TaxTMI 
TaxTMI 
1985 (8) TMI 339
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....ecious export markets in European and other advanced countries lost them and the industry was facing a crisis. With the object of rehabilitating the industry and placing it on a sound footing, accepting the recommendations of a conference held thereto, the then Viceroy and Governor General of India, promulgated the Coffee Market Expansion Ordinance (Ordinance No. 13 of 1940) on 14th December, 1940 inter alia establishing the Board from 21st December, 1940. The said Ordinance continued by another ordinance, was replaced by a permanent enactment of the then British Indian Legislature titled as "The Coffee Market Expansion Act (Act 7 of 1942)", but by later amendments made, is now briefly titled as "The Coffee Act". 4.. The Board is constituted under section 4 of the Coffee Act. The Board is charged with the duty to administer the "Coffee Act", exercise the powers and functions enjoined on it under that Act. The Board is a registered dealer under the KST Act and the Central Sales Tax Act of 1956 (Central Act No. 74 of 1956) ("CST Act") on the file of the Commercial Tax Officer (Legal-A), Bangalore ("CTO"). Amongst a variety of functions and powers that are not material for our purp....
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.... 1982 the petitioner has challenged the show cause notice issued by the Commissioner, the proposition notice issued by the CTO and the assessment order made by him thereto. In Writ Petitions Nos. 13981, 17071, 17072, 19285 and 19118 of 1983 the petitioner has challenged the assessment orders made by the CTO. 6.. The petitioner has challenged the validity of sections 2(t) and 6 of the KST Act on the ground that they contravene the Coffee Act, articles 265 and 300-A of the Constitution. 7.. The petitioner has urged that under the Coffee Act when the growers compulsorily deliver the coffee grown by them; which it receives, extinguishing all rights over the same for marketing in and outside the country, in law and fact, it was nothing but "compulsory acquisition" and was not a sale or purchase to attract the levy of purchase tax under section 6 of the KST Act. Alternatively, the petitioner has urged that even if there was a compulsory sale or purchase, then also it only acts as a "trustee" or "agent" of the growers, for which reason, it was not exigible to purchase tax under section 6 of the KST Act. Lastly, the petitioner has urged that all export sales directly effected by it w....
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....e reasons that all the assessments in these cases relate to the period prior to that date and the enabling provisions of the Constitution had not been availed by the Karnataka State so far and at any rate for the assessment periods involved in these cases. 13.. We first propose to deal with two minor contentions and then deal with the substantial questions that were seriously debated before us. 14.. As on 1st November, 1956 on which day the new State of Mysore now called as "Karnataka" comprising of the areas specified in section 7 of the States Reorganisation Act, came into being there were 5 sets of sales tax laws in the five integrating areas of the State detailed in section 40 of the KST Act. The new State by virtue of the powers derived by article 246(3) and entry No. 54 of the State List of the Seventh Schedule to the Constitution enacted the uniform KST Act repealing all the earlier enactments on the subject. The KST Act came into force on 1st October, 1957. The KST Act as originally enacted, which has undergone a large number of amendments from time to time, by section 5 provided for levy of sales tax on sales as stipulated in that section. 15.. Section 2(t) of the....
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....nd from the selling agent to the purchaser, or (b) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid,- (i) to have sold the goods at one rate and to have passed on the sale proceeds to his principal at another rate; or (ii) to have purchased the goods at one rate and to have passed them on to his principal at another rate; or (iii) not to have accounted to his principal for the entire collections or deductions made by him in the sales or purchases effected by him on behalf of his principal; or (iv) to have acted for a fictitious or non-existent principal; ". 16.. Section 6 of the KST Act, as originally enacted regulated the exemptions and reductions of taxes leviable under the KST Act. But, the Mysore Sales Tax (Amendment) Act, 1970 (Mysore Act 9 of 1970) which came into force from 1st April, 1970 [vide sub-section (2) of section 1 of the said Amending Act) replaced the earlier section 6 with a new section providing for levy of purchase tax in the State for the first time as stipulated in that section. 17.. Section 6 as introduced by Act 9 of 1970 w....
