Taxable business sales under a compromise scheme require genuine assent, and protective creditor safeguards do not negate volition.

Sales of plant, machinery and stock-in-trade under a sanctioned compromise scheme were treated as taxable under the Gujarat Sales Tax Act because the company had not ceased business in law and continued to hold an effective registration while filing returns. The court also found no lack of free consent: the company itself sought sanction, fixed the price, identified purchasers and completed the transactions by mutual agreement, with bank consent and creditor safeguards serving only as protective conditions. The sales were therefore held to be made in the course of business and not transactions lacking volition.

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Issues: Whether the sales of plant and machinery and stock-in-trade made pursuant to the sanctioned compromise scheme were liable to tax under the Gujarat Sales Tax Act, 1969, including whether they were outside the course of business or were effected under compulsion and without free will.

Analysis: The assessment record showed that the mill company had not ceased business in law and continued to file returns, with its registration remaining effective until operations were resumed. The sales were therefore treated as having been made in the course of business. On the question of compulsion, the sanctioned compromise scheme was held to reflect the company's own volition to sell its assets for a willing purchaser at market price, subject to the bank's consent and oversight safeguards for creditors. Those conditions were viewed as protective arrangements and not as fetters destroying contractual freedom. The element of assent was found in the conduct of the company in seeking sanction, fixing the price, identifying purchasers and completing sales by mutual agreement.

Conclusion: The sales were held to be taxable sales made in the course of business and not transactions lacking free consent or volition.

Final Conclusion: The reference was answered in favour of the department and against the assessee.

Ratio Decidendi: Even where a sale is made under a sanctioned compromise or regulatory framework, it remains a taxable sale if the seller retains freedom in essential terms and the transaction reflects mutual assent and volition.

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