1. On a reference made by one of us, these cases were posted before a Division Bench for disposal.
2. A statutory Board called 'the Coffee Board' ('the Board') which was formerly called the Indian Coffee Market Expansion Board constituted and functioning under the Coffee Act of 1942 (Central Act VII of 1942) ('the Coffee Act') is the common petitioner before us and the principal question that arises for our determination is whether it is exigible to purchase tax or not under section 6 of the Karnataka Sales Tax Act of 1957 (Karnataka Act 25 of 1957) ('KST Act'). In order to decide that principal and certain other allied questions, it is necessary to notice the facts that are not also in dispute in the first instance.
3. On the out break of the II World War, the Indian coffee that enjoyed precious 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 purpose, the Board procures all coffee grown in the country and markets the same in and outside the country on which the sales tax authorities under the KST Act have either proposed or levied 'purchase tax' under section 6 of the KST Act on the Board.
5-1. For the period from 1st April, 1974 to 31st March, 1975 the Assistant Commissioner of Commercial Taxes (Assessment-I), Bangalore ('ACCT') completed his assessment on 2nd December, 1978 (annexure A in Writ Petitions Nos. 15536 to 15540 of 1982 to the documents of which we will hereafter refer) under the KST Act, however accepting the exemption claimed by the petitioner and did not subject its purchase turnover to purchase tax under section 6 of the KST Act. In his show cause notice No. SMR 59/81-82 dated 25th July, 1981 (annexure C) the Commissioner of Commercial Taxes in Karnataka, Bangalore ('Commissioner') evidently in conformity with the opinion expressed by him in his D.O. letter No. MSA. CR 34/78-79 dated 18th July, 1981 (annexure B) addressed to the Chairman of the Board, a course that was not very commendable but was not rightly made an issue, has proposed to suo motu revise the said order of the ACCT and levy purchase tax on the purchase turnover for the aforesaid assessment year.
5-2. On an examination of the return filed by the petitioner under the KST Act for the period from 1st April, 1975 to 31st March, 1976, the CTO expressing that the same was incomplete and incorrect, issued a proposition notice on 10th March, 1982 (annexure D) inter alia proposing to bring the purchase turnover during the said period to purchase tax under section 6 of the KST Act. On 31st May, 1983 (annexure H) the CTO overruling the objections urged thereto by the petitioner, has completed his assessment for the said period levying a sum of Rs. 5,97,28,359.30 as purchase tax under section 6 of the KST Act and an additional tax of Rs. 59,72,835.93 under section 6B of the KST Act.
5-3. For the assessment years 1976-77, 1977-78, 1978-79, 1979-80 and 1980-81, the CTO has completed his regular assessments on 18th June, 1983, 27th July, 1983 and 5th September, 1983 subjecting the purchase turnovers effected during the aforesaid years to a purchases tax of Rs. 8,70,18,295.00; Rs. 8,31,85,560.00; Rs. 7,70,11,240.00; Rs. 9,29,68,459.43 and Rs. 7,53,87,448.59 respectively.
5-A. In Writ Petition Nos. 15536 to 15540 of 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 receiver, 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 were 'in the course of export' which were immune from purchase tax in terms of article 286 of the Constitution. On these grounds, the petitioner had sought for appropriate reliefs from this Court.
8-1. The respondents have resisted these writ petitions without, however, filing their returns in any of them, though the dimensions of the cases and the questions raised called for such a course, which would have considerably helped us in satisfactorily deciding them.
8-2. The respondents have urged that sections 2(t) and 6 of the KST Act were valid.
8-3. The respondents disputing the legal basis and claim of the petitioner, have urged that 'compulsory delivery' were nothing but sales and purchases and it was exigible to purchase tax under section 6 of the act. The respondents have urged that export sales from the 'pool coffee' were not 'in the course of export' and were not immune from tax under article 286 of the Constitution.
9. M/s. Consolidated Coffee Limited, a public limited company, owning extensive coffee estates in Karnataka and other States, one Sri K. S. Eswaran of Bangalore, a coffee planter, Sriyutus C. D. Vinaya Prasad and Pradeep Kumar of Mudigere, Chickmagalur District, representing an Association called Mudigere Planters' Association for themselves and on behalf of the Association have intervened and wholeheartedly supported the Board.
10. Sri F. S. Nariman, learned Senior Advocate of the Supreme Court Bar, assisted by Sri. R. J. Babu of Bangalore Bar have appeared for the petitioner. Sri N. Santosh Hegde, learned Advocate-General of the State had appeared for the respondents in all the cases. Sriyuths V. P. Raman, learned Senior Advocate of the Supreme Court Bar assisted by T. Subbarao and K. P. Kumar of Bangalore Bar, P. K. Kurien, Senior Advocate of Cochin Bar, and B. Veerabhadrappa of Bangalore Bar have appeared for the interveners.
11. Both sides and the intervenors that supported the petitioner have relied on a large number of rulings in support of their respective cases and we will refer to them at the appropriate stages.
12. Even before examining the contentions, it is necessary to notice that all the questions that arise in these cases have to be examined and decided without reference to the amendments made to the Constitution by the 46th Constitution Amendment Act of 1982 that came into force from 2nd March, 1983 for the 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 the 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 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 KST Act which defines the term 'sale' with various amendments made to that provision, but not on and after 1st April, 1974, reads thus :
'(t) 'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge.
Explanation (1). - A transfer of property involved in the supply or distribution of goods by a society (including a co-operative society), club, firm, or any association to its members, for cash or for deferred payment or other valuable consideration, whether or not in the course of business, shall be deemed to be a sale for the purposes of this Act.
Explanation (3). - (a) The sale or purchase of goods shall be deemed, for the purposes of this Act, to have taken place in the State wherever the contract of sale or purchase might have been made, if the goods are within the State, -
(i) in the case of specific or ascertained goods at the time the contract of sale or purchase is made; and
(ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation.
(b) where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of clause (a) shall apply as if there were separate contracts in respect of the goods at each of such places.