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....on provides is that a person shall not be subjected to a tax without the authority of law. The Act is a law imposing purchase tax in the State. Article 265 has hardly any relevance to sustain the challenge of the petitioner to sections 2(t) and 6 of the KST Act. 22.. Article 300-A of the Constitution, which provides that a person shall not be deprived of his property except by the authority of law, does not provide for immunity from taxation. Article 300-A does not also help the petitioner to sustain its challenge to sections 2(t) and 6 of the KST Act. 23.. On the foregoing discussion itself the challenge of the petitioner to sections 2(t) and 6 of the KST Act calls for our rejection. 24.. Section 2(t) that defines the term "sale" as in all other sales tax enactments in the country is within the legislative competence of the State Legislature and does not contravene any of the provisions of the Constitution. In more than one case, the Supreme Court has upheld the validity of similar provision. We see no merit in the challenge of the petitioner to section 2(t) of the KST Act and we reject the same. 25.. Section 6 of the Act is within the legislative competence of the State ....
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....re is nothing incongrous in the Board being subjected to purchase tax under the KST Act. 29.. As ruled by the Supreme Court in Kandaswami's case [1975] 36 STC 191 (SC), the taxable event is the purchase and it is on that taxable event, the purchase tax is levied on the taxable person on the taxable goods. Whether the taxable person that bears the tax can or cannot pass on that burden on others, if that is permitted by law, is a matter for him to decide. But, that right, if any, of the taxable person with which we are not concerned cannot affect the validity or otherwise of section 6 or the validity or otherwise of a levy under that provision at all. 30.. Even otherwise, we are also of the view that this contention urged by Sri Raman is plainly opposed to the well accepted rule of construction of taxation statutes admirably stated by Rowlatt, J. In Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 at 71 to the effect that "in a taxing Act one has to look merely on what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied". That has become ....
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....isting of Satyanarayana Rao and Rajagopalan, JJ., examined this very contention of the petitioner on its liability for taxes under the then Madras General Sales Tax Act of 1939 that was then in force and rejected the same in these words: "The argument on behalf of the petitioner strenuously urged was that the Board was merely an agent of the producer and as the sale by the producer of his produce is excluded from the 'turnover' definition in the Act, there is no justification for imposing the tax on the assessee. In support of this argument reliance was placed upon the decision of the judicial Committee in Weldon v. Smith [1924] AC 484. We do not think that this argument is sound. There is no question of any agency between the producer and the Board, as there is no contract, express or implied, between them, nor is the Board constituted representative of the producer under the provisions of the statute. The Board does not hold the goods on behalf of the producer. After the goods enter the pool after delivery they become the absolute property of the Board and the producer, a registered owner, has no right or claim to the goods except to share in the sale proceeds after the....
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.... clarity'. We can do no better than repeat the famous words of Judge Learned Hand when he said '..........it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing: be it a statute, a contract or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning'. We must not adopt a strictly literal interpretation of section 52, sub-section (2) but we must construe its language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which section 52, sub-section (2) appears, because, as pointed out by Judge Learned Hand in most felicitous language: ..........the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particu....
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...." that was in operation, at any rate for the assessment years in issue. What then is its legal effect is the next question and to answer the same it is first necessary to know what is meant by "compulsory acquisition" or "eminent domain" as it is called in America. 40.. The principle of compulsory acquisition or eminent domain, an essential attribute of sovereignty of every modern State, is based on two legal maxims or principles and they are (1) "Salus Populieit Supremalex", i.e., the welfare of the people or the public is the law paramount and (2) "Necessitus Publica major est quam Privata", i.e., Public necessity is greater than private. Michols on Eminent Domain (1950 Edition) a classic authority on the subject defining "eminent domain" as "the power of the sovereign to take property for public use" without the owner's consent (vide para 1.11, page 2 of Vol. 1) elaborates the same in these words: "..........This definition expresses the meaning of the power in its irreducible terms: (a) Power to take, (b) Without the owner's consent, (c) For the public use. All else that may be found in the numerous definitions which have received judicial recognition is merel....
