Report No. 61
1.4. Power of States to levy tax on "sale"-meaning attributed to sale.-
The power of the States to levy a tax on the sale or purchase of goods is to be found in the Constitution, 7th Schedule, State List, entry 54. The Supreme Court1 has consistently held that the expression "sale of goods", as used in the legislative entries in the Constitution and in the Government of India Act, 1935, bears the same meaning as it has2 in the Sale of Goods Act, 1930. Therefore, while the State Legislature may, under the State List, entry 54, legislate in respect of the series of acts beginning with an agreement of sale between parties competent to contract and resulting in the transfer of property from one of the parties to the agreement to the other for a price (and matters incidental thereto), it cannot levy a tax on a transaction which is not a "sale" within the Sale of goods Act.
1. (a) State of Madras v. Gannon Dunkerley & Co. Ltd., 1959 SCR 379: AIR 1958 SC 560;
(b) New Indian Sugar Mills v. Commissioner of Sales Tax, Bihar, 1933 Supp 2 SCR 459: AIR 1963 SC 1207;
(c) Bhopal Sugar Industries v. S.T.O., (1964) 1 SCR 481: AIR 1964 SC 1037.
2. As to the Sale of Goods Act, see para. 1.3, supra.
1.4A. Sale under the English Act.-
In England the Sale of Goods Act defines a contract of sale of goods as1-
"a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price."
The Act gives different names to the two transactions:-
"Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell."
1. The Sale of Goods Act, 1893, sections 1(1) and 1(3) (English).
1.4B. Sale under common law.-
It would appear that at common law also, "sale of goods" had a narrow meaning, and the passing of property-immediately or at an appointed time-was of the essence of the transaction. As the Indian Contract Act1 (as originally enacted) provided,-"Sale is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer".
1. Section 77, Indian Contract Act (repealed).