Explanation (3A). - Every transaction of supply by way of or as a part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration, shall be deemed to be a sale of those goods by the person making the supply and purchase of those goods by the person to whom such supply is made;
Explanation (4). - Notwithstanding anything to the contrary contained in this Act or any other law for the time being in force, two independent sales or purchases shall, for the purposes of this Act, be deemed to have taken place, -
(a) when the goods are transferred from a principal to his selling agent and 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 reductions 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 with amendments made to the made thereafter by the Mysore Act No. 78 of 1976 which regulate the levy of purchase tax in the State reads thus :
'6. Levy of purchase tax under certain circumstances. - Subject to the provisions of sub-section (5) of section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and,
(i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State, or
(ii) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce,
shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 5;
Provided that this section shall not apply -
(i) in respect of sale or purchase of goods specified in the Fourth Schedule -
(a) which are taxable at the point of purchase; and
(b) which have already been subjected to tax under sub-section (4) of section 5.
(ii) in respect of sale or purchase of goods specified in the Second Schedule which have already been subjected to tax under clause (a) of sub-section (3) of section 5.'
18. Section 2(t) and section 6 of the KST Act are challenged by the petitioner and a declaration is sought to strike them down. But, in seeking that declaration the petitioner has not elaborated as to how and for what reason they are constitutionally invalid.
19. In the prayers made, the petitioner has urged that the aforesaid provisions are violative of the Coffee Act. But, at the hearing, learned counsel for the petitioner did not elaborate as to how and why they violate the Coffee Act and are liable to be struck down by this Court. On this short ground, this challenge of the petitioner to section 2(t) and 6 of the KST Act calls for our rejection without any discussion.
20. In its petitions, the petitioner has urged that sections 2(t) and 6 are violative of article 265 and 300-A of the Constitution. But, even here the contention is as bald as it could be, which were also not highlighted at the hearing. On this ground itself we must reject this challenge of the petitioner.
21. All that article 265 of the Constitution 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 section 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 Legislature and is not violative of any of the provisions of the Constitution. In State of Tamil Nadu v. M. K. Kandaswami : 1SCR38 the Supreme Court reversing the decision of the Madras High Court upholding section 7A of the Madras General Sales Tax Act that corresponds to section 6 of the KST Act, approved the principles enunciated by the Kerala High Court in Yusuf Shabeer v. State of Kerala  32 STC 359 and Malabar Fruit Products Company, Bharananganam, Kottyam v. The Sales Tax Officer, Paloi  30 STC 537 which had upheld a similar provision in Kerala General Sales Tax Act. On the principles enunciated in Kandaswami's case : 1SCR38 , the challenge to section 6 of the KST Act is without any merit.
26. Sri Raman has urged that purchase tax levied on the Board by section 6 of the KST Act was really a tax on growers or agriculturists who were exempted from payment of sales tax by the exception added to explanation 2 of section 2(k)(vi) of the KST Act and applying the legal principle of 'what cannot be done directly cannot be done indirectly' discussed on paged 78 to 80 Craies on Statute Law, 6th Edition under the heading 'Fraud upon an Act not tolerated', section 6 should be struck down or should be so construed as not empowering levy of purchase tax on compulsory purchases by the Board under the Coffee Act.
27. In its petitions, the petitioners has not urged this plea. When the petitioner, who is primarily concerned with the exigibility or otherwise of taxes had not urged this plea, an intervenor that can only support or oppose a ground urged by either of the parties, cannot challenge the same, that too on an entirely different ground. We are of the view that on this short ground, we must reject this contention urged by Sri Raman. But, we will however assume that the petitioner had also urged this plea and examine its tenability or otherwise also.
28. We are of the view that this very contention urged by Sri Raman stands rejected by the Supreme Court in Kandaswami's case : 1SCR38 . In Kandaswami's case : 1SCR38 the Supreme Court dealing with the construction and validity of section 7A of the Madras General Sales Tax Act referring to the situation of a grower being exempted from payment of sales tax but purchaser being subjected to purchase tax has upheld the same. If that is so, there is nothing incongruous in the Board being subjected to purchase tax under the KST Act.
29. As ruled by the Supreme Court in Kandaswami's case : 1SCR38 , 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  1 KB 64 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 classical, approved by the Supreme Court and this Court in more than one case. What follows from this is that the principles stated in Craies on Statute Law under the heading 'Fraud upon an Act not tolerated' and the various rulings noticed in that text or the ruling of the Supreme Court in Commissioner of Income-tax, Bangalore v. B. C. Srinivasa Setty : 128ITR294(SC) that interpreted the assessability or otherwise of goodwill to capital gains under the Income-tax Act, 1961 do not really bear on the point and assist Sri Raman. We see no merit in this contention of Sri Raman and we reject the same. With this we now proceed to deal with the substantial contentions urged for the petitioner.
31. Sri Nariman has urged that the Board in procuring coffee from growers under the Coffee Act, acts as a 'trustee' or as an 'agent' of growers and was, therefore, not exigible to purchase tax under section 6 of the KST Act.
32. We are of the view that this contention of Sri Nariman is concluded by the ruling of the Supreme Court in State of Kerala v. Bhavani Tea Produce Co. Ltd., Punalur : 59ITR254(SC) and therefore a detailed examination of the same is not called for. In Bhavani Tea Produce Co. Limited's case : 59ITR254(SC) a Constitution Bench of the Supreme Court speaking through Hidayatullah, J. (as His Lordship then was) examining the scheme of the Coffee Act and the position of the Board vis-a-vis a grower and his exigibility to taxes under the Madras Plantations Agricultural Income-tax Act of 1955 has rejected a similar contention in these words :
'The Coffee Board is neither a trustee nor even an agent of the planter.'
Sri Nariman is right that this conclusion reached by the Court is without any discussion and reason. We, however, venture to think that the Supreme Court reached this conclusion as it was as obvious as it was inevitable. But even then that hardly makes any difference on its binding nature on us under article 141 of the Constitution. We are of the view that this statement of law equally governs this contention of the petitioner with reference to its liability, if any, under the KST Act and the same, therefore calls for our rejection.