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.... ultimate ownership in the soil, but that it is based upon the sovereignty of the state. As the sovereign power of the state is broad enough to cover the enactment of any law affecting persons or property within its jurisdiction which is not prohibited by some clause of the constitution of the United States, and as the taking of property within the jurisdiction of a state for the public use upon payment of compensation is not prohibited by the constitution of the United States, it necessarily follows that it is within the sovereign power of a state, and it needs no additional justification." Cooley in his Treatise on the Constitutional Limitations, Chapter XV expresses the same view at page 524 in these words: "........ More accurately, it is the rightful authority which must rest in every sovereignty to control and regulate those rights of a public nature which pertain to its citizens in common and to appropriate and control individual property for the public benefit, as the public safety, convenience or necessity may demand." Wheanton's International Law, Edited by A. BERRIEDALE KEITH, 6th Edition, Vol. IL explains the same in these words: "The right of the state to its ....
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....ffee in, British India, and other connected means. 2.. The duration of the Ordinance was limited in order to make proposals for legislation after gaining experience and after ascertaining the wishes of the coffee interests in the matter. 3.. A Second Coffee Control Conference of the coffee interests was accordingly convened on the 20th October, 1941. The Conference recognised that the control scheme has been greatly beneficial to the coffee industry in its present crisis and unanimously made the following recommendations: (1) that the control scheme as generally embodied in the ordinance should be continued by legislation and that its duration be for the period of the war and one coffee crop year thereafter, and (2) that the control should be limited to estates with area of 10 acres or more but provision should be made whereby control may be extended, if necessary, over estates with areas below 10 acres. These recommendations were endorsed by the Standing Advisory Committee of the Legislature attached to the Commerce Department. 4 In view of the general agreement of all interests for the maintenance of the coffee control scheme it is proposed to continue control b....
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....f the Act and the subsidiary rules in great detail regulate the accounting and the administration of the general and pool funds. 46.. Section 48(1) of the Coffee Act empowers the Central Government to make rules to carry out the purposes of the Act. Section 48(2)(xviii) and (xix) empower the Central Government to regulate the internal sale quota and the manner in which the Board shall exercise its powers of buying or selling coffee. Rule 34 of the Rules framed by the Central Government exhaustively deals with the general and pool funds. Rule 34(2)(d) directs the Board to specify the amounts spent in purchasing coffee from registered owners. Rule 38B empowers the Board to make advances to growers in accordance with the terms and conditions framed and approved by the Central Government. Rule 38C empowers the Board to make ad hoc and final payments to growers. Rule 40 provides for purchasing and selling of coffee by the Board in the internal market. The language of all these general provisions that deliberately employ the terms "sale" and purchase and nowhere employ the term acquisition militate against the case urged by the Board before us. 47.. With this it is now necessary to cl....
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....l be responsible for storage, curing where necessary, and marketing of the coffee. (4) The Board shall, from time to time prepare a differential scale for the valuation of coffee, and shall in accordance with that scale classify the coffee in each consignment delivered for inclusion in the surplus pool according to its kind and quality and shall make an assessment of its value based on its quantity, kind and quality. (5) The Board may, with the consent of a registered owner treat as having been delivered for inclusion in the surplus pool any coffee from such estate which the registered owner may agree to have so treated. (6) When coffee has been delivered or is treated as having been delivered for inclusion in the surplus pool, the registered owner whose coffee has been so delivered or is treated as having been so delivered shall retain no rights in respect of such coffee except his right to receive the payments referred to in section 34." The first part of section 17 prohibits a grower from selling any coffee in the Indian market without fulfilling the obligation of internal sale quota allotted to his estate by the Board. The provision made in this part of this section....
