the compulsion of law was not coercion as defined
in section 15 of the Indian Contract Act, 1892. The agreement in spite of the
compulsion of law was said to 'be neither void nor voidable. A cane grower made
an offer directly to the factories. The factory accepted it. The parties signed
an agreement. There was privity of contract between the parties. It was
therefore a contract of sale and purchase though the buyer was obliged to give
his assent under compulsion of a statute.
In the case of Andhra Sugars Ltd. this Court
referred to the whittling down of the laissez faire concept in a social Welfare
State by emphasising the public interest to control unfair competition and
combination. It was said "The cane growers scattered in the villages had
no real bargaining power. The factory owners or their combines enjoyed a near
monopoly of buying and could dictate their own terms. In this unequal contest
between the canegrowers and the factory owners, the law stepped in. and
compelled the factory to enter into contracts of purchase of cane offered by
the canegrowers on prescribed terms and conditions".
The Colliery Control Order, 1945 empowered
the Central Government to fix price at which coal might be sold by colliery
owners. The colliery owners were prohibited from selling or agreeing to sell or
offering to sell coal at a price different from the price fixed in that behalf.
Where a colliery owner signified to the Deputy Coal Controller (Distribution)
in writing his willingness to sell direct to consumers and an allotment was
made by the Deputy Controller to a consumer for such direct sale, the coal was
to be delivered to the consumer at the price fixed under clause 4 of the Order.
The Central Government was authorised to issue from time to time such
directions as it thought fit to any colliery owner regulating the disposal of
his stocks of coal or of the expected output of coal in the colliery during any
period including directions as to the grade, size and quantity of coal which
might be disposed of and persons or class or description of persons to whom
coal should or should not be disposed of. The order 241 further provided that
no person shall acquire or purchase any coal from a colliery, and no colliery
owner or his agent shall dispatch or agree to despatch or transport any coal
from the colliery except under the authority and in accordance with the
conditions contained in a general or special authority of the Central
The Colliery Coal Control Order 1945 came up
for consideration in State of Rajasthan & Anr. v. M/s. Karam Chand Thappar
& Bros. Ltd.  1 S.C.R. 861. Under a contract with Equitable Coal
Company, Karam Chand Thappar and Bros. Ltd. acquired the monopoly right to
supply coal on behalf of the collieries in Rajasthan and sold as the agent of
the Equitable Coal Company. Karam Chand Thappar and Bros.
entered into an agreement with the State of
Rajasthan to supply coal to the Rajasthan Government. The company contended
that the supply of coal to the State of Rajasthan did not constitute sale as
the supply was controlled by the Colliery Control Order, 1945 and even if there
was a sale it would be inter-State sale. It was held that the Colliery Control
Order super-imposed upon the agreement between the parties the rate fixed and
the elements necessary to render turnover from sale of goods liable to sales
tax, namely, competency of parties, mutual assent of the parties, passing of
property in the goods supplied to the purchaser and payment or promise of
payment of price were present in the transaction. In the Rajasthan case it was
noticed that when the goods supply of which is controlled by statutory orders
are delivered pursuant to contract of sale the principle of die decision in the
case of New, India Sugar Mills Ltd. has no application. Shah, J. speaking for
the Court in the Rajasthan case said that there was an agreement of sale
between the parties competent to contract and in pursuance of the agreement of
sale property in the goods supplied passed to the purchaser for price.agreed to
be paid. The transaction was, therefore, one of sale of goods within the
meaning of the Rajasthan Sales Tax Act.
The U.P. Wheat Procurement (Levy) Order, 1959
was made for maintaining and securing equitable distribution and availability
of wheat at fair prices. By clause 3 (1) of the Order 'every licensed dealer
shall sell to the State Government at the controlled prices 50 per cent of the
wheat held in stock by him at the commencement of this Order'.
Again by clause 3(2) licensed dealer 'is
directed to sell to the State Government 50 per cent of wheat purchased by him
every day with the date of the commencement of this Order and until such time
as the State Government otherwise directs'. The Order enjoins the licensed
dealer to deliver the quantities specified in sub-clause (1 ) of clause 3
either to the Controller c. to such other person as may be authorised by the
Controller to take delivery on his behalf.
The Enforcement 242 Officer had power to find
out whether the dealer was carrying out the obligation. The U.P. Wheat
Procurement Order was challenged in M/s. Chitter Mal Narain Das v.