33. In The Indian Coffee Board, Batlagundu v. The State of Madras  5 STC 292 (to be here after referred to as First Coffee Board's case) a Division Bench of the High Court of Madras consisting 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  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 goods are sold in accordance with the provisions of the Act. Weldon v. Smith  AC 484 was a case in which there was an agreement between the Government and the producer of the wheat and the question that arose for consideration was whether the Government were liable for damage to the goods while in their custody ..........'.
In Bhavani Tea Produce Co. Limited's case : 59ITR254(SC) the Supreme Court has not referred to this case. But, this principle is in accord with the enunciation made in Bhavani Tea Produce Co. Limited's case : 59ITR254(SC) . If that be so, then the enunciation made by their Lordships of the Madras High Court, if we may say so with great respect, is absolutely correct and unexceptionable. Even otherwise, we are of the view that the same is sound and we are in complete agreement with the views expressed therein.
34. On the above discussion, we see no merit in this contention of the petitioner and we reject the same.
35. Sri Nariman has urged that all the coffee grown and compulsorily delivered to the board by the growers under the Coffee Act in form, reality and substance was nothing but 'compulsory acquisition' and was not a sale or purchase to attract purchase tax under section 6 of the KST Act.
36. Sri Hegde refuting the contention of Sri Nariman has urged that coffee grown and delivered by growers to the Board under the Coffee Act was no more than 'a compulsory sale and purchase' with an element of consensuality which clearly attracts purchase tax under section 6 of the KST Act.
37. In K. P. Varghese v. Income-tax Officer, Ernakulam : 131ITR597(SC) Bhagwati, J. (as His Lordship then was) speaking for the Bench referred to various passages expressed by Lord Denning and Judge Learned Hand on the progressive rule of Construction of Statutes has expressed thus :
'...... The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and as pointed out by Lord Denning, it would be idle to expect every statutory provision to be 'drafted with divine prescience and prefect 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 he setting in which it occurs. We cannot ignore the context and the collection 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 particularity can ever obviate recourse to the setting in which all appear, and which all collectively create'. Keeping these observations in mind we may now approach the construction of section 52, sub-section (2).'
In C. Arunachalam v. Commissioner of Income-tax : 151ITR172(KAR) a full Bench of this Court of which one of us (Puttaswamy, J.) was a member, reviewing all the authorities has expressed on the same topic thus :
'So far as the fiscal statutes are concerned, we must remember one more principle. The provisions in a fiscal statute are not to be so construed as to furnish a chance of escape and a means of evasion.'
Bearing these and other well settled rules of construction of statutes, it is necessary to ascertain the true scope and ambit of the relevant provisions touching on the rival contentions urged before us.
38. The Coffee Act provides for two types of delivery, one called 'internal sale quota' and the other 'compulsory delivery'. The term 'internal sale quota' is defined in section 2(h) of the Coffee Act 'as that portion stated in terms bulk or weight, or the whole of the coffee produced by the estate in the year, which a registered estate is permitted under this Act to sell in the Indian market'. The power to regulate internal sale quota and its modalities are primarily dealt in section 22 of the Coffee Act. On the very definition of the 'internal sale quota', and its modalities detailed in section 22 of the Coffee Act, which only provides for fixation of the percentage of delivery and a sale thereto, there would be a contractual sale and purchase under the Sale of Goods Act and such purchases by the Board would undoubtedly attract purchase tax under section 6 of the KST Act.
39. But, the Board has asserted that for the last 40 years, 'internal sale quota' had not been resorted to under the Coffee Act and has not been in operation (vide para 5 of the writ petitions) which assertion has not been denied by the respondents. In the absence of a denial of that plea, this Court must accept the same and examine the case of the petitioner only on that basis. Even otherwise, there is no reason even to doubt the correctness of the said assertion of the petitioner. We must, therefore, proceed to examine the case of the petitioner that 'internal sale quota' system was not in operation and that it was the second mode of 'compulsory delivery' 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 Private', 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 I. 11, page 2 of Vol. I) 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 merely by way of limitation or qualification of the power. As a matter of pure logic it might be argued that inclusion of the term 'for the public use' is also by way of limitation. In this connection, however, it should be pointed out that from the very beginning of the exercise of the power that concept of the 'public use' has been so inextricably related to a proper exercise of the power that such element must be considered as essential in any statement of its meaning. 'The public use' element is set forth in some definitions as the 'general welfare' the 'welfare of the public', the 'public goods', the 'public benefit' or 'public utility or necessity.'
It must be admitted, despite the logical accuracy of the foregoing definition and despite the fact that the payment of compensation is not an essential element of the meaning of eminent domain, that it is an essential element of the valid exercise of such power. Courts have defined eminent domain so as to include this universal limitation as an essential constituent of its meaning. It is much too late in the historical development of this principle to find fault with such judicial utterances. The relationship between the individual's right to compensation and the sovereign's power to condemn is discussed in Thayer's cases on Constitutional Law. 'But while this obligation (to make compensation) is thus well established and clear let it be particularly noticed upon what ground it stands, via., upon the natural rights of the individual. On the other hand, the right of the state to take springs from a different source, viz., a necessity of government. These two, therefore, have not the same origin; they do not come, for instance, from any implied contract between the state and the individual, that the former shall have the property, if it will make compensation; the right is no mere right of pre-emption, and it has no condition of compensation annexed to it, either precedent or subsequent. But, there is a right to take, and attach to as an incident, an obligation to make compensation; this latter, morally speaking, follows the other, indeed like a shadow, but it is yet distinct from it, and flows from another source'.
.......................... (4) Conclusion :
Accordingly, it is now generally considered that the power of eminent domain is not a property right, or an exercise by the state of an 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. II, explains the same in these words :
'The right of the state to its public property or domain is absolute, and excludes that of its own subjects as well as other nations. The national proprietary right, in respect of those belonging to private individuals, or bodies, corporate, within its territorial limits, is absolute so far as it excludes that of other nations; but in respect to the members of the State, it is paramount only, and forms what is called the eminent domain; that is the right, in case of necessity or for the public safety, of disposing of all the property of every kind within the limits of the State.'