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.... that the Board will be its owner, however, subject to his right to receive payment for the same in accordance with section 34 of the Coffee Act and the rules made thereto for that purpose. 50.. Sections 17 and 25 of the Coffee Act cast a legal obligation on every grower to deliver or sell all coffee grown by him to the Board which has a corresponding power or duty to receive or purchase the same, then dispose all such coffee and make payments to the growers in terms of the Act and the Rules. We must remember that coffee is a commercial crop and an important foreign exchange earner providing gainful employment to many. In keeping with the scheme and object of the Act, these and other provisions really establish a marketing agency for securing a fair price to the growers and consumers but at the same time ensuring quality control of the product. The penal provisions in the Act are intended to secure the purposes and objects of the Act and are not made to punish any general crime against the society and the State. 51.. On a careful analysis of all the provisions of the Coffee Act in general and sections 17 and 25 in particular vis-a-vis the true principles of compulsory acquisi....
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....m can be applied without qualification to another. This may be so even where the words or expressions used are the same in both cases; for a word or a phrase may take a colour from its context and bear different senses accordingly." In Automobile Transport (Rajasthan) Limited v. State of Rajasthan AIR 1962 SC 1406 S.K. Das, J. (as his Lordship then was), speaking for the majority of the Supreme Court reiterated these principles in these words: "This Court pointed out in the Atiabari Tea Co. case [1961] 1 SCR 809; AIR 1961 SC 232, that it would not be always safe to rely upon the American or Australian decisions in interpreting the provisions of our Constitution. Valuable as those decisions might be in showing how the problem of freedom of trade, commerce and intercourse was dealt with in other federal constitutions, the provisions of our Constitution must be interpreted against the historical background in which our Constitution was made; the background of problems which the Constitution-makers tried to solve according to the genius of the Indian people whom the Constitution-makers represented in the Constituent Assembly." Bearing this note of warning, we now proceed to....
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....rily in the course of trade and commerce, whether foreign, inter-State or intra-State. Section 15 of the Act of 1926 provides that 'all the commodity' shall be delivered by the growers to the marketing board, and that 'all the commodity', so delivered shall be deemed to have been delivered to the board for sale by the Board, 'who shall account to the growers thereof for the proceeds thereof after making all lawful deductions therefrom for expenses and outgoings and deductions of all kinds in consequence of such delivery and sale or otherwise under these Acts' [see 15(1)(2) as modified by the Order in Council]. Sub-section (3) of section 15 penalizes the sale or delivery of any of the 'commodity' to, or the purchase or the receipt of any of the 'commodity' from, any person except the Board. These provisions operate even although the Governor in Council does not resort to compulsory acquisition. It was said by Mr. Mitchell that the provisions authorizing the borrowing of money constituted the chief purpose of the compulsory acquisition. If this means that the control of the marketing of peanuts is a subordinate or consequential purpose of the instruments, I cannot agree. The ability ....
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....isition with the object of placing restrictions on all trade, domestic, inter-State and foreign, and, following the decision of His Majesty in Council in James v. Cowan [1932] AC 542; 47 CLR 386, I think the Act operates in contravention of section 92 of the Constitution, and so far as it does so is necessarily void." (per Starke, J.) "..........It compels every grower to dispose of his peanuts to the statutory Board in order that it may conduct the marketing of the commodity as a whole in the interests of the growers collectively, and it acquires the property in the peanuts as and when they come into existence in order to insure that the grower producing them for sale shall not exercise his former freedom of selling them by an ordinary transaction of commerce whether intra-State or inter-State." (per Dixon, J.) "..........Gathered from the effect which has been wrought by these provisions of the Act and Order in Council, their primary object or real object or pith and substance is, in my opinion, to constitute an authority for marketing peanuts, to vest in it an owner all peanuts produced in Qaeensland during the period for which it was to operate, to prevent all persons oth....
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....cern itself with, any inter-State trade in peanuts." We have carefully read the Australian Act also made available to us by Sri Babu. We are of the view that the use of the expression "acquisition" in some of the opinions of the learned Judges is not in the sense of compulsory acquisition or eminent domain by the State but has been used for compulsory delivery by the growers or purchase by the Board, which is also the other expression that has been used by all of them at more than one place. We are, therefore, of the opinion that the ratio in Peanut Board's case 48 CLR 266 does not really assist the petitioner. This is also true of the original decision rendered by Webb, J., of the Supreme Court, Brisbane. 55.. What is true of Peanut Board's case 48 CLR 266 is also true of the two other cases in (i) Milk Board (New South Wales) v. Metropolitan Cream Private Limited 62 CLR 116 and (ii) Crothers v. Sheil 49 CLR 399 of that very Court that really followed Peanut Board's case 48 CLR 266 with reference to similar enactments. 56.. In Chittar Mal Narain Das v. Commissioner of Sales Tax [1970] 26 STC 344 (SC); AIR 1970 SC 2000 the Supreme Court dealing with the U.P. Wheat Procurem....