Commissioner of Sales Tax  1 S.C.R. 671
on the ground that there was no contract between the licensed dealer and the
State pursuant to which goods were sold within the meaning of the U.P. Sales
Tax Act. It was held that the obligation to deliver wheat arose out of the
statute and there was no volition of the licensed dealer. The source of the
obligations to deliver the goods and pay for them was said to be not in
consensus 'but in the statutory order. It was said that the order did not
'envisage any consensual agreement' and it did 'not require the State to enter
into even an informal agreement'. It was said 'On the date of the commencement
of the U.P. Wheat Procurement (Levy) Order, upon the licensed dealer was
imposed a liability to deliver half the quantity of wheat on hand, and he had
also to supply to the State Governmeat 50 per cent of the quantity of wheat
procured or purchased by him every day beginning with the date of commencement
of the Order. If he failed to carry out the obligation he was liable to be
penalised. To ensure that he carried out his obligation his premises were
liable to be searched and his property sequestered (sic.) The Order ignored the
volition of the dealer'.
The meaning of the word 'compulsory sale'
came up for consideration in three English decisions. These are Newcastle
Breweries Ltd. v. Inland Revenue Commissioner  96 L.J.K.B. 735 and also
reported in 43 T.L.R. 476, Kirkness (Inspector of Taxes) v. John Hudson &
Co. Ltd.  A.C.
696 and Ridge Nominees Ltd. v. Inland Revenue
Commissioners  Ch. 376.
In Newcastle Breweries Ltd. (supra) the
question was whether a sum awarded to the company by way of compensation for a
quantity of rum requisitioned by the Admirality under the Defence of the Realm
Regulations was a profit arising from its trade or business. The company contended
that it was not, because the compensation represented the compulsory taking by
the Crown of a part of the capital of the company, and, therefore, the
compensation was not a profit from the business. It was held by Rowlatt, J.,
the Court of Appeal and the House of Lords that the cost of the rum was treated
as an outgoing of the business and if raw rum had been voluntarily sold the
price would have come into computation of profits and the circumstance that the
sale was compulsory made no difference.
In the case of John Hudson & Co. Ltd. the
wagons owned by the company were on 1 January, 1948 under requisition by the
Minister of Transport under the powers contained in Regula243 tion 53 of the
Defence Regulations 1939. On the same day the property in these wagons was
vested in the British Transport Corporation by virtue of section 29 of the
Transport Act, 1947. Section 30 of the Transport Act provided compensation to
the owner of the wagons. The amount of compensation determined in accordance
with the provisions of the Transport Act was substantially higher than the.
written down value of the wagons for the purposes of income-,tax allowances in
respect of wear and tear as appearing in the company's books. On these facts a
balancing charge under section 17 of the English Income Tax Act, 1945 was made
on the company. The amount represented the excess of the original cost over the
written down value.
The company appealed against the balancing
charge to the Commissioners for the special purposes of the Income-tax Act who
determined the question in favour of the Crown. Upjohn, J. reversed their
determination. The Court of Appeal and the House of Lords upheld his decision.
The decisions in the case of John Hudson
& Co. Ltd. turned on the meaning of the provisions of sction 17 of the
English Income-tax Act, 1945 as to whether the company's wagons were sold
within the meaning of that section. Viscount Simonds, L.C. said that the wagons
were not sold and it would be a rave misuse of language to say that they were sold.
Under the English Lands Clauses Consolidation Act, 1845 central or local
authorities have powers of compulsory acquisition and these powers are commonly
referred to as powers of compulsory purchase and the transaction is sometimes
referred to as a compulsory sale. The word sale' in the English Income-tax Act
without some context to aid the inclusion of compulsory sale within the meaning
of the word 'sale' in the Income-tax Act was hold not to apply to include a
case of compulsory acquisition. The operation of the Transport Act in that case
was held to be different from that of the Lands Clauses Consolidation Act,
1845, because the Transport Act did not have the elements which in some degree
assimilate a compulsory sale to a sale simpliciter.
These compulsory sales under the English
Lands Clauses Consolidation Act place the parties in a position to negotiate
and apart from the power of compulsion in the background they were like an
ordinary vendor and purchaser.
The consensus between vendor and purchaser which
is involved in the natural meaning of the word 'sale' came up for consideration
in the recent decision of the Court of Appeal in the case of Ridge Nominees
Ltd. Ridge Securities made an offer to purchase from the stockholders of
another company Gresham the whole of the stock of that company. The offer was
conditional upon acceptance before a certain date. A document of transfer of
440 shares in Gresham was made by Mrs. Rita Bell in consideration of 244 pound
891 paid by Ridge. The question was whether the document was properly described
as a conveyance or transfer on sale of any property within the meaning of the
English Stamp Act, 1891. Section 209 of the English Companies Act, 1948
conferred power on an agent to execute an instrument of transfer on a dissenting
shareholder's behalf. The offer made by Ridge Company to purchase shares in
Gresham company was conditional upon acceptance by the holders of not less than
90 per cent of the issued capital of Gresham. In fact, more than 90 per cent in
value did accept the offer. Mrs.
