Union Territory of Chandigarh Vs. M/S.
Amrit Roller Flour Mills [1985] INSC 148 (8 July 1985)
PATHAK, R.S. PATHAK, R.S.
VENKATARAMIAH, E.S. (J)
CITATION: 1985 AIR 1199 1985 SCR Supl. (2) 14
1985 SCC Supl. 213 1985 SCALE (2)51
ACT:
Punjab General Sales Tax Act 1948, Section
2(h) Roller Flour Mills - Licence holder under Wheat Roller Flour Mills
(Licensing and Control) Order 1957 - Sale of maida, Suji and rawa to permit
holders - Transactions whether constitute sale - Whether liable to be taxed.
HEADNOTE:
The respondent-Firm was a Roller Flour Mills
and held a licence under the Wheat Roller Flour Mills (Licensing and Control)
Order, 1957. Clause 3 of the said Order provides that no owner or person in
charge of a roller Mill shall manufacture or cause to be manufactured any wheat
product except under and in accordance with the terms and conditions of a
licence issued under the Order. The licence was an annual licence renewable
from year to year and liable to suspension or cancellation in the event of contravention
of the Control Order or any of the conditions of the licence.
The licensee was required to abide by any
directions issued by the licensing authority in regard to purchase of wheat,
the extraction of maida, suji and rawa and also in regard to the distribution
or disposal of the wheat products.
Wheat is supplied to the respondent under the
orders of the Government of India. The respondent grinds the wheat and supplies
maida and suji emerging from that process to the holders of permits issued by
the District Food and Supplies Officer.
The respondent was assessed for the years
1964-65 to 1967-68 to sales tax under the Punjab General Sales Tax Act, 1948 on
the turnover of the supplies effected by it. During the assessment proceedings
it was contended that the transactions entered into by it did not constitute
"sales" within the meaning of the Act and as such sales tax should
not be levied. The assessing authority relying on the decision in the Excise
and Taxation Officer (Assessing Authority) Hissar and Another v. Jaswant Singh
[1971] 27 S.T.C. 582 rejected the pntention and assessed the firm. The
assessment orders were maintained in appeal and in second appeal also.
15 At the instance of the assessee, the High
Court called for a reference and held that as the respondent was obliged to
follow the instructions of the concerned authority in regard to the purchase of
wheat, or the extraction of maida, suji and rawa as well as in regard to the
distribution and disposal of such products, it followed the decision in Food
Corporation of India & Another v. State of Punjab & Others [1971] 27
S.T.C. 582 and took the view that there was no 'sale'.
In the appeal to this Court on the question
whether the transaction affected by the respondent fall within the definition
of "sale" under Clause (h) of Sec. 2 of the Punjab General Sales Tax
Act, 1948.
Allowing the appeals ^
HELD: In Vishnu Agencies (Pvt.) Ltd. etc. v.
Commercial Tax Officer "Others etc. [1978] 2 S.C.R. 433, this Court held
that notwithstanding the conditions imposed by the statutory framework of the
Control Order within which the dealer operated the transaction effected by him
must clearly be regarded as sales. The instant case is covered by that
decision. The transactions effected by the respondent are 'sales' liable to
tax. The Judgment of the High Court is set aside. The question referred to the
High Court is answered in the affirmative in favour of the appellant and
against the respondent. [19 D-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 404-
407 of 1978.
From the Judgment and Order dated 13.10.1976
of the Punjab and Haryana High Court in General Sales Tax Reference No. 15,17,
18 and 19 of 1974.
P.A. Francis, S.P. Nayar and Miss A.
Subhashini for the Appellant S.T. Desai and R.S. Sodhi for the Respondent.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by special leave are directed against the judgment of
the High Court of Punjab and Haryana disposing of four references under the
Punjab General Sales Tax Act, 1948.