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....oard in the Peanut's case, the sales effected by the assessee were in the course of trade and commerce, even as the sales would have been in the course of trade and commerce had there been no Board and the sales been by the producers themselves. We are therefore in entire agreement with the view of the Tribunal that the assessee was a dealer and therefore the assessee was rightly assessed to sales tax on the turnover." We are in respectful agreement with these views. 58.. On the above analysis of all the provisions of the Coffee Act and the Rules and in particular sections 17 and 25, with due regard to the meaning and principles of compulsory acquisition, we are of the considered opinion that when growers compulsorily deliver their coffee to the Board for marketing, that would not result in compulsory acquisition as contended by Sri Nariman. We, therefore, reject this contention of Sri Nariman. 59.. Sri Nariman has next contended that in the compulsory sales and purchases of coffee under the Coffee Act, consensuality was totally lacking, as in compulsory sales arising under the control orders and the principles enunciated by the Supreme Court in Vishnu Agencies' case [1978....
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....ne the question in the light of the principles enunciated by the Supreme Court in Vishnu Agencies' case. 65.. We have earlier noticed that the extended meaning of the terms "tax on the sale or purchase of goods" incorporated by the 46th Amendment had no application which necessarily means that exposition in State of Madras v. Gannon Dunkerley and Company [1958] 9 STC 353 (SC); AIR 1958 SC 560 the correctness of which was only doubted but not overruled in Vishnu Agencies' case [1978] 42 STC 31 (SC), which is also the basis of that very decision, at any rate, governs these cases. 66.. In Gannon Dunkerley and Company's case [1958] 9 STC 353 (SC) on the meaning of the term "sale" occurring in entry 48 of the Government of India Act of 1935 corresponding to entry 54 of the State List of the Constitution, the Court expressed thus: "(46) To sum up, the expression 'sale of goods' in entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement." In Vishnu Agencies' case [1978] 42 STC 31 (SC) the Supreme Court has proceeded to examine compulsory sales on this basis only. We must, there....
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....onsent. Two or more persons are said to consent when they agree upon the same thing in the same sense. Section 14 defines free consent. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in sections 15 to 22. Now, under Act No. 45 of 1961 and the Rules framed under it, the cane grower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory. But, if he makes an offer, the occupier of the factory is bound to accept it. The resulting agreement is recorded in writing and is signed by the parties. The consent of the occupier of the factory to the agreement is not caused by coercion, undue influence, fraud, misrepresentation or mistake. His consent is free as defined in section 14 of the Indian Contract Act though he is obliged by law to enter into the agreement. The compulsion of law is not coercion as defined in section 15 of the Act. Inspite of the complusion, the agreement is neither void nor voidable. In the eye of the law, the agreement is freely made. The parties are competent to contract. The agreement is made for a lawful consideration and with a lawful o....
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....ane growers on prescribed terms and conditions. (6) In Indian Steel and Wire Products Ltd. v. State of Madras (Civil Appeals Nos. 1968-1970 of 1966 dated 11th September, 1967) [1968] 21 STC 138 (SC); AIR 1968 SC 478, the Court held that sales of steel products authorised by the Controller under clauses 4 and 5 of the Iron and Steel (Control of Production and Distribution) Order, 1941 were exigible to tax under entry 54, List II. The Court found that the parties had entered into contracts of sale though in view of the Order the area of bargaining between the buyer and the seller was greatly reduced. Hedge, J., speaking for the Court said that as a result of economic compulsions and changes in the political outlook the freedom to contract was now being confined gradually to narrower and narrower limits. We have here a case where one party to a contract of sale is compelled to enter into it on rigidly prescribed terms and conditions and has no freedom of bargaining. But the contract, nonetheless, is a contract of sale. * * * On the special facts of that case, the majority decision was that there was no offer and acceptance and no contract resulted. That decision should not be treat....
