Compulsory levy rice procurement is not a taxable sale where mutual assent and profit-motive are absent.

Rice procurement under a statutory levy order was held not to create a principal-agent relationship between State officers and the Food Corporation of India, because compulsory procurement under delegated powers did not amount to legal representation of the Corporation. The onward supply of rice was also held not to be a taxable sale, as the levy scheme involved statutory compulsion, no mutual assent, no freedom of contract, and no profit-motive. The Court further held that the writ petitions were maintainable despite an appellate remedy, since the challenge went to jurisdiction and rested on admitted or patent facts. The assessment orders and demand notices were quashed.

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Issues: (i) whether the State officers procured rice as agents of the Food Corporation of India; (ii) whether procurement and onward supply of rice under the levy order amounted to a taxable sale; (iii) whether the writ petitions were barred by the availability of an alternative appellate remedy.

Issue (i): whether the State officers procured rice as agents of the Food Corporation of India.

Analysis: Agency in law requires one person to represent another so as to affect the principal's legal position in dealings with third parties. Procurement under the levy order was made under statutory compulsion in exercise of delegated powers under the Essential Commodities Act, and the State did not represent the Corporation in the strict legal sense. The admissions made in assessment proceedings were insufficient to create a legal relationship of principal and agent where the surrounding statutory framework negatived such relationship.

Conclusion: The State officers were not agents of the Food Corporation of India in the strict legal sense.

Issue (ii): whether procurement and onward supply of rice under the levy order amounted to a taxable sale.

Analysis: A taxable sale requires a contract with mutual assent and a profit-motive in the course of business. The levy order imposed an obligation to deliver specified quantities at controlled prices and did not envisage a consensual bargain. The transaction was a statutory compulsion forming part of a composite public distribution scheme, without freedom of contract or profit-motive. The Court distinguished the later decision concerning sugarcane purchases, holding that its features of agreement, choice, and bargaining were absent here, and applied the principle that a compulsory statutory acquisition or delivery under an order is not a sale.

Conclusion: The transactions under the levy order did not constitute sales and were not taxable events.

Issue (iii): whether the writ petitions were barred by the availability of an alternative appellate remedy.

Analysis: The challenge went to the jurisdiction of the taxing authorities and turned on admitted or patent facts. In such circumstances, insisting on the appellate remedy would not serve a useful purpose, and recourse to writ jurisdiction was justified.

Conclusion: The preliminary objection failed and the writ petitions were maintainable.

Final Conclusion: The assessment orders and demand notices were quashed, and the petitions succeeded on the footing that the levy-order transactions were not sales and the taxing authorities lacked jurisdiction to impose tax on them.

Ratio Decidendi: A transaction compelled by a statutory levy order, lacking mutual assent and profit-motive, is not a sale for sales tax purposes, and admissions in assessment proceedings cannot create agency where the statute itself negatives a principal-agent relationship.

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