16 The respondent firm, Messrs. Amrit Roller
Flour Mills, carries on business at Chandigarh. It is registered as a dealer
under the Punjab General Sales Tax Act, 1948 (hereinafter called the
"Act"). It holds a licence under the Wheat Roller Flour Mills (Licensing
and Control) Order, 1957 (hereinafter referred to as the "Control
Order"). Wheat is supplied to the respondent under the orders of the
Government of India. The respondent grinds the wheat and supplies the atta,
maida and suji emerging from that process to the holders of permits issued by
the District Food and Supplies Officer under the Control Order.
The respondent was assessed for the years
1964-65 to 1967-68 to sales tax under the Act on the turnover of the supplies
effected by it. During the assessment proceedings it contended that the
transactions entered into by it did not constitute sales within the meaning of
the Act and consequently no sales tax could be levied. The contention was
rejected. The assessing authority relied on The Excise and Taxation Officer
(Assessing Authority), Hissar and Another v. Jaswant Singh. [1971] 27 S.T.C.
582. The assessment orders were maintained in appeal and thereafter in second
appeal also. At the instance of the assessee, the High Court called for a
reference on the following question of law in each of the four cases:
Whether on the facts and in the circumstances
of the case, the sale of wheat products against permits issued by the District
Food and Supplies Controller, Chandigarh, is liable to be taxed under the Punjab
General Sales Tax Act, 1948?" The High Court referred to the provisions of
s.3 of the Essential Commodities Act, 1955, under which the Control Order had
been issued, and to clause V of the Licence under which the respondent carried
on his business, and holding that the respondent was obliged to follow the
instructions of the concerned authority in regard to the purchase of wheat, or
the extraction of maida, suji and rawa as well as in regard to the distribution
and disposal of such products, the High Court took the view that there was no
sale. In adopting that view the High Court preferred to follow its decision in
The Food Corporation of India and Another v. State of Punjab and Others [1976]
38 S.T.C. 144.
In these appeals by the Union Territory of
Chandigarh, the sole question is whether the transactions effected by the
respondent fall within definition of "sale" under the Act. Clause(h)
17 of s.2 of the Act defines a "sale" to mean "any transfer of
property in goods ..... for cash or deferred payment or other valuable
consideration, but does not include a mortgage, hypothecation, charge or
pledge. The broad basis on which the High Court has proceeded is that a sale
necessarily implies the freedom to contract, and that all the four elements,
that is to say, that the parties should be competent to contract, that there
should be mutual assent, that property or goods should pass from the seller to
the buyer and that the price in money should be paid or promised must all exist
together, and that inasmuch as they do not so exist in the transactions in
question, it must be held that there is no sale.
The Essential Commodities Act, 1955, under
which the Control Order was issued, is an Act to provide, in the interest of
the general public, for the control of the production, supply and distribution
of and trade and commerce in, certain commodities. Sub-s.(1) of s.3 empowers
the State Government to make orders providing for regulating or prohibiting the
production, supply and distribution of an essential commodity, and trade and
commerce in such commodity, if it is of opinion that it is necessary or
expedient so to do for maintaining or increasing supplies of such essential
commodity, of securing its equitable distribution and availability at fair
prices or for securing such essential commodity for the Defence of India or the
efficient conduct of military operations. Sub-s.(1) of s.3 details that an
order under sub-s.(1) may provide for controlling the price at which any
essential commodity may be bought or sold, and for regulating by licences,
permits or otherwise the storage, transport, distribution, disposal,
acquisition, use or consumption of any essential commodity and for requiring
any person holding in stock, or engaged in the production, or in the business
of buying or selling, of any essential commodity, to sell the whole or a
specified part of the quantity held in stock or produced or received by him, or
likely to be produced or received by him, to the Central Government or a State
Government or such other person as may be specified in the Order. In the
exercise of that power the Central Government made the Control Order with which
we are concerned. Clause 3 of the Order provides that no owner or person in
charge of a roller mill shall manufacture, or cause to be manufactured, any
wheat product except under and in accordance with the terms and conditions of a
licence issued under that Order. The licence was to be in Form II. It was an
annual licence renewable from year to year, and liable to suspension or
cancellation in the event of a contravention of the Control Order 18 or any of
the conditions of the licence. Paragraph V of the licence required the licensee
to abide by any directions issued by the licensing authority in regard to the
purchase of wheat, the extraction of maida, suji and rawa and also in regard to
the distribution or disposal of the wheat products.
