TaxTMI 
TaxTMI 
TaxTMI 
1997 (1) TMI 459
X X X X Extracts X X X X
X X X X Extracts X X X X
....il) Nos. 8773, S.L.P. (Civil) Nos. 8774 of 1987, S.L.P. (Civil) Nos. 10126 of 1987, S.L.P. (Civil) Nos. 10137 of 1987, S.L.P. (Civil) Nos. 10161 of 1987, S.L.P. (Civil) Nos. 10162 of 1987, S.L.P. (Civil) Nos. 10248 of 1987, S.L.P. (Civil) Nos. 10508 of 1987, S.L.P. (Civil) Nos. 10150 of 1987, S.L.P. (Civil) Nos. 10151 of 1987, S.L.P. (Civil) Nos. 10152 of 1987, S.L.P. (Civil) Nos. 10153 of 1987, S.L.P. (Civil) Nos. 10154 of 1987, S.L.P. (Civil) Nos. 6775 of 1991, S.L.P. (Civil) Nos. 7477 of 1991, S.L.P. (Civil) Nos. 7478 of 1991, S.L.P. (Civil) Nos. 8541 of 1991, S.L.P. (Civil) Nos. 13131 of 1991, S.L.P. (Civil) Nos. 15719 of 1994, Dr. A.M. Singhvi, Senior Advocate (Sunil Gupta, Nisha Bagchi and Indu Malhotra, Advocates, with him), for the State of Haryana. G.K. Bansal, Sanjay Bansal and A. Misra, Advocates, for the State of Punjab. H.C. Agarwal, Senior Advocate (Y.P. Mahajan and Indu Malhotra, Advocates, with him), for the Union of India. A.S. Nambiar, Senior Advocate (M.T. George, Advocate, with him), for the State of Kerala. D.D. Thakur, Senior Advocate (Y.P. Rao and N.N. Bhatt, Advocates, with him), for the respondent in Civil Appeals Nos....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Allahabad High Court, in taking the view that the FCI is liable to pay tax, after elaborately dealing with the case law up to the date of the judgment, has come to a conclusion that the decision of this Court in Chittar Mal Narain Das v. Commissioner of Sales Tax [1970] 26 STC 344; (1970) 3 SCC 809, in view of subsequent decisions of larger benches of this Court, does not hold good. The Division Bench of the Punjab and Haryana High Court, however, has taken exactly the opposite view holding that the decision of this Court in Chittar Mal's case [1970] 26 STC 344; (1970) 3 SCC 809, holds good notwithstanding subsequent decisions of this Court and on that basis held that the FCI was not liable to pay tax. The Andhra Pradesh and Kerala High Courts while dealing with the liability of the FCI to pay tax on the distribution of fertilizers have taken the view that the FCI is liable to pay tax. It is under this background, arguments were advanced before us supporting and opposing the view taken by this Court in Chittar Mal's case [1970] 26 STC 344; (1970) 3 SCC 809. 3.. Undoubtedly this Court in Chittar Mal's case [1970] 26 STC 344; (1970) 3 SCC 809, positively has taken a view that there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Corporation of India denied its liability to pay the said tax. 6.. Although the purchase made by the FCI from the State is a second sale or purchase, in view of Explanation II to section 3-D(i) of the U.P. Sales Tax Act, it is deemed to be the first purchase. Explanation II was added with retrospective effect by U.P. Act No. 23 of 1976. It is specifically in respect of purchase of foodgrains in pursuance of orders made under section 3 of the Essential Commodities Act. The Explanation II reads as follows: "Explanation II.-For the purposes of this sub-section, in relation to purchases of foodgrains in pursuance of any order made under section 3 of the Essential Commodities Act, 1955, including any purchase in excess of the levy share, the purchase first made by a dealer from the State Government or its purchasing agent shall be the first purchase of such foodgrains and the tax shall accordingly be levied at that point on such dealer." 7.. An additional tax was also payable at the rate of five per cent over the turnover by the dealer whose yearly turnover exceeded rupees ten crores as provided under section 3-F of the U.P. Sales Tax Act, which now stands omitted by the U.P. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the Food Corporation of India, for the procurement from 1968 to 1976, had been bearing the burden of sales tax on the first purchase made by the Regional Food Controller by reimbursing the same to them. The tax being single point tax, the same could not be levied twice. Explanation II retrospectively levies sales tax at more than one point. It is impermissible under the provisions of the U.P. Sales Tax Act. 4.. That section 3-F which levied surcharge of 5 per cent on dealers whose turnover in foodgrains exceeding Rs. 10 crores was arbitrary and discriminatory and hit by article 14, particularly when the same was made effective retrospectively from 1st April, 1975. 5.. That the 46th Constitutional Amendment which came into force from 2nd February, 1983, was made retrospective only in a limited sphere and not covering the legislation affecting the appellants. 6. That the interest calculated by the respondents is not payable and, therefore, in any case the respondents have no right to recover the same. 11.. From the judgment of the High Court, we do not find any discussion on the proposition No. 6. We, therefore, presume no such plea was taken or if taken no such plea was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h distinguishable and the ratio laid down therein will have no application to the procurement under levy orders which amounts to compulsory acquisition. According to the learned counsel, there is nothing left to be decided for the parties and everything is determined in the levy orders. Even the place of delivery of the foodgrains is fixed by the control orders. Even if there is any small matter left to the discretion of the parties, the same being unimportant, insignificant and peripheral, cannot be said to be determinative of the existence of the consensus. According