1962 (11) TMI 21 - SC - VAT and Sales Tax

Sugar despatches to Madras not sales under Bihar Sales Tax Act due to lack of mutual assent. Dissent on taxability.

New India Sugar Mills Ltd. Versus Commissioner of Sales Tax Bihar  

The despatches of sugar by the assessees to the Province of Madras were held not to constitute sales under the Bihar Sales Tax Act by the majority ... Whether there was a sale by the assessees of sugar despatched by them to the Provincial Government of Madras in compliance with the directions issued by the Controller in exercise of authority under the Sugar and Sugar Products Control Order, promulgated on February 18, 1946, by the Central Government under powers conferred by sub-rule (2) of rule 81 of the Defence of India Rules? Held that:- Appeal allowed. For the purposes of legislation such as on sales tax it is only necessary to see whether there is a sale express or implied. Such a sale was not found in 'forward' contracts and in respect of materials used in building contracts. But the same cannot be said of all situations. I for one would not curtail the entry any further. The entry has its meaning and within its meaning there is a plenary power. If a sale express or implied is found to exist then the tax must follow. I am of the opinion that in these transactions there was a sale of sugar for a price and the tax was payable. I would, therefore, dismiss these appeals with costs. Issues Involved:1. Whether the despatch of sugar by the assessees to the Province of Madras constituted a sale.2. Whether the sale, if any, took place in Bihar and was thus taxable under the Bihar Sales Tax Act.3. The interpretation of the term 'sale' under the Bihar Sales Tax Act and its consistency with the Indian Sale of Goods Act, 1930.4. The impact of the Sugar and Sugar Products Control Order, 1946, on the nature of the transaction.Issue-Wise Detailed Analysis:1. Whether the despatch of sugar by the assessees to the Province of Madras constituted a sale:The assessees argued that the despatches of sugar were not sales because they were made under compulsion from the Controller and not through mutual assent. The Court held that a sale under the Sale of Goods Act requires a transfer of property in goods for a price under a contract of sale. The Court found that the transactions were not the result of any contract of sale but were compelled by the Controller's directions. The assessees had no volition in these transactions, and there was no mutual assent between the assessees and the Government of Madras. Therefore, the Court concluded that the despatches did not constitute sales.2. Whether the sale, if any, took place in Bihar and was thus taxable under the Bihar Sales Tax Act:The Court discussed the definition of 'sale' under Section 2(g) of the Bihar Sales Tax Act, which includes any transfer of property in goods for valuable consideration. The Court emphasized that the Bihar Legislature could only tax transactions that conformed to the requirements of a sale under the Sale of Goods Act. Since the transactions in question did not meet these requirements, the Court held that they were not taxable under the Bihar Sales Tax Act.3. The interpretation of the term 'sale' under the Bihar Sales Tax Act and its consistency with the Indian Sale of Goods Act, 1930:The Court reiterated that the term 'sale' in the Bihar Sales Tax Act must be understood in the same sense as in the Sale of Goods Act, 1930. The definition of 'sale' in the Bihar Sales Tax Act includes a transfer of property in goods for valuable consideration. The Court held that the transactions in question did not involve a contract of sale, as there was no mutual assent or agreement between the parties. Therefore, these transactions could not be considered sales under the Bihar Sales Tax Act.4. The impact of the Sugar and Sugar Products Control Order, 1946, on the nature of the transaction:The Court examined the relevant clauses of the Sugar and Sugar Products Control Order, 1946, which imposed controls on the production, sale, and distribution of sugar. The Court found that the Controller's directions left no room for negotiation or mutual assent between the assessees and the Government of Madras. The transactions were compelled by the Controller's statutory authority, and compliance with these directions did not amount to acceptance of an offer. Therefore, the Court concluded that the transactions were not sales but were compelled deliveries under statutory orders.Separate Judgment by Hidayatullah, J.:Hidayatullah, J., disagreed with the majority opinion and held that the transactions constituted sales. He argued that the entry 'taxes on the sale of goods' in the Government of India Act, 1935, should be given a broad and liberal interpretation. He emphasized that the transactions involved the transfer of property in goods for a price, and the control orders did not negate the existence of a sale. He concluded that the transactions were sales and were taxable under the Bihar Sales Tax Act.Conclusion:The majority judgment held that the despatches of sugar by the assessees to the Province of Madras did not constitute sales under the Bihar Sales Tax Act, as they were compelled by the Controller's directions and lacked mutual assent. Therefore, the transactions were not taxable. However, Hidayatullah, J., delivered a dissenting opinion, arguing that the transactions were sales and were taxable. The appeals were allowed with costs, based on the majority judgment.