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.... regard to their conduct at or about the time when the goods changed hands. In the first place, it is not obligatory on a trader to deal in cement nor on any one to acquire it. The primary fact, therefore, is that the decision of the trader to deal in an essential commodity is volitional. Such volition carries with it the willingness to trade in the commodity strictly on the terms of the Control Orders. The consumer too, who is under no legal compulsion to acquire or possess cement, decides as a matter of his volition to obtain it on the terms of the permit or the order of allotment issued in his favour. That brings the two parties together, one of whom is willing to supply the essential commodity and the other to receive it. When the allottee presents his permit to the dealer, he signifies his willingness to obtain the commodity from the dealer on the terms stated in the permit. His conduct reflects his consent. And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity. His conduct too reflects his consent. Thus, though both par....
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.... an implied offer and implied acceptance by the parties.' Adverting to the construction of the Legislative entry 48 of List II, Seventh Schedule to the Government of India Act, 1935 the learned judge observed that the entry had to be interpreted in a liberal spirit and not cut down by narrow technical considerations. 'The entry in other words should not be shorn of all its content to leave a mere husk of legislative power. For the purposes of legislation such as on sales tax it is only necessary to see whether there is a sale, express or implied..........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.' 39.. We are of the opinion that the true position in law is as is set out in the dissenting judgment of Hidayatullah, J., and that the view expressed by Kapur and Shah, JJ., in the majority judgment, with difference, cannot be considered as good law. * * * 45.. We would, however, like to clarify that though 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 Chitt....
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....ition of the book was published. The formulations in Benjamin's 2nd edition relating to the conditions of a valid 'sale' of goods, which are reproduced in the 8th edition, evidently require modification in the light of regulatory measures of social control. Hidayatullah, J., in his minority judgment referred to above, struck the new path; and Bachawat, J., who spoke for the Court in Andhra Sugars [1968] 21 STC 212 (SC); AIR 1968 SC 599 went a step ahead by declaring that 'the contract is a contract of sale and purchase of cane, though the buyer is obliged to give his assent under compulsion of a statute (at page 223 of STC; 606 of AIR). The concept of freedom of contract, as observed by Hegde, J., in Indian Steel and Wire Products [1968] 21 STC: 138 (SC); AIR 1968 SC 478 has undergone a great deal of change even in those countries where it was considered as one of the basic economic requirements of a democratic life (page 148 of STC). Thus, in Ridge Nominees Ltd. [1962] Ch 376 the Court of Appeal, while rejecting the argument that there was no sale because the essential element of mutual assent was lacking, held that the dissent of the shareholder was overriden by an assent which t....
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....sory acquisition of goods" and "supply of goods under a public duty" respectively to contend that in the compulsory sales under the Coffee Act, there cannot be consensuality at all. 69.. Benjamin's Sale of Goods is a high and classic authority on the law of sale of goods in England, codified in that country in "The Sale of Goods Act of 1893" on which the Sale of Goods Act of 1930 of our country also is generally modelled. But, that high authority cannot override the law declared by the Supreme Court in Vishnu Agencies [1978] 42 STC 31 (SC); AIR 1978 SC 449 and other cases referring to Benjamin, Cheshire and Fifoot's Law of Contracts, Friedman's Law in a Changing Society, the Constitution of our country, its philosophy and its economic conditions. We may with advantage refer to the very scholarly and stimulating treatises of Julius Stone (1) "Social Dimensions of Law and Justice", 1977 edition, on the topic "Freedom of Contract" pages 251 to 254 of Chapter 5 "Individual Interests or Conditions of Individual Life in Society" and again on topic "Positive Action for the adjustment of conflicts with economic security, efficiency and progress" pages 467-469, (2) Human Law and Human ju....