to the learned Senior Counsel, it is the consensus, which is vital aspect for determining the character of the transaction. The levy orders leave no option to the seller but to sell compulsorily to the State Government or its nominee. There is no discretion left to the parties in regard to price or any other matter and, therefore no area is left out for the parties to operate unlike matters coming under regulatory orders. According to the learned Senior Counsel, Chittar Mal's case [1970] 26 STC 344 (SC); (1970) 3 SCC 809 has rightly laid down the law when it held that the levy procurement is a compulsory acquisition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere deliverable, were prescribed by the State Government, the payment of compensation was also pre-determined by the orders themselves. Centres for each area were also fixed. There was, therefore, no area where the parties could have any volition." 13.. Learned Senior Counsel appearing for the States, in support of the common judgment under appeal and other judgments, submitted that the transactions under levy orders are definitely "sales" and there was no compulsory acquisition of property as contended by the learned Senior Counsel for the appellants. According to them, there is an area of consensual arrangement between the parties and the element of volition is not completely excluded under the levy orders. It is their further submission that the decision in Chittar Mal's case [1970] 26 STC 344 (SC); (1970) 3 SCC 809, stands practically overruled and, therefore, it is no more good law in view of latter decisions of larger benches of this Court. Though an argument referring to 46th Amendment of the Constitution was faintly raised, it was not pursued seriously. To support the contention, reliance was placed on the following judgments: Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re sales within the meaning of "sale" under section 2(h) of the U.P. Sales Tax Act and, if so, are the assessees liable to pay sales tax on the price for wheat supplied to the Regional Food Controller? We must at once, point out that the Food Corporation of India was not a party in that case. The assessee in that case was a dealer in foodgrains who supplied wheat to the Regional Food Controller, a nominee of the U.P. Government for procuring wheat under the Levy Order. The learned Judges, it is apparent from the judgment, were very much influenced by the view expressed in New India Sugar Mills case [1963] 14 STC 316 (SC); AIR 1963 SC 1207 in arriving at a decision that those supplies were not sales and, consequently, not exigible to tax. It is pertinent to point out that in the Chittar Mal's case [1970] 26 STC 344 (SC); (1970) 3 SCC 809, itself, the learned Judges have noticed that certain amount of volition was left between the parties. However, it was felt that that volition was not sufficient to make the transaction contractual. While referring to a Full Bench judgment of the Allahabad High Court in Commissioner of Sales Tax v. Ram Bilas Ram Gopal [1969] 24 STC 508; AIR 1970 A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....there is some consensual arrangement, in our judgment, the transaction of supply of wheat pursuant to clause 3 of the Order and acceptance thereof do not result in a contract of sale. The High Court observed that: '.............whatever compulsive or coercive force is used to bring about a transaction under clause 3 of the Levy Order, it must be traced to legislation. It cannot be attributed to the State Government as a party to the transaction. This, then, is clear. There is nothing in the Levy Order which can be accused of vitiating the free consent of the parties, as defined under section 14 of the Indian Contract Act, when entering into the contract of sale'. But these observations assume a contract of sale which the Order does not contemplate. If there be a contract, the restrictions imposed by statute may not vitiate the consent. But the contract cannot be assumed. 9.. We may refer to certain decisions of this Court on which reliance was placed at the Bar. In New India Sugar Mill's case [1963] 14 STC 316 (SC); (1963) Suppl 2 SCR 459; AIR 1963 SC 1207 under the Sugar and Sugar Products Control Order, 1946, a scheme was devised for equitable distribution of sugar. The consum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....compulsory acquisition of property would exclude the element of mutual assent which is vital to a sale, the learned Judges were, with respect, not right in holding in Chittar Mal [1970] 26 STC 344 at 348 (SC); [1971] 1 SCR 671 at 677, that even if in respect of the place of delivery and the place of payment of price, there could be a consensual arrangement, the transaction will not amount to a sale (p. 677); (SCC page 314). The true position in law is as stated above, namely, that so long as mutual assent, express or implied, is not totally excluded the transaction will amount to a sale. The ultimate decision in Chittar Mal [1970] 26 STC 344 (SC); [1971] 1 SCR 671 can be justified only on the view that clause 3 of the Wheat Procurement Order envisages compulsory acquisition of wheat by the State Government from the licensed dealer. Viewed from this angle, we cannot endorse the court's criticism of the Full Bench decision of the Allahabad High Court in Commissioner, Sales Tax, U.P. v. Ram Bilas Ram Gopal [1969] 24 STC 508; AIR 1970 All. 518, which held while construing clause 3 that so long as there was freedom to bargain in some areas the transaction could amount to a sale though e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....] were cited and specifically disapproved by a Bench of this Court in Chittar Mal Narain Das v. Commissioner of Sales Tax [1970] 26 STC 344 (SC); [1971] 1 SCR 671. But, perhaps the view of this Court in Chittar Mal Narain Das [1970] 26 STC 344 (SC); [1971] 1 SCR 671 goes too far in this respect. It is not really the nomenclature of the order involved, but the substance of the transaction under consideration which matters in such cases." 