1988 (2) TMI 453 - HC - VAT and Sales Tax

Contract for bamboos not a sale under Sale of Goods Act & Sales Tax Act. Petition allowed, tax proceedings quashed.

The court held that there was no 'sale' of bamboos under the Indian Sale of Goods Act, 1930 and the Andhra Pradesh General Sales Tax Act, 1957, either at ... - Issues Involved:1. Whether the preliminary contract or the regular contract amounts to 'sale' of bamboos under the Indian Sale of Goods Act, 1930 and the Andhra Pradesh General Sales Tax Act, 1957.2. Whether there is a 'contract of sale' or 'sale' of bamboo at any point later when each year one lakh tonnes of bamboos are put in a deliverable state and removed by the petitioner-company during the period from 1st October, 1975 to 30th September, 1995.Detailed Analysis:Point No. 1: Whether there is any 'sale' of the bamboos under the preliminary or regular contract.The court analyzed the terms of the contract, statutory provisions, and relevant Supreme Court judgment to determine if the contract amounts to a 'sale' of bamboos. The contract allowed the petitioner-company to fell, collect, and remove bamboos from specified forest areas, paying a royalty of Rs. 60 per tonne. The contract terms were scrutinized, including the rights and obligations of the lessee, the conditions for felling and removing bamboos, and the regulatory framework under the A.P. Forest Act, 1967.The court referred to the Supreme Court judgment in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213, which held that similar contracts did not constitute a 'sale' as the goods were not in a deliverable state at the time of the contract. The court found that the terms of the present contract were materially similar to those in the Titaghur case. The bamboos were not in a deliverable state either on the date of the preliminary contract or the regular contract. The property in the bamboos did not pass to the petitioner-company at the time of the contract, and therefore, there was no 'sale' as defined under the Indian Sale of Goods Act, 1930 and the Andhra Pradesh General Sales Tax Act, 1957.Point No. 2: Whether there is a 'contract of sale' or 'sale' of bamboo at any point later when each year one lakh tonnes of bamboos are put in a deliverable state.The court examined whether the annual removal of one lakh tonnes of bamboos constituted a 'sale' and whether the royalty paid could be considered as sale consideration. The petitioner argued that the contract created a right to benefits arising out of land, a grant of profit a prendre (a right in immovable property), and not a 'sale of goods.' The court again referred to the Supreme Court judgment in the Titaghur case, which distinguished between timber and bamboo contracts, concluding that bamboo contracts were grants of profit a prendre and not sales of goods.The court found that the terms of the present contract were similar to those in the Titaghur case, where the Supreme Court held that the bamboo contract was not a contract of sale of goods but a grant of profit a prendre. The contract in the present case allowed the petitioner to fell, collect, and remove bamboos growing or likely to grow in the leased areas, subject to various conditions and regulations under the A.P. Forest Act, 1967. The payment of royalty was not related to the actual quantity of bamboos cut and removed, and the lessee was bound to pay a minimum royalty irrespective of the quantity removed.The court concluded that there was no 'sale' of bamboos at any point during the contract period. The contract was a grant of a benefit arising out of land, a profit a prendre, and not a sale of goods. Therefore, the contract did not attract the provisions of the Andhra Pradesh General Sales Tax Act, 1957.Conclusion:The court held that there was no 'sale' of bamboos either at the time of the preliminary agreement or the regular contract. The contract was a grant of profit a prendre, a right in immovable property, and not a sale of goods. The writ petition was allowed, and the proceedings demanding sales tax from the petitioner were quashed.