In Charanjit Lal Chowdhury v. The Union of India : 1SCR869 Mukherjea, J. (as His Lordship then was) while examining the scope and ambit of article 31 of the Constitution that was part of our Constitution, then, has stated on the subject thus :
'(48) It is a right inherent in every sovereign to take and appropriate private property belonging to individual citizens for public use. This right, which is described as eminent domain in American law, is like the power of taxation, and of spring of political necessity, and it is supposed to be based upon an implied reservation by Government that private property acquired by its citizens under its protection may be taken or its use controlled for public benefit irrespective of the wishes of the owner.'
In State of Karnataka v. Ranganatha Reddy : 1SCR641 the Supreme Court reversing the decision of this Court and upholding the validity of the Karnataka Contract Carriages (Acquisition) Act, 1976 has ruled hat the power of acquisition can be exercised both in respect of immovable and movable properties of every kind.
41. The Statement of Objects and Reasons accompanying the bill that ultimately became the Coffee Act, sets out the objects in these words :
'1. After the outbreak of the present war the Indian Coffee industry lost certain important foreign markets. There was therefore a great slump in the prices of coffee. A Coffee Control Conference consisting of the interests affected was held in September, 1940 to consider the steps that could be taken to save industry from collapse. After full consideration of the recommendations made at the Conference, the Coffee Market Expansion Ordinance, 1940, was promulgated providing for the necessary assistance to the Indian Coffee Industry by regulating the export of coffee from, and the sale of coffee 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 by legislation, and the present Bill is designed to achieve this object.'
The Coffee Act has been enacted to regulate development of Coffee Industry in the country. The avowed object of the Coffee Act is not to acquire coffee grown by the growers and vest the same in the Board for distribution for a public purpose.
42. The Board is chosen as the instrumentality for the administration of the Coffee Act. In reality the Board is only a statutory trading or commercial organisation which becomes apparent from section 7 of the Coffee Act and rule 8 of the Coffee Rules, 1955 ('the Rules') which provide for the establishment of a 'propaganda committee', a 'marketing committee', a 'research committee', a 'development committee' and a 'Coffee quality committee'.
43. The Coffee Act does not compel a person to become a grower. But when a person becomes a grower then he is required to register himself as a grower, file returns and deliver or sell the coffee grown by him to the Board with a guarantee or right to receive payment of its value or price from the Board [vide section 25(6) of the Coffee Act].
44. Section 11 and 12 of the Coffee Act regulate the levy and payment of customs and excise duties on the coffee produced and exported from the country and the manufacturing process. Both these duties are levied on the growers and are payable by them to Central Government which, however, is free to repay them to the Board for development of coffee industry in the country. These provisions when closely examined really establish that what is grown by growers and delivered to Board was not at all compulsory acquisition but was a sale. If it was compulsory acquisition and there was payment of compensation, then these provisions would not have found their place in the Act at all. We need hardly say that levy of customs and excise duties on compensation is something unheard, an incongruity and an anchronism. The obligation to pay these duties or taxes to government are consistent with the concept of sale to the Board and are clearly inconsistent with the concept of compulsory acquisition at all.
45. Section 15 of the Act empowers the Central Government to control the sale price of coffee in the country. Sections 27 to 29 regulate the curing of coffee. Section 30 provides for creation of two funds called a general fund and a pool fund. Section 34 of the Act and the subsidiary rules in great details 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 closely examine section 17 and 25 of the Coffee Act, which are the fulcrum of the case urged by the Board before us and they read thus :
'Control of sale, export and re-import of coffee
* * * 17. No registered owner shall sell or contract to sell in the Indian market coffee from any registered estate if by such sale the internal sale quota allotted to that estate is exceeded. Nor shall a registered owner sell or contract to sell in the Indian Market any coffee produced on his estate in any year for which no internal sale quota is allotted to the estate.
25. (1) All coffee produced by a registered estate in excess of the amount specified in the internal sale quota allotted to that estate or when no internal sale quotas have been allotted to estates, all coffee produced by the estate shall be delivered to the Board for inclusion in the surplus pool by the owner of the estate or by the curing establishment receiving the coffee from the estate :
Provided that where no internal sale quotas have been allotted to estates, the Chairman may allow the owner of any estate to retain with himself for purposes of consumption by his family and for purposes of seed, such quantity of coffee as the Chairman may think reasonable :
Provided further that where the Central Government is satisfied that it is not practicable for any class of owners producing coffee in any specified area, to comply with the provisions of this sub-section on account of the small quantity of coffee produced by them or on account of their estates being situated in a remote locality, the Central Government may, by notification in the Official Gazette; exempt such class of owners from the provisions of this sub-section.
(2) Delivery shall be made to the Board in such places at such times and in such manner as the Board may direct, and such directions may provide for partial delivery to the surplus pool at any time whether or not at that time the internal sale quota has been exceeded; and the coffee delivered shall be such as to represent fairly in kind and quality the produce of he estate. The Board may reject any consignment offered for delivery which does not satisfy this requirement, but shall not reject any consignment merely for a defect in curing.
(3) Coffee delivered for inclusion in the surplus pool shall upon delivery to the Board remain under the control of the Board which shall 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 provisions made in this part of this section only aids in fulfilling the obligations of internal sale quota system by growers, which as noticed earlier, has not been in operation for about 40 years. From this it follows that the first part of section 17 of the Coffee Act has really no relevant to decide the question.
48. The second part of section 17 deals with that situation when internal sale quota system is not in operation by prohibiting the grower from selling to any other person other than the Board. This prohibition or compulsion on the grower to sell coffee only to the Board and no other created in this section by itself or in conjunction with other provisions of the Act does not make the coffee delivered by the grower as one in the process of 'compulsory acquisition' or 'eminent domain', the true import of which we have earlier noticed.