19.. In Dewan's Modern Breweries case [1979] 43 STC 454 (SC), the question for consideration was whether the supplies of Indian-made foreign liquor by distilleries and brewery company from its wholesale depots to permit holders on the permit issued by the Excise and Taxation Officer are sales and liable to sales tax under the Punjab General Sales Tax Act, 1948. The contention was that there was no sale at all as the prices were fixed by the competent authorities and dealers had to charge the fixed price from its retailers holding licences and there was no volition in the distribution of liquor which was received from the manufacturing concern at Jammu. This contention was negatived by the court. In the course of the argument, attention of the learn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d before us on behalf of the appellants, were advanced. This Court repelled such arguments. As this case dealt with an issue more or less similar to the one on hand, we propose to extract liberally from this judgment. The question involved in that case was as to the exigibility of tax on sale, if there be any, by the growers of coffee to the Board. The principal features of the legislation connected therewith as noticed in that judgment were: "(a) Compulsory registration of all lands planted with coffee (section 14 of the Coffee Act). (b) Mandatory delivery of all coffee grown in the registered estates except the quantities permitted by the Board to be retained for domestic consumption and for seed purposes [see section 25(1)] of the Coffee Act]. Estates situated in remote areas specified in the notification issued by the Central Government under the proviso to section 25(1) of the Coffee Act are exempt from this provision. (c) Seizure by the Board of coffee wrongly withheld from the pool. Prosecution for failure to deliver and confiscation of quantity not delivered. (d) Delivery to be effected at such times and at such places as designated by the Board [section 25(2)]; the ext....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis supplied). 19.. We are, however, bound by the clear ratio of this decision. The court considered this question 'was there a sale to the Coffee Board?' at page 99 of the paper book and, after discussing, clearly said the answer must be in the affirmative. It was rightly argued, in our opinion, by Dr. Chitale on behalf of the respondents that the question whether there was sale or not or whether the Coffee Board was a trustee or an agent could not have been determined by this Court, as it was done in this case unless the question was specifically raised and determined. We cannot also by-pass this decision by the argument of the learned Additional Solicitor-General that section 10 of the Act had not been considered or how it was understood by some. This decision in our opinion concludes all the issues in the instant appeal." 22.. While referring to the Vishnu Agencies case [1978] 42 STC 31 (SC); (1978) 1 SCC 520, the following was observed in that case: "26. All parties drew our attention to the decision in the case of Vishnu Agencies (Pvt.) Ltd. [1978] 42 STC 31 (SC); [1978] 2 SCR 433. There the court was concerned with the Cement Control Order and the transactions taking plac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aracter or core of sale from the transaction. Such a law which governs a class obliges a seller to deal only with parties holding licences who may buy particular or allotted quantities of goods at specified prices, but an essential element of choice was still left to the parties between whom agreements took place. The agreement, despite considerable compulsive elements regulating or restricting the area of his choice might still retain the basic character of a transaction of sale. In the former type of cases, the binding character of the transaction arose from the order directed to particular parties asking them to deliver specified goods and not from a general order or law applicable to a class. In the latter type of cases, the legal tie which binds the parties to perform their obligations remains contractual. The regulatory law merely adds other obligations, such as the one to enter into such a tie between the parties. Although the regulatory law might specify the terms, such as price, the regulation is subsidiary to the essential character of the transaction which is consensual and contractual. The parties to the contract must agree upon the same thing in the same sense.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ature of the transactions contemplated under the Act mutual assent either express or implied is not totally absent in this case in the transactions under the Act. Coffee growers have a volition or option, though minimal or nominal to enter into the coffee growing trade. Coffee growing was not compulsory. If any one decides to grow coffee or continue to grow coffee, he must transact in terms of the regulation imposed for the benefit of the coffee growing industry. Section 25 of the Act provides the Board with the right to reject coffee if it is not up to the standard. Value to be paid as contemplated by the Act is the price of the coffee. Fixation of price is regulation but is a matter of dealing between the parties. There is no time fixed for delivery of coffee either to the Board or the curer. These indicate consensuality which is not totally absent in the transaction. ................... 