Now the High Court considered the matter and
found itself obliged to follow its decision in The Food Corporation of India
(supra). That was a case under the Punjab Rice Procurement (Levy) Order, 1958
where rice was procured by the State Government and its officers from licensed
dealers and licensed millers and then supplied to the Food Corporation of
India, which in turn made supplies to various State Governments. The Food
Corporation of India was assessed to sales tax under the Punjab General Sales
Tax Act. The High Court held that the chain of transactions between the miller
and the dealer on the one hand and the State Government on the other and
thereafter between the State Government and the Corporation and then between
the Corporation and the other States was a single composite process originating
in an arrangement between the Central Government and the State Governments
under which the State Governments were required to contribute to a central pool
a certain percentage of foodgrains intended for supply to deficit States
through the agency of the Corporation, that there was no profit motive at any
stage and the Corporation did not act as a dealer in the legal sense when it
passed on the goods to other States. Accordingly, the Food Corporation of
India, the High Court concluded, could not be said to sell the rice and was
therefore not liable to pay sales tax, there being no freedom of contract
within the meaning of the law laid down in Salar Jung Sugar Mills Ltd. v. State
of Mysore [1972] 29 S.T.C. 246 and the element of mutual assent, implicit or
explicit, being non-existent. The High Court observed that the facts of the
case brought it within the law explained by this Court in Chittar Mall Narain
Das v. Commissioner of Sales Tax, [1970] 26 S.T.C. 344.
We think that the case before us is
distinguishable from The Food Corporation of India (supra). It is a case which
falls more appropriately within the rule laid down by this Court in Vishnu
Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer & Ors. etc. [1978] 2
S.C.R. 433 where the majority judgment discussed the entire case law on the
subject, including the earlier decisions in Salar Jung Sugar Mills Ltd.(supra)
as well as Chittar Mall Narain Das (supra). The appellants in Vishnu Agencies
(Pvt.) Ltd.
(supra) had carried on business as agents 19
and distributors of cement in the State of West Bengal. The distribution of
cement was regulated by the West Bengal Cement Control Act, 1948 and by the
Control Order made thereunder. Sub-s.(1) of s.3 of the Cement Control Act is
framed in language analogous to sub-s.(1) of s.3 of the Essential Commodities
Act, 1955. And under the Cement Control Order, 1948 issued under that Act, no
sale or purchase of cement can be made, except in accordance with conditions
contained in a written order issued by a specified statutory authority and at a
price not exceeding the notified price. The appellant, who was a licensed
stockiest of cement was permitted to stock cement in its godown and to supply
it to persons in whose favour allotment orders were issued and at the price
stipulated and in accordance with the conditions in the permits issued by the
authorities. Pursuant to the allotment orders the appellant supplied cement to
various allottees from time to time in accordance with the terms of the licence
obtained by it. The appellant was assessed to Sales tax, and in appeal it
contended that there was no sale because having regard to the stringent
provisions of the Cement Control Order no violation or bargaining power was
left to it and there was no element of mutual consent or agreement between it
and the allottees. This Court came to the firm conclusion that notwithstanding
the conditions imposed by the statutory framework within which the dealer
operated the transactions effected by it must clearly be regarded as sales.
After the decision by this Court in Vishnu Agencies (Pvt.) Ltd.
(supra) we do not feel called upon to enter
into the question arising in the present case in any detail. We are satisfied
that upon the facts of the present case the question is concluded by the view
taken by this Court in Vishnu Agencies (Pvt.) Ltd. (supra) and that the
transactions effected by the appellant must be regarded as sales.
Accordingly, we allow the appeals, set aside
the judgment of the High Court of Punjab and Haryana and answer the question
referred to the High Court in the affirmative, in favour of the Union Territory
of Chandigarh and against the respondent. In the circumstances, there is no
order as to costs.
N.V.K. Appeals allowed.
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