Rita Bell was one of those who did not think
it fit to accept it. Thereupon Ridge Company invoked powers and provisions of
section 209 of the English Companies Act. The transfer of the shares of Mrs.
Bell was not executed by her but pursuant to the powers given by section 209 of
the English Companies Act by someone on her behalf. Mrs. Bell was not an
assenting but a dissenting shareholder. Her shares were transferred by virtue
of the powers given to the transferee company by the Act. It is in that context
that the question was whether the conveyance or transfer was sale of any
property. The contention was that there could not be a sale because the
essential element of mutual assent was absent. The Court of Appeal held that
the instrument must be regarded as a transfer of sale. Lord Ever shed, M.R.
said that by the machinery created by the Companies Act and the statutory
authority given by the Act to the agent to execute transfer on Mrs. Bell's
behalf 'it has in truth brought into being that which ex facie in all its
essential characteristics and effect is, and becomes, a transfer on sale of
Mrs. Bell's stock. Danckwerts, L.J. in the same case said about the transfer of
shares. "It seems to me that a sale may not always require the consensual
element mentioned in Benjamin on Sale. 8th ed. p. 2, and that there may, in
truth, be a compulsory sale of property with which the owner is compelled to
part for a price against his will. The effect of the statute in such a case is
to say that the absence of the transferor's consent does not matter and the
sale is to proceed without it".
These decisions establish that statutory
orders regulating the supply and distribution of goods by and between the
parties under Control Orders in a State do not absolutely impinge on the
freedom to enter into contract. Legislative measures or statutory provisions
fixing the price, delivery, supply, restricting areas for transactions are all
within the realm of planning economic needs ensuring production and distribution
of essential commodities and basic necessities of community. The recent trends
in these legal rules delmit the variety of structure of rights and duties which
individuals may create by such acts and transactions. The complexity of modern
activities and the consequent difficulty of 245 providing for every eventuality
have shaken fervour for freedom of contract as there was during the nineteenth
century. The economic environment has changed. The individual freedom is to be
reconciled with adequate performance by the Government of its functions in a
highly organised society. Delimiting areas for transactions or parties or
denoting price for transactions are all within the area of individual freedom
of contract with. limited choice by reason of ensuring the greatest good for
the greatest number by achieving proper supply at standard or fair price to
eliminate the evils of hoarding and scarcity on the one band and availability
on the other.
In the present case, the parties are certain.
The parties are defined, namely, that the sugarcane grower is delivering and
supplying and the factory is accepting the goods. The property in the goods is
transferred from the grower to the factory. The transaction is not a gift nor
an exchange nor a hypothecation nor a loan. There is consideration for the
transfer. Counsel for the appellants contended that there was no mutual assent
because the price was fixed, the quantity for supply and delivery was
determined, the parties had no choice to go to strangers or outsiders in the open
market. In Benjamin on Sale, 8th Ed. at page 68 the law as to mutual assent is
stated as this. "The assent need not as a general rule be express. It may
be implied from their language or from their conduct; may be signified by a nod
or a gesture, or may even be inferred from silence in certain cases; as if a
customer takes up wares off a tradesman's counter and carried them away and
nothing is said on other side, the law presumes an agreement of sale for the
reasonable worth of the goods. But the assent must in order to constitute a
valid contract, be mutual and intended to bind both sides. It must also
co-exist on the same moment of time". The assent must be mutual and bind
The proposal by one man must be accepted by
another and this acceptance must be unconditional. The assent must be
communicated to the other party or some act must be done which the other party
has expressly or impliedly offered to treat as a communication. Judged by these
standards in the forefront exists the agreement between the parties in the
present case. The statutory orders required parties to enter into agreement.
The parties did in fact enter into agreements. The agreement contains intrinsic
evidence that the growers agreed to sell and the factory to buy goods.
Counsel for the appellants contended that
mutual assent in the present case would not be free but compulsory and the
parties would have no choice in the matter and therefore there would be no
sale. The most common place illustration of supply and acceptance of goods
resulting in sale under the present conditions.
