TaxTMI 
TaxTMI 
1969 (2) TMI 163
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....nt (Levy) Order, 1959, are sales within the meaning of 'sales' under section 2(h) of the U.P. Sales Tax Act? (2) Whether in the circumstances of the case the assessees are liable to pay sales tax on the sales made to the Regional Food Controller under the provisions of the U.P. Wheat Procurement (Levy) Order, 1959?" The case came on for hearing before a Division Bench, which because of the importance of the questions raised, referred the case to a larger Bench. The case has now been laid before us. To appreciate the controversy embodied in the questions referred, it is necessary to examine the U.P. Wheat Procurement (Levy) Order, 1959. The "Levy Order", as I shall describe it, was made in exercise of the powers conferred by section 3(2) of the Essential Commodities Act, 1955. It recites its purpose as the maintenance of supplies of wheat and the securing of its equitable distribution and availability at fair prices. Clause 3 of the Levy Order provides: "3. Levy on wheat procured or in stock: (1) Every licensed dealer shall sell to the State Government at the controlled prices (a) Fifty (50%) per cent. of wheat held in stock by him at the commencement of this order; a....
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....he statements of stock received from various sugar factories, the Sugar Controller made allotments. An allotment order was sent by him to the factory owner directing him to supply sugar to the State Government in accordance with despatch instructions to be conveyed by the latter. The State Government was notified of the allotment and upon despatch instructions communicated by it to the factory the sugar was despatched by the factory. It was admitted that those facts represented the course of dealing between the assessee and the State of Madras. The Supreme Court held, by majority (Kapur and Shah, JJ.), that the transactions of despatches of sugar by the assessee pursuant to the directions of the Controller were not the result of any contract of sale. Reference was made to State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd.[1958] 9 S.T.C. 353; [1959] S.C.R. 379; A.I.R. 1958 S.C. 560., where while examining the validity of statutes of Provincial Legislatures imposing sales tax on the value of goods used in the execution of building contracts, the Supreme Court observed that the expression "sale of goods" in entry 48 of List II in the Seventh Schedule of the Government of India Ac....
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.... (Control of Production and Distribution) Order, 1941, issued under the Defence of India Act, 1939. Relying principally on M/s. New India Steel Mills[1963] 14 S.T.C. 316; A.I.R. 1963 S.C. 1207. , the assessee contended that as it was the Controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were to be transported, and the mode in which the payment of the price was to be made, there was nothing left for the parties to determine by agreement, and, therefore, the transactions could not be considered as sales. The Supreme Court did not accept the contention, observing that while the Controller fixed the base price of the steel products and determined the buyers the parties were free to decide the remaining terms of the contract by consent. It was open to the assessee to agree with its customers as to the dates on which the goods were to be supplied. All orders booked were subject to the assessee's terms of business in force at the time, and it was also open to the assessee to fix the time and mode of payment of the price of the goods supplied. Accordingly, it could not be said, observed the cou....
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....ct. The purchases of sugarcane under the agreement can be taxed by the State Legislature under entry 54, List II." It was emphasised that even though there was no freedom of bargaining between the parties the contract was still a contract of sale. The court rejected the submission that the decision in New India Sugar Mills Ltd.[1963] 14 S.T.C. 316; A.I.R. 1963 S.C. 1207. should be regarded as an authority for the proposition that there can be no contract of sale under the compulsion of a statute. It was a matter, it said, which turned upon the facts of each case and the terms of the particular statute regulating the dealings between the parties. I may also refer to the recent decision of the Supreme Court in State of Rajasthan v. M/s. Karam Chand Thappar and Bros. Ltd. Civil Appeal No. 1364 of 1966 decided on August 27, 1968; since reported at [1969] 23 S.T.C. 210.. The court held that there was an agreement of sale between the parties and although the price chargeable for the goods was fixed under the Colliery Control Order, the effect of the Control Order was only to super-impose upon the agreement between the parties the rate fixed under the Order. It was a case where the con....
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....by him at the commencement of the Order, and thereafter fifty per cent. of the wheat daily procured or purchased by him beginning with the date of commencement of the Order until such time as the State Government otherwise directs. The price at which the wheat is sold is the maximum price fixed in the Wheat (Uttar Pradesh) Price Control Order, 1959, as notified by the Government of India. Delivery of the wheat has to be given by the dealer to the Regional Food Controller or a person authorised by him in that behalf. The dealer has no option but to sell the specified percentage of wheat to the State Government. The State Government has also no option but to purchase fifty per cent. of the wheat held in stock by the dealer at the commencement of the Levy Order. As regards the wheat procured or purchased daily by the dealer thereafter, it is open to the State Government to say that from any particular date it will not purchase any or all of the specified percentage of wheat. Therefore, as regards that wheat the Levy Order leaves it open to one of the parties, namely the State Government, to decide when it will stop purchasing wheat from the dealer. That in substance is clause (3) of t....