49-1. Section 25(1) requires a grower to deliver all coffee grown by him to the Board for inclusion in the surplus pool. The two provisions appended to section 25(1) are not material for our purpose. Section 25(2) empowers the Board to direct a grower to deliver in whole or in part coffee grown by him at such time and place as may be directed in that behalf. But, such delivery by the grower should fairly represent in kind and quality for which directions are issued by the Board. By this the Board is empowered to procure coffee from growers of the required quality and quantity at such intervals and places as is found necessary for its ultimate marketing operations of coffee in the country and abroad. The last part of section 25(2) empowers the Board to reject any consignment offered for delivery that does not satisfy its earlier directions. But, that power of rejection cannot be exercised for defects in curing over which the grower has really no control. In respect of all coffee delivered sections 25(2) and 25(3) of the Act makes the Board responsible for its storage, curing and marketing of coffee.
49-2. Section 25(4) empowers the Board to prepare differential scales for the valuation of coffee on the basis of the quality and quantity and make payment to the growers. Section 25(5) empowers the Board to treat any coffee delivered by a registered owner as if it is delivered by him with reference to the registered estate owned by him. Section 25(6) declares that when coffee has been delivered, the grower ceases to be the owner of such coffee and 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 the purpose.
50. Section 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 section 17 and 25 in particular vis-a-vis the true principles of compulsory acquisition or eminent domain we find it difficult to hold that on compulsory delivery by growers to the Board, there would be compulsory acquisition of coffee by the Board and any such conclusion, to borrow the inimitable language of Viscount Simonds in Kirkness (Inspector of Taxes) v. Johnson Hudson and Company Limited  AC 696, would be 'a grave misuse of language'.
52. Before examining the Australian enactments and the cases of the Australian High Court on which great reliance was placed by Sri Nariman, it is well to remember a note of warning administered by the judicial committee of the Privy Council in Ezra v. Secretary of State 30 Cal 36 and Imambandi v. Mutsaddi 45 Cal 878 in replying on foreign decisions. In Imambandi's case 45 Cal 878 their Lordships expressed thus :
'Their Lordships cannot help deprecating the practice which seems to be growing in some of the Indian Courts of referring largely to foreign decisions. However useful in the scientific study of comparative jurisprudence, judgments of foreign Courts, to which Indian practitioners cannot be expected to have access, based often on considerations and conditions totally differing from those applicable to or prevailing in India, are only likely to confuse the administration of justice.'
In the matter of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 Sir Maurice Gwyer, C.J., on the same topic expressed thus :
'The decisions of Canadian and Australian Courts are not binding upon us, and still less those of the United States, but, where they are relevant, they will always be listened to in this Court with attention and respect, as the judgments of eminent men accustomed to expound and illumine the principles of a jurisprudence similar to our own; and if this Court is so fortunate as to find itself in agreement with them, it will deem its own opinion to be strengthened and confirmed. But there are few subjects on which the decisions of other Courts require to be treated with greater caution than that of federal and provincial powers, for in the last analysis the decision must depend upon the words of the Constitution which the Court is interpreting; and since no two Constitutions are in identical terms, it is extremely unsafe to assume that a decision on one of them 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 : 1SCR491 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 : 1SCR809 , 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 wearing, we nor proceed to examine the ruling of the Australian High Court.
53. In State of New South Wales v. Commonwealth 20 CLR 54 referred to as Wheat case, the High Court of Australia was examining the validity of the Wheat Acquisition Act of 1914 enacted by the State of New South Wales as violative of section 92 of the Australian Constitution that guaranteed inter-State freedom, trade and commerce in Australia. As the very title of that Act and its material provisions show that that Act in express terms and in substance provided for acquisition of wheat grown in the State of New South Wales. The Coffee Act is not in pari materia with the Wheat Acquisition Act, and therefore, the principles stated in Wheat case, which appears to have considerably influenced the later rulings of that Court in dealing with the regulatory measures do not bear on the construction of the Coffee Act and the question that arises before us.
54. In Peanut Board v. Rockhampton Harbour Board 48 CLR 266 referred to as Peanut Board's case, the High Court of Australia in examining an appeal filed by that Board against the decision of the Supreme Court of Queensland that had dismissed its suit on the facts narrated at pages 267 of 169 of the report, had to construe the scope and ambit of the Primary Producers' organization and Marketing Act of 1926 of New South Wales and an Order made thereunder and its validity or otherwise with reference to section 92 of the Australian Constitution. On the scope and ambit of that Act, that has relevance, Rich, J., with whom the learned Chief Justice concurred expressed thus :
'It therefore remains only to consider whether the operative instruments affecting to deal with peanuts do or do not interfere with the freedom of inter-State trade. This should be done weighing compulsory acquisition as a matter perhaps characterizing the enactments, but not of necessity determining their effect. The feature which at once challenges attention is that these instruments provides a means of marketing. They are concerned with establishing a compulsory pool through which growers producing peanuts for sale must dispose of their product for distribution and receive their reward. The pith and substance of the enactments is the establishment of sale and distribution of the proceeds of the total crop and the concomitant abolition of the grower's freedom to dispose of his product voluntarily 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 to borrow upon the whole crop may afford an advantage, it not an incentive, in the concentration of the 'commodity' in the hands of one marketing authority. But, the weight attached to supposed advantages arising from the policy adopted in these enactments is not material. What is material is whether the scope and object of the enactments as gathered from their contents are to deal with trade and commerce including inter-State trade and commerce. In examining this question one cannot fail to observe that compulsory acquisition is resorted to as a measure towards ensuring that the whole crop grown in Queensland is available for collective marketing by the central authority. The case is not one in which a State seeks to acquire the total production of something it requires for itself and its citizens. It is interposing in the course of trade in the 'commodity' an organization established for the purpose of carrying out one of the functions of trade. In my opinion the enactment controls directly the commercial dealing in peanuts by the grower and aims at, and would, apart from section 92, accomplish, the complete destruction of his freedom of commercial disposition of his product. Part of this freedom is guaranteed by section 92. Accordingly the Primary Producers' Organization and Marketing At, 1926-1930 and the Order in Council thereunder are ineffectual to prevent the grower of peanuts from disposing of them in inter-State trade and commerce and the appellant Board had no title to the peanuts the subject-matter of this action.'
