Regulated trade transactions may still be sales when parties retain commercial choice; retrospective sales tax levy remains valid.

Transactions between a wholesale dealer and retail licence-holders were treated as sales where, despite strict excise regulation and fixed pricing, the parties still retained sufficient consensual freedom over material commercial terms such as quantity, supply mode and package size. The transactions were therefore liable to sales tax against the assessee. The Court also held that retrospective levy of sales tax under a validating ordinance was legally permissible; the absence of actual collection from customers did not defeat liability once the levy was validly imposed with retrospective effect. The assessment was upheld and the High Court's quashing order was set aside.

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Issues: (i) Whether the transactions between the wholesale dealer and retail licence-holders constituted sales exigible to sales tax; (ii) whether retrospective levy of sales tax under the validating ordinance defeated taxability for the relevant period.

Issue (i): Whether the transactions between the wholesale dealer and retail licence-holders constituted sales exigible to sales tax.

Analysis: The governing question was whether the regulatory control under the excise regime left any real area of agreement between the parties sufficient to amount to a sale. The Court applied the principle that even where trade is highly regulated and the price is fixed, transactions may still be sales if the parties retain an area of consensual adjustment in matters such as quantity, mode of supply, package size, and other commercial terms. On the facts, such an area of agreement remained available.

Conclusion: The transactions were sales and were liable to sales tax, against the assessee.

Issue (ii): Whether retrospective levy of sales tax under the validating ordinance defeated taxability for the relevant period.

Analysis: The Court held that retrospective imposition of sales tax is legally permissible. The argument that the assessee had not traded on the assumption of tax liability was rejected because retrospective legislation is effective notwithstanding that consideration. The absence of actual collection from customers did not displace the tax liability once the levy was validly imposed with retrospective effect.

Conclusion: The retrospective levy did not invalidate the assessment, against the assessee.

Final Conclusion: The assessment to sales tax was upheld and the High Court's quashing order was set aside, leaving the revenue's levy intact.

Ratio Decidendi: A transaction carried on under a restrictive regulatory regime is nevertheless a sale if the parties retain sufficient consensual freedom on material commercial terms, and such transactions remain taxable even where the sales tax is imposed retrospectively.

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