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....of Goods Act shows that there was an element of consensuality in the compulsory sales regulated by the Coffee Act. 74.. But, Sri Nariman has urged that on a combined reading of sections 17 and 25, the Board had no right to reject what was delivered as coffee and therefore, the element of consensuality was completely excluded. 75.. The power conferred by section 25(2) of the Coffee Act must be read subject to the very requirements of that and all other provisions of the Act. When a grower sells coffee that has become totally unfit for human consumption for one or the other valid reason, such a grower cannot compel the Board to purchase such coffee on the ground that it was coffee and thus endanger public safety and also pay its value or price. In the very nature of things, these things cannot be foreseen or enumerated exhaustively. We are also of the view that the power conferred on the Board cannot be restricted in the manner suggested by Sri Nariman. 76.. On the above discussion, we hold that the power of rejection conferred on the Board has an element of consensuality in the compulsory sales under the Coffee Act. 77.. When a grower delivers coffee to the Board, the Co....
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....agent of the planter. It is not accountable to the owner, except as to payment for coffee received and valued according to the differential prices. All coffee which the Coffee Board obtains under the Coffee Act is put in a pool and gets mixed up with other coffee. Coffee in the pool is disposed of on behalf of the Coffee Board. The Coffee Board only pays a proportionate price to the planter. Even though the planter does not actually sell coffee to the Coffee Board there is in reality a sale by operation of law as a result of which the planter ceases to be the owner of coffee the moment he has handed over his produce to the Coffee Board. He is then entitled to receive payment and is not concerned any more with his coffee. The unsold coffee is not returned to him and he does not enjoy any rights of ownership in it. The Coffee Board can pledge it and sell it as and when it likes. In these circumstances it is plain that the handing over of coffee by the planter amounts to a sale to the Coffee Board and the payment of the price is from the sale of all the coffee in the surplus pool unless the planter settles for immediate payment. The system of account must make a difference. If it were....
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....adras Act and the Coffee Act held that the Board was a dealer within the meaning of that term and was exigible to the sales tax thereunder. When once the Board is held to be a dealer, it also follows from the same that there is a sale from the grower, purchase by the Board and then a sale by the Board. We are of the view that on these principles with which we are in respectful agreement, the contention urged for the petitioner has no merit. 83.. On the foregoing discussion, we hold that there is no merit in this contention of Sri Nariman and we reject the same. 84.. Sri Nariman has urged that all export sales directly made by the Board must be held as purchases "in the course of export" on which purchase tax under section 6 of the Act cannot be levied, such a construction alone would subserve the purposes of article 286 of the Constitution and section 5 of the CST Act before or after its amendment by the Central Sales Tax (Amendment) Act, 1976 ("CST Amendment Act"). 85.. Sri Hegde has urged that all purchases made were only "for export" and were not "in the course of export" which do not decidedly earn exemption under article 286 of the Constitution from payment of purchas....
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....rd's case) which was a case filed by the Board raised the very contention as the CST Act then stood and the Supreme Court by majority rejected the same. Therein Hidayatullah, C.J., speaking for the majority explained the meaning of the term "in the course of export" in these words: "The phrase 'sale in the course of export' comprises in itself three essentials (i) that there must be a sale, (ii) that goods must actually be exported, and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the customs frontiers, or the sale must occasion the export. The word 'occassion' is used as a verb and means 'to cause' or 'to be the immediate cause of'. Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word 'course' in the expression 'in the course of' means 'progress or process of', or shortly 'during'. The phrase expanded with this meaning reads 'in the progress or process of....
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....ples the purchases made by the Board and the export sales made prior to 31st March, 1976 were not in the course of export but were only purchases made for export and therefore, they do not qualify for exemption provided by article 286 of the Constitution. 90.. In Consolidated Coffee Limited v. Coffee Board, Bangalore [1980] 46 STC 164 (SC) the Supreme Court has examined the true import of section 5(3) of the CST Act as amended by Act 103 of 1976 and Tulzapurkar, J., who spoke for the Bench has expressed on the same thus: "Section 5(1) was construed by this Court in the context of two sales (though both were closely connected with the ultimate exportation of the goods out of India) rather very strictly in the two cases, namely, the Coffee Board's case [1970] 25 STC 528 (SC) and the Mohd. Serajuddin's case [1975] 36 STC 136 (SC). In the former case, in regard to the very export auctions conducted by the Coffee Board for the avowed purpose of exporting the coffee through the registered exporters (which are the subject-matter of the instant writ petitions) this Court negatived the claim that the sales of coffee at such auctions were made 'in the course of export' within the meani....