43.. The true principle or basis in Vishnu Agencies case [1978] 42 STC 31 (SC); [1978] 2 SCR 433 applies to this case. Offer and acceptance need not always be in an elementary form, nor does the law or contract or of sale of goods require that consent to a contract must be express. Offer and a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son is that the transfer of property which constitutes the agreement in spite of the compulsion of law is neither void nor voidable. It is not as a result of coercion. The statute supplies the consensus and the modality of consensus is furnished by the statute. There is privity of contract between the parties. The other third, fourth, fifth and sixth propositions are these: Third, such a transaction is neither a gift nor an exchange nor a hypothecation nor a loan. It is a transfer of property from one person to another. There is consideration for the transfer. There is assent. The law presumes the assent when there is transfer of goods from one to the other. Fourth, a sale may not require the consensual element and that there may, in truth, be a compulsory sale of property with which the owner is compelled to part for a price against his will and the effect of the statute in such a case is to say that the absence of the transferor's consent does not matter and the sale is to proceed without it. In truth, transfer is brought into being which ex facie in all its essential characteristics is a transfer of sale. Fifth, delimiting areas for transactions or denoting parties or denoting p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts and in the light of observations of Full Bench of the Allahabad High Court in Commissioner of Sales Tax v. Ram Bilas Ram Gopal [1969] 24 STC 508; AIR 1970 All. 518, we are satisfied that some area of consensual arrangement and some field for volition is left untouched by the legislation in all disputed transactions. The disputed transactions are sales, may be, under the compulsion of a statute. Nevertheless, they are sales exigible to tax. Whatever coercive force is used to bring about the transactions, the same must be traced to legislation and not to the State Government as a party to such transactions. 27.. We, therefore, answer the principal common point holding that the levy procurement is a sale/purchase and therefore, falls within the purview of entry No. 54 of List II of Seventh Schedule to the Constitution. The States were competent to levy sales/purchase tax on such transactions. In the light of the rulings of this Court referred to above in detail, we are unable to agree with the submission of the learned Senior Counsel for the appellants that there was no area left for consensual agreement in the parties to the procurement transactions. The view taken by the Full B....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., was at all points of purchases. Therefore, Explanation II of section 3-D(1) of the U.P. Sales Tax Act which deals only with first purchase, does not affect this period. From 2-9-1976 to 30-4-1977 tax on foodgrains was at the point of sale to consumer. The Explanation II of section 3-D(1) of the U.P. Sales Tax Act, which deals only with first purchase does not affect this period. However, if any tax has been levied upon Food Corporation of India for this period, it is on account of their failure to supply the requisite forms, etc., whereupon the liability, under the law devolves on them. There is no challenge specifically to any such assessment. 3.. For the period commencing from 1968-69 and afterwards (excluding the period 15-11-1971 to 18-5-1973 and 2-9-1976 to 30-4-1977) provision of Explanation II of section 3-D(1) is applicable because this Explanation II in section 3-D(1) has been inserted with complete retrospective effect by the U.P. Sales Tax (Amendment and Validation) Act, 1976 (U.P. Act No. 23 of 1976) published on 20-5-1976. Therefore, Food Corporation of India had been taxed rightly because under the provision of Explanation II of section 3-D(1) the tax is collected....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e basis of their challenge was that there was no sale to demand the market fee when the rice was procured under the levy orders. According to the appellants in these matters there was compulsory acquisition of stocks under the levy orders and therefore, there was no sale. In the earlier paragraphs, we have dealt with and have arrived at a finding that the disputed transactions are sales. The same view was taken by the High Court and consequently, the writ petitions filed by the millers were dismissed. We affirm the view of the High Court. 34.. The Food Corporation of India have distributed fertilizers to the State Governments/their nominees under Fertilizer (Control) Order. The levy of sales tax on such distribution of fertilizers was challenged by the Food Corporation of India. The High Courts of Andhra Pradesh and Kerala upheld the levy and aggrieved by that, the Food Corporation of India have filed civil appeals. The argument advanced before the High Court on behalf of the FCI was that in the distribution of fertilizers, the FCI was discharging a statutory obligation vested in it under the Control Order and there is no element of volition or consensus of agreement in those tra....