246 is furnished by the present system of
sale of rationed goods. There are ration shops in particular areas. Ration
cards are distributed to residents in that area. The owners of these cards are
required to go to the particular shop mentioned in the card for supply of
Price is also regulated by the Rationing
Order. Therefore the parties, the price, the shop, the supply and the
acceptance of goods in accordance with the provisions of the Rationing Order
are all regulated. When one presents a ration card to the shop and the shop
owner delivers the rationed articles and the holder of the ration card accepts
them and pays the price, there is indisputably a sale.
Counsel for the appellants said that choice
was left with the ration card holder to co to the shop or not to go there at
all but the parties had no choice in the present case whether the factory would
or would not enter into agreement.
In the present case both the factory and the sugarcane
rower have some choice in the matter. The factory owner and the grower might
not have occasion to enter into agreements at all. The factory may be closed.
The grower may not grow sugarcane. The rower might not tender the goods. The
factory owners might not accept delivery. The choice of the parties is there as
in ordinary sales. The position of the factory owner vis-a-vis the sugarcane
grower is either that factory will be shut and closed down or the factory will
have to be kept running and for that supply will have to be taken from the
sugarcane growers. This may be comparable to undertaking a journey by rail or
air with no choice as to the medium.
The agreement between the factory owner and
the sugarcane ,,rower furnishes the guide to ascertain the real character of
the transaction between the parties. These are the features. The factory agrees
to buy. The grower agrees to sell. It is true that 95 per cent of the sugarcane
will be sold. The parties have the choice to increase the quantity above 95 per
cent. The quantity to he bought and sold is cultivated or to be cultivated by
the grower. The delivery is to be at the factory. Delivery will be in such
lots, on such dates and at such time as shall be agreed upon. The mode of
delivery may also be within the scope of agreement.
The price will be the controlled price. The
grower can bargain for higher price. The sugarcane grower can ask for payment
in advance. Payment may be in cash or in kind. The sugarcane will be accepted
after inspection. There is scope for rejection of goods. Various columns in the
agreement indicate the villages where sugarcane is to be cultivated, the names
of the varieties of sugarcane to be cultivated.
The last two columns are estimated quantity
offered to be delivered and the period of delivery. All these features
indicate, with unerring accuracy that there is offer, inspection, and
appropriation of goods to the con247 tract. The goods will be accepted by the
factory after inspections and price will be paid on delivery. The mutual assent
is not only implicit but is also explicit.
Another feature in the agreements in the
present case is that the goods are unascertained. The agreements speak of
inspection of goods. Inspection and appropriation of unascertained goods
indicates not only freedom in the formation but also in the performance of
Unascertained goods are distinct from
specific or ascertained goods in the sense that future goods include goods not
yet in existence or goods in existence but not yet acquired by the seller. It
is safe to say that future goods for purposes of passing of property can never
Future goods if and when sufficiently
identified might be specific goods. Unascertained goods are not defined by the
Sale of Goods Act but they fall into three main categories.
First, goods to be manufactured or grown by
the seller which are necessarily future goods. Second, generic goods. for
example, 100 tons of sugarcane or the like which must also be future goods
where the seller does not own sufficient goods of the description in question
to appropriate to the contract. The third category is an unidentified part of a
specific whole, for example 1000 tons of sugarcane out of a particular lot of
5000 tons of sugarcane. In the present case, sugarcane was to be grown by the
grower. Delivery was to be made thereafter. The goods were to be inspected and
then paid for. Therefore, in the present case, it would be a sale of
unascertained goods. Under section 23 of the Indian Sale of Goods Act when
there is a contract of sale of unascertained goods no property in the goods is
transferred to the buyer unless and until the goods are ascertained.
Then again. under section 23 of the Indian
Sale of Goods Act where there is a contract for the sale of unascertained or future
goods by description when the goods of that description and in a deliverable
state are unconditionally appropriated to the contract, either by the seller
with the assent of the seller, the property in the goods thereupon passes to
the buyer. It is this unconditional appropriation which will pass the property.
Again, under section 23 of the Indian Sale of Goods Act where the seller
delivers the goods to the buyer or to a carrier or other bailee for the purpose
of transmission to the buyer and does not reserve the right of disposal he is
deemed to have unconditionally appropriated the goods to the contract.
Therefore, in the present case the goods were to be ascertained by
identification, delivery, inspection and unconditional appropriation.
These foregoing features indicate that the
transaction in the present case constituted sale within the meaning of sale in
section 2(t) of the Mysore Sales Tax Act, 1957. Sale is defined in section 2(t)
as follows 248 "sale' with all its grammatical variations and cognate
expressions means every transfer of the property in goods by one person to
another in the course of trade or business for cash or for deferred payment or
other valuable consideration, but does not include a mortgage, hypothecation,
charge or pledge".