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....rpose of implementing such foreign buyer's contracts, this Court held that the sales between Mohd. Serajuddin and the S.T.C. were not sales in the course of export. It was at this stage, i.e., when section 5(1) was interpreted by this Court in the aforesaid manner that the Parliament felt the necessity of enacting section 5(3) for the purpose of giving relief in respect of penultimate sales that immediately precede the final (export) sales provided the former satisfy the conditions specified therein. The Statement of Objects and Reasons in this behalf runs thus: 'According to section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held [vide Mohd. Serajuddin v. State of Orissa [1975] 36 STC 136 (SC)] that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders ....
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....t by necessary implication 'the agreement' spoken of by section 5(3) refers to the agreement with a foreign buyer. * * * Having come to the conclusion that on proper construction the expression 'the agreement' occurring in section 5(3) refers to the agreement with a foreign buyer and does not include any agreement with a local party containing a covenant to export, the next question that arises for our consideration is as to when does the penultimate sale (the sale of coffee at export auctions conducted *Here italicised. by the Coffee Board to the registered exporters) takes place, i.e., becomes complete by the passing of the property in the coffee sold thereat to the registered exporters? The determination of the point of time at which the property in the coffee passes to the registered exporters becomes necessary because before that the agreement with or order from a foreign buyer in respect of those goods must come into existence to implement which the penultimate sale must have taken place. * * * Having regard to the above discussion it is clear to us that in the penultimate sales (sales of coffee effected to the registered exporters at export auctions conduct....
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....ese cases, though we hardly doubt the correctness of the facts stated by the Board. 93.. Sri Nariman has lastly contended that even if export sales directly made by the Board were held to be "not in the course of export" they have to be treated as "deemed local sales" within the State of Karnataka in terms of explanation (3)(a)(ii) to section 2(t) of the KST Act on which ground all the purchases made cannot be subjected to purchase tax under section 6 of the KST Act. 94.. We are of the view that all the purchases made and the exports, if any, made by the Board thereafter on any principle will not be "local sales" within the State of Karnataka. Explanation (3)(2)(ii) to section 2(t) of the KST Act has hardly any relevance to hold that the later export sales were "local sales" to avoid liability under section 6 of the KST Act. We are of the view that this contention is also opposed to the principles enunciated by the Supreme Court in Kandaswami's case [1975] 36 STC 191 (SC). 95.. In P.P.M. Thangiah Nadar v. State of Tamil Nadu [1980] 46 STC 67 followed in P.S. Sankaralinga Nadar v. Commissioner for Commercial Taxes, Board of Revenue, Madras-5 [1982] 49 STC 302 and D.A. Sathy....
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.... rate of sales tax on coffee had remained at 10 per cent and, therefore, the levy of purchase tax at that rate was in order. 102.. On the above discussion, we find no merit in this contention of Sri Raman and we reject the same. 103.. In his assessment orders the CTO has also imposed additional tax under section 6B of the KST Act. The levy of additional tax on the purchase tax is also authorised and is in conformity with that provision. We, cannot, therefore take exception to the levy of additional tax on the purchase tax imposed by the CTO. 104.. In his assessment made on 5th September, 1983 for the assessment periods 1979-80 and 1980-81 the CTO has imposed surcharge on the purchase tax levied under section 6 of the KST Act. The levy of surcharge is authorised by section 6C of the KST Act. This levy is in conformity with section 6C of the Act. We cannot, therefore, take exception to the same. 105.. As the respondents succeed, the question of this Court directing the repayment of the amounts paid by the petitioner with any interest thereon in pursuance of the interim order made on 20th February, 1985 does not arise and the same is not therefore made. 106.. As all the....