Starke, Dixon and McTiernan, JJ., in their separate opinions concurred with Rich, J., expressing themselves thus :
'The policy of the Act is doubtless to preserve and protect primary producers in Queensland, but the method adopted for achieving that policy, as gathered from the words of the Act itself, is the compulsory regulation and control of all trade, domestic, inter-State and foreign. The volume of trade is not restricted, but the producers are restricted, and are prevented from engaging in inter-State and other trade in peanuts. Their peanuts are compulsorily taken from them for that purpose, pooled, and the disposal thereof placed in the hands and under the control of the Board. It is a compulsory marketing scheme, entirely restrictive of any freedom of action on the part of the producers. The Act confers the power of acquisition 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  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 Queensland during the period for which it was to operate, to prevent all persons other than the Board from buying or selling peanuts, to give it the exclusive right to engage in trade and commerce in peanuts whether inter-State, intra-State, or overseas, to make it unlawful for any other person to engage in this trade and commerce, to regulate the manner in which the Board should conduct its business and to require it to account to the growers for the profits it derived from the sale of the commodity which it acquired from them.' (Per McTiernan, J.)
Evatt, J., who dissented on the violation or otherwise of the Order made under the Marketing Act with section 92 of the Australian Constitution, that being the question that arose for decision in that case, however, really concurred with the majority on the scope and ambit of that Act by expressing thus :
'The general nature of the scheme disclosed by the Act and Order in Council is to induce co-operation in an industry the maintenance of which is considered essential by the Queensland Parliament and Government. The initiative lies with the growers and compulsion is introduced only under conditions which ensure that the will of the majority shall be carried into effect. The entire product is pooled and then sold by an authority which is directly representative of the producers, but, is assisted by a government expert. This system of pooling is well known in the States of Australia, and has been employed for many years. Without it, the individual grower may receive little reward for his labours, and may even be unable to continue producing at all. With it, however, the pooled product facilitates financing over a lengthy period, and the industry and those dependent upon it may be saved from disaster.
In the case of the Peanut Board there are three outstanding features of the scheme of control. One is the vesting of the commodity in the Board as owner. As has been seen, this is not made an essential of every marketing board. The second feature is the period of control which in this special case extend over a period of ten years. This long period makes the scheme bear, very definitely, the aspect of a regulation of the industry itself, each person proposing to produce the commodity well knowing that his reward will be dependent upon an extended operation of the pooling system. The third feature is the complete absence from the scheme of any intention to discriminate against, or specially concern 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 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 : 1SCR671 the Supreme Court dealing with the U.P. Wheat Procurement (Levy) Order, 1959 which compelled the dealers to deliver 50 per cent. of the stocks to Government expressed that it was a case of acquisition and therefore, it was not exigible to sales tax under the U.P. Sales Tax Act, 1948. But, that is not the position in the present cases and the ratio in that case to the extent it is not overruled in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer : 2SCR433 does not bear on the point. On this very conclusion, it is hardly necessary to examine the Full Bench ruling of the Punjab and Haryana High Court in Krishna Rice Mills, Ambala Cantt. v. State of Haryana  47 STC 182 (FB); (FB) in which that Court has only held that the enunciation in Chittar Mal Narain Das' case : 1SCR671 is still good law. In Bagalkot Udyog Limited v. State of Karnataka  43 STC 352 a Division Bench of this Court dealing with the liability of a dealer compelled to deliver cement to State Trading Corporation under the Cement Control Order distinguished Chittar Mal Narain Das' case : 1SCR671 , as we have done here.
57. In First Coffee Board's case  5 STC 292 the Madras High Court rejecting the claim of the board that it was not a dealer in the sale of coffee procured from growers referring to Peanut 48 CLR 266 and Milk Board's 62 CLR 116 cases expressed thus :
'The object of such Acts is to provide means for obtaining what is thought to be the proper price for the produce and for benefiting consumers from being charged what were thought to be excessive prices.
* * * The petitioner's learned counsel attempted to distinguish the Australian cases on the ground, that the Acts under consideration in those cases expressly vested the product in the Board, whereas there is no such express provision in the Coffee Market Expansion Act. We do not think that this really alters the situation. The effect of the provisions of the Act does undoubtedly vest the coffee in the Board, as it is expressly provided in the Act that after delivery to the pool the registered owner has no other right except to partake in he distribution of the sale proceeds of the pool. The function of the Board and its legal position are in out opinion undoubtedly those of a seller of goods which are owned by it and which are vested in it absolutely. As in the case of the statutory Board 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 : 2SCR433 had no application at all.
60. Sri Hegde refuting the contention of Sri Nariman has urged that in the compulsory sales and purchases under the Coffee Act, there was consensuality and therefore, the Board was exigible to purchase tax under section 6 of the Act as held by the Supreme Court in Vishnu Agencies' case.
61. We first consider it useful to deal with the applicability or otherwise of Vishnu Agencies' case : 2SCR433 .
62. In Vishnu Agencies' case a larger Bench of seven learned Judges dealt with compulsory sales and their exigibility to sales tax under the West Bengal Cement Control Act, 1948 analogous to the Cement Control Order and the Andhra Pradesh Paddy Procurement (Levy) Order under the Essential Commodities Act. Sri Nariman is right that in Vishnu Agencies' case the Supreme Court was dealing with essential commodities that are generally in short supply, their distribution and their ultimate exigibility to taxes under the Sales Tax Acts in the country and had no occasion to deal with the Coffee Act which is an unique Act with no comparison in the country.
63. In its 61st report submitted to Government of India on 21st May, 1974 the Law Commission of India then presided over by Mr. Justice Gajendragadkar, retired Chief Justice of India, in Chapter-lC deals with sale of controlled commodities. In that report the Law Commission could not deal with the later decision rendered by the Supreme Court on 16th December, 1977 in Vishnu Agencies' case though the same has referred to the decision rendered by Salil Kumar Datta, J., reported in 77 CWN 141, which was obviously in appeal before a Division Bench of that Court, out of which the appeal before the Supreme Court ultimately arose.
