Statutory compulsion does not exclude sale where consent and contractual terms remain; excise duty deduction was also allowed.

Statutory compulsion to sell cement to the State Trading Corporation at controlled prices was held to remain a sale, because the transfer of title was for consideration and some area of consent survived on terms such as delivery, payment, rebates and packing charges; the transaction was not compulsory acquisition by the State. That sale was treated as the first sale under the Karnataka Sales Tax Act and was exigible to tax. Excise duty paid by the manufacturer was deductible from turnover under the relevant rule, because the taxable sale was the manufacturer's sale to the corporation. The assessment and appellate orders were set aside and the matter remanded for fresh assessment.

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Issues: (i) Whether the compulsory sale of cement by the manufacturer to the State Trading Corporation under the Cement Control Orders constituted a "sale" within section 2(t) of the Karnataka Sales Tax Act, 1957 and was the first sale exigible to tax under section 5(3)(a) of that Act. (ii) Whether the excise duty paid by the manufacturer was deductible from the sales turnover under rule 6(4)(j) of the Karnataka Sales Tax Rules, 1957.

Issue (i): Whether the compulsory sale of cement by the manufacturer to the State Trading Corporation under the Cement Control Orders constituted a "sale" within section 2(t) of the Karnataka Sales Tax Act, 1957 and was the first sale exigible to tax under section 5(3)(a) of that Act.

Analysis: The statutory scheme required the manufacturer to sell cement to the State Trading Corporation at controlled prices, but the transaction was not treated as compulsory acquisition in favour of the State. The sale was to a corporation and not to the State itself. The Court applied the principle that where the transfer of title is for a price and some area of consent remains, however limited, the transaction is a sale. It found that the manufacturer's consent was implicit in producing cement for sale, and that matters such as rebate or commission, place and time of delivery, mode of payment, and packing charges still left scope for agreement.

Conclusion: The transfer of cement by the manufacturer to the State Trading Corporation was a sale within section 2(t) and constituted the first sale under section 5(3)(a), exigible to sales tax.

Issue (ii): Whether the excise duty paid by the manufacturer was deductible from the sales turnover under rule 6(4)(j) of the Karnataka Sales Tax Rules, 1957.

Analysis: Since the taxable sale was the manufacturer's sale to the State Trading Corporation and the excise duty had been paid by the manufacturer in that capacity, the turnover liable to tax had to be computed after allowing the statutory deduction for excise duty.

Conclusion: The assessee was entitled to deduct the excise duty under rule 6(4)(j).

Final Conclusion: The assessment orders and appellate orders were set aside, and the matters were remanded for fresh assessments in accordance with the legal position that the manufacturer's sale to the State Trading Corporation was taxable as the first sale with excise-duty deduction available.

Ratio Decidendi: A transfer of goods under statutory compulsion remains a sale where mutual consent is not wholly excluded and some contractual area survives, unless the transaction is in substance compulsory acquisition in favour of the State.

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