The Control Orders are to be kept in the
forefront for appreciating the true character of transactions. It is apparent
that the area is restricted. The parties are determined by the order. The
minimum price is fixed. The minimum quantity of supply is also regulated. These
features do not complete the picture.' The entire transaction indicates that
the parties agree to buy and sell. The parties choose the terms of delivery.
The parties have choice with regard to obtaining supply of a quantity higher
than 95 per cent of the yield. The parties can stipulate for a price higher
than the minimum. The parties can have terms for payment in advance as well as
in cash. A grower may not cultivate and there may not be any yield. A factory
may be closed or wound up and may not buy sugarcane. A factory can reject goods
The combination of all these features
indicates that the parties entered into agreement with mutual assent and with
volition for transfer of goods in consideration of price.
Transactions of purchase and sale may be
regulated by schemes and may be liable to restrictions as to the manner or mode
of sale. Such restrictions may become necessary by reason of co-ordination
between production and distribution in planning the economy of the country. The
contention of the appellants fails. The transactions amount to sales within the
meaning of the Mysore Sales Tax Act.
The second contention on behalf of the
appellants was that the factories were not dealers within the meaning of the
Mysore Sales tax Act. Dealer is defined in section 2(k) of the Mysore Sales Tax
Act of 1957 as follows :" 'Dealer" means any person who carries on
the business of buying, selling, supplying or distributing goods, directly or
otherwise, whether for cash or for deferred payment or for commission
remuneration or other valuable consideration and includes :
(v) a person who sells goods produced by him
by manufacture or otherwise".
249 It was contended that the factory was a
manufacturer of sugar and paid excise duty on sugar to the Central Government
and sugar was item 34 of the Second Schedule and therefore no tax was payable
by a dealer who is a manufacturer of sugar. The purchase of sugarcane was said
to be for manufacture of sugar and not for resale of sugarcane and therefore
the tax which is levied on the dealer will not fall on the appellants on the
purchase of sugarcane. The High Court held relying on the decision of this
Court in State of Andhra Pradesh v. Abdul Bakshi & Bros. A.I.R. 1965 S.C.
531 that if a person carries on the business of buying or selling a commodity
it is not necessary that he should sell the same commodity to become a dealer.
The commodity may be converted into another saleable commodity or it may be
used as an ingredient in the manufacture of a commodity. Therefore, the
factories which bought sugarcane could be said to carry on the business of
buying and selling sugarcane and the factories are dealer within the meaning of
the Mysore Sales Tax Act.
The third contention on behalf of the
appellants was that the levy of 15 per cent purchase tax on the sugarcane on
the appellants was in violation of Article 14 of the Constitution inasmuch as
the rates were different in different States. It is an indisputable feature in
the present appeals that all the factories in Mysore have been treated equally.
Different rates in different States are explicable on various grounds. The quantity
available, the conditions of agriculturists, the number of factories will all
have distinctive features. Therefore, there can be no infraction of Article 14
of the Constitution.
It was also said on behalf of the appellants
that tax on purchase of sugarcane could not be collected by the appellants as
tax. The High Court relying on the decision in Tata Iron & Steel Company v.
State of Bihar  S.C.R. 1355 said that the mere circumstances that the
appellant could not collect from the purchasers of the sugar the amount the
factories had paid as purchase tax on sugarcane would not alter the nature or
quality of tax. This Court in the case of Tata Iron and Steel Company said
'This is further made clear by the fact that the registered dealer need not, if
he so pleases or chooses, collect the tax from the purchaser and sometimes by
reason of competition with other registered dealers he may find it profitable
to sell his goods and to retain his old customers even at the sacrifice of the
sales tax. This also makes it clear that the sales tax need not be passed on to
the purchasers and this fact does not alter the real nature of the tax which,
by the express provisions of the law, is cast upon the seller'. It therefore
follows that the appellants cannot impeach the imposition or 250 levy of sale
tax on the ground that the appellants could not collect from the purchasers of
sugar the purchase tax paid by the appellants on purchase of sugarcane.
Another contention was raised on behalf of
the appellants that the authorities had not taken into account the varying
rates of tax on purchase of sugarcane levied by different States while
computing the cost of production of sugar in different States and fixing
different selling prices of sugar. The High Court rightly did not entertain
this contention because there were no materials to support the contention.
For these reasons, the appeals fail and are
dismissed with costs. There will be one set of hearing fees.
G.C. Appeals dismissed.