Statutory control does not negate sale where property passes for consideration; controlled wheat transactions remained taxable.

Supplies made under a statutory control regime may still constitute a sale for sales tax purposes where property in goods passes for consideration. The Supreme Court applied the principle in Vishnu Agencies and held that restrictions on bargaining power or freedom of contract under the Essential Commodities Act and the relevant licensing order do not, by themselves, negate the legal character of a sale. On that basis, wheat product transactions made against permits issued by the licensing authority were treated as sales within the Punjab General Sales Tax Act and were held liable to tax.

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Issues: Whether supplies of wheat products made under the statutory control regime and against permits issued by the licensing authority constituted a sale liable to tax under the Punjab General Sales Tax Act, 1948.

Analysis: The turnover was assessed under the definition of sale in section 2(h) of the Punjab General Sales Tax Act, 1948, which covers transfer of property in goods for consideration. The transactions took place under the Essential Commodities Act, 1955 and the Wheat Roller Flour Mills (Licensing and Control) Order, 1957, with the licensee bound by directions regarding purchase, extraction, distribution and disposal. The controlling question was whether the absence of unrestricted bargaining power or complete freedom of contract negatived sale. The Court held that the case was governed by the principle stated in Vishnu Agencies, namely that transactions effected within a statutory control framework may still amount to sales where property passes for consideration and the controlled character of the transaction does not eliminate the legal character of sale.

Conclusion: The transactions were sales and were liable to tax under the Act; the answer to the referred question was in the affirmative, in favour of the Union Territory of Chandigarh and against the respondent.

Ratio Decidendi: A transaction made under a statutory control order is not excluded from the definition of sale merely because the seller's freedom of contract is restricted, so long as there is a transfer of property in goods for consideration.

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