64. We are of the view that the ruling of the Supreme Court in Vishnu Agencies' case : 2SCR433 deals with cases of compulsory sales governed by one or the other law in the country and does not restrict itself to cases of only controlled commodities that are in short supply. In his separate but concurring opinion that is how Beg, C.J., deals with the matter and has examined the question. We are of the view that the distinction made by Sri Nariman to persuade us that the principles enunciated in Vishnu Agencies's case : 2SCR433 had no application is without a difference. We must, therefore, proceed to examine 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 : 1SCR379 the correctness of which was only doubted but not overruled in Vishnu Agencies' case : 2SCR433 , which is also the basis of that very decision, at any rate, governs these cases.
66. In Gannon Dunkerley and Company's case : 1SCR379 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 : 2SCR433 the Supreme Court has proceeded to examine compulsory sales on this basis only. We must, therefore, proceed to examine the same on that basis only.
67. In New India Sugar Mills Limited v. Commissioner of Sales tax, Bihar : AIR1963SC1207 Hidayatullah, J. (as his Lordship then was), in his dissenting opinion has traced the law of sales tax from the earliest times to the modern times, the constitutional provisions made in the Government of India Act, 1935 in that behalf that found their way in the new Constitution of the country, with which the Supreme Court in Vishnu Agencies' case : 2SCR433 has expressed its approval. We must keep that opinion of Hidayatullah, J. (as his Lordship then was) at the forefront. In Andhra Sugars Limited v. State of Andhra Pradesh : 1SCR705 an unanimous Constitution Bench of the Supreme Court speaking through Bachawat, J., that had earlier decided the Indian Steel and Wire Products Limited v. State of Madras : 1SCR479 treating the majority decision in New India Sugar Mills Limited's case : AIR1963SC1207 as only a decision on the facts of that case, expressed thus :
'(4) Under section 4(1) of the Indian Sales of Goods Act, 1930 a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. By section 3 of the this Act, the provisions of the Indian Contract Act, 1872 apply to contracts of sale of goods save in so far as they are inconsistent with the express provisions of the later Act. Section 2 of the Indian Contract Act provides that when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal. When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal when accepted becomes a promise. Every promise and every set of promises forming the consideration for each other is an agreement. There is mutual assent to the proposal when the proposal is accepted and in the result and agreement is formed. Under section 10, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not by the Act expressly declared to be void. Section 13 defines consent. 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 section 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 compulsion, 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 object and is not void under any provisions of law. The agreements are enforceable by law and are contracts of sale of sugarcane as defined in section 4 of the Indian Sales of Goods Act. The purchases of sugarcane under the agreement can be taxed by the State Legislature under entry 54, List II.
(5) Long ago in 1702, Holt, C.J., said in Lane v. Cotton (1701) 1 Id R 646; 91 ER 17 :
'When a man takes upon himself a public employment, he is bound to serve the public as far as his employment goes, or an action lies against him for refusing.' The doctrine that one who takes upon a public employment is bound to serve the public was applied to innkeepers and common carriers. Without lawful excuse, an innkeeper cannot refuse to receive guests at his inn, and a common carrier cannot refuse to accept goods offered to him for carriage : see Halsbury's Laws of England, 3rd Edn., Vol. 4, Article 375 and Vol. 21, Article 938. A more general application of the doctrine was arrested by the growth of the principle of laissez faire which had its heyday in the mid-nineteenth century. Thereafter, there has been a gradual erosion of the laissez faire concept. It is now realised that in the public interest, persons exercising certain calling or having monopoly or near monopoly powers should sometimes be charged with the duty to serve the public, and, if necessary, to enter into contracts. Thus section 66 of the Indian Railways Act, 1890 compels the railway administration to supply the public with tickets for travelling on the railway upon payment of the usual fare. Section 22 of the Indian Electricity Act, 1910 compels a licensee to supply electrical energy to every person in the area of supply on the usual terms and conditions. Cheshire and Fifoot in their Law of Contract, Sixth Edn., page 23, observe that for reasons of social security the State may compel persons to make contracts. One of the objects of Act No. 45 of 1961 is to regulate the purchase of sugarcane by the factory owners from the cane growers. The cane growers scattered in the villages had no real bargaining power. The factory owners or their combines enjoyed a near monopoly of buying and could dictate their own terms. In this unequal contest between the cane growers and the factory owners, the law stepped in and compelled the factory to enter into contracts of purchase of cane offered by the cane 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, : 1SCR479 , 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 thought 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 treated as an authority for the proposition that there can be no contract of sale under compulsion of a statute. It depends upon the facts of each case and the terms of the particular statute regulating the dealing whether the parties have entered into a contract of sale of goods.'
In Vishu Agencies' case : 2SCR433 the Supreme Court overruling the majority decision in New India Sugar Mills Limited's case : AIR1963SC1207 and expressing its concurrence with the minority opinion of Hidayatullah, J. (as his Lordship then was), the exposition in Indian Steel and Wire Products Limited's : 1SCR479 , Andhra Sugars Limited's : 1SCR705 nd Salar Jung Sugar Mills Limited v. State of Mysore : 2SCR228 cases, has ruled that consensuality was not excluded in compulsory sales and purchases regulated by law. On the factors that should guide in deciding such consensuality, mutual assent or bargain, the Court has expressed thus :
'32. These limitations on the normal right of dealers and consumers to supply and obtain th goods, the obligations imposed on the parties and the penalties prescribed by the Control Order do not, in our opinion, militate against the position that eventually, the parties must be deemed to have completed the transactions under an agreement by which one party bound itself to supply the stated quantity of goods to the other at a price not higher than the notified price and the other party consented to accept the goods on the terms and conditions mentioned in the permit or the order of allotment issued in its favour by the concerned authority. Offer and acceptance need not always be in an elementary form, nor indeed does the Law of Contract or of Sale of Goods require that consent to a contract must be express. It is common place with offer and acceptance can be spelt out from the conduct of the parties which covers not only their acts but omissions as well. Indeed, on occasions, silence can be more eloquent than eloquence itself. Just as correspondence between the parties can constitute or disclose an offer and acceptance, so can their conduct. This is because, law does not require offer and acceptance to conform to any set pattern or formula.