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....tial contractual base is not impaired no serious violence is done to the freedom of contract. Modern jurists conceive of the law as a powerful instrument of social engineering. They point out that in a social order where the doctrine of laissez-faire has yielded place to the concept of a welfare society, the movement appears to proceed once again from contract to status. The development is normal and inevitable when the absolutism of individual rights has begun to give way to the play of wider social interests. Indeed, it is too late in the day to permit the values of a rapidly withering philosophy to influence and contain the growth of socially progressive forces. So long as these considerations can operate within the basic and primary fundamentals of the law, so long as they reflect progressive social trends consistent with the principles expressed in the Constitution, the approach which the courts must adopt today when considering them becomes increasingly clear. A too rigid approach, valid when the values of a different social order dominated society, can result in stultifying the aspirations and objectives expressed in the Constitution, which carefully balances individual righ....
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.....P. Sales Tax Act. That is a conclusion with which, upon the considerations set out above, I respectfully agree. I may refer, en passant, to Messrs Cement Ltd. v. State of Orissa at Cuttack[1961] 12 S.T.C. 205. and S.K. Roy v. Additional Member, Board of Revenue, West Bengal[1966] 18 S.T.C. 379; A.I.R. 1967 Cal. 338. In neither of those cases do the considerations which have prevailed with me appear to have been placed before the learned Judges who decided those cases and held that the transactions there were not sales. In my judgment the sales made to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959, must be held to be sales as contemplated by the Indian Sale of Goods Act and, therefore, sales within the meaning of section 2(h) of the U.P. Sales Tax Act. That being so the assessee is liable to pay sales tax on such sales. In the result, I answer the questions referred in the affirmative. The Commissioner of Sales Tax is entitled to his costs which I assess at Rs. 200. Counsel's fee is also assessed in the same figure. GULATI, J.-I agree. BEG, J.-The questions to be answered and the relevant facts and provisions of law which gave rise to the....
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....trol of Production and Distribution) Order, 1941, came up for consideration. It was held that they were sales notwithstanding that the sales in question could only take place at prices fixed by a Controller and "in accordance with the conditions contained or incorporated in a general or special order of the Controller." The ground for a unanimous decision of five of their Lordships of the Supreme Court was that the test of "sale" laid down in G. Dunkerley & Co.'s case [1958] 9 S.T.C. 353; A.I.R. 1958 S.C. 560. was satisfied. It was pointed out that this test was satisfied if "there was a concurrence of the following elements, viz., (1) parties competent to contract, (2) mutual assent, (3) a thing, the absolute or general property in which is transferred from the seller to the buyer, and (4) a price in money paid or promised." The earlier decision in New India Sugar Mills' case[1963] 14 S.T.C. 316; A.I.R. 1963 S.C. 1207. was distinguished on facts as "no room for mutual assent" was left in the transactions under consideration in the earlier case. In Andhra Sugars Ltd. v. State of Andhra Pradesh[1968] 21 S.T.C. 212; A.I.R. 1968 S.C. 599 at p. 606., their Lordships of the Supreme C....
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....usiness. This clause has already been reproduced in the judgment of my learned brother R.S. Pathak, J. The obvious result of the provision was that a licensed dealer was obliged to offer the quantities of wheat indicated in the Order to the State Government which was impliedly bound to purchase it under the terms of this Order at the controlled prices. The Control Order only restricts the field of choice of parties and the price at which an offer could be made by either side. Nevertheless, the process of offer and acceptance and payment of price, presumably fixed at a fair rate, was retained. The essential ingredients of "sale", as indicated above, are not destroyed. The form of the transactions before us is that of sales and not of a compulsory acquisition of goods to be supplied. It appears to me to be necessary to distinguish between a restriction in the area of choice of parties and the transaction itself in order to determine the true character of the transaction. Limitation of the field of choice is a necessary concomitant of a controlled or mixed economy which ours is. Absolute freedom of contract or unregulated operation of the laws of supply and demand, which an apotheo....