33. In order, therefore, to determine whether there was any agreement or consensuality between the parties, we must have 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 the 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, thought both parties are bound to comply with the legal requirements governing the transactions, they agree as between themselves to enter into the transaction on statutory terms, one agreeing to supply the commodity to the other on those terms and the other agreeing to accept it from him on the very terms. It is, therefore, not correct to say that the transactions between the appellant and the allottees are not consensual. They, with their free consent, agreed to enter into the transactions.
34. We are also of the opinion that though the terms of the transaction are mostly predetermined by law, it cannot be said that there is no area at all in which there is no scope for the parties to bargain.
* * * 38. Hidayatullah, J., who delivered a dissenting opinion, observed after reviewing the position both under the English and the Indian law, that though it was true that onsent makes a contract of sale, such consent 'may be express or implied and it cannot be said that unless the offer and acceptance are there in an elementary form, there can be no taxable sale'. Taking the view that on obtaining the necessary permit, the sugar mills on the one hand and the Government of Madras on the other agreed to 'sell' and 'purchase' sugar could admit of no doubt, the learned Judge said that when the Province of Madras after receiving the permit, telegraphed instructions to despatch sugar and the mills despatched it, 'a contract emerged and consent must be implied on both sides though not expressed antecedently to the permit'. The Controller brought the seller and the purchaser together, gave them permission to supply and receive sugar leading thereby to an implied contract of sale between the parties. The learned Judge accepted that there was an element of compulsion in both selling and buying perhaps more for the supplier than for the receiver, but, according to him, 'a compelled sale is nevertheless a sale' and 'sales often take place without volition of a party'. The learned Judge summed up the matter pithily thus : 'So long as the parties trade under controls at fixed price and accept these as any other law of the realm because they must, the contract is at the fixed price both sides having or deemed to have agreed to such a price. consent under the law of contract need not be express, it can be implied ......... The present is just another example of an implied contract with 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 goods 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 Chittar Mal : 1SCR671 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 (at page 348 of STC, 2004 of AIR). 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 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 : AIR1970All518 (FB) 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 effected under compulsion of a statute. Looking at the scheme of the U.P. Wheat Procurement Order, particularly clause 3 thereof, this Court in Chittar Mal seems to have concluded that the transaction was, in truth and substance, in the nature of compulsory acquisition, with no real freedom to bargain in any area. Shah, J., expressed the Court's interpretation of clause 3 in no uncertain terms by saying that 'it did not envisage any consensual arrangement'.
* * * 49. This resume of cases, long as it is, may yet bear highlighting the true principle underlying the decisions of this Court which have taken the view that a transaction which is effected in compliance with the obligatory terms of a statute may nevertheless be a sale in the eye of a law.
* * * But, as observed by Hidayatullah, J., in his dissenting judgment in that case, consent may be express or implied and offer and acceptance need not be in an elementary form : AIR1963SC1207 . It is interesting that the General Editor of the 1974 edition of 'Benjamin's Sale of Goods' says in the preface that the editors decided to produce an entirely new work party because commercial institutions, modes of transport and of payment, forms of contract, types of goods, market areas and marketing methods, and the extent of legislative and governmental regulation and intervention, had changed considerably since 1868, when the 1st edition of he 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 : 1SCR705 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 : 1SCR479 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.  Ch 376 the Court of Appeal, which 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 the statute imposed on him, fictional though it may be, that a sale may not always require the consensual element mentioned in Benjamin on Sale, 8th edition, page 2 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 (pages 405-406). Decisions in cases of 'compulsory acquisition', where such acquisition is patent as in Kirkness  AC 696 or is inferred as in Chittar Mal : 1SCR671 fall in a separate and distinct class. The observations of Lord Reid in Kirkness that 'sale' is a nomen juris - the name of a particular consensual contract - have therefore to be understood in the context in which they were made, namely, that compulsory acquisition cannot amount to sale. In Gannon Dunkerley : 1SCR379 , Venkatarama Aiyar, J., was influenced largely by these observations (see pages 375, 376 of STC, 577 of AIR) and by the definition of 'sale' in Benjamin's 8th edition. Gannon Dunkerley involved an altogether different point and is not an authority for the proposition that there cannot at all be a contract of sale if the parties to a transaction are obliged to comply with the terms of a statute. Since we are putting in a nutshell what we have discussed earlier, we would like to reiterate in the interest of uniformity and certainty of law that, with great deference, the majority decision in New India Sugar Mills : AIR1963SC1207 is not good law. The true legal position is as is stated in the minority judgment in that case and in Indian Steel and Wire products : 1SCR479 , Andhra Sugars : 1SCR705 , Salar Jung Sugar Mills : 2SCR228 and Oil and Natural Gas Commissioner : 1SCR354a .....'
What emerges from this ruling is that there must be an element of consensuality even in compulsory sales governed by law and if there is an element of consensuality however minimal that may be, which can be express or implied, then that would be a sale or purchase for purposes of the Sales of Goods Act and the same would be exigible to sales or purchase tax as the case may be under the relevant sales tax law of the country.
68. Sri Nariman has also relied on paras 69 to 70 of Benjamin's Sale of Goods (latest edition) dealt under caption 'compulsory 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 : 2SCR433 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 Justice of the same author on the topic 'Traditional legal restraints on abstract liberty in order to secure liberty of contract' pages 96 and 97 of Chapter 3 'Metaphysical Individualism'; and (3) Seervai Constitutional Law of India, Vol. II, 3rd edition, paras 22-34 to 22-83 (pages 1913 to 1951) which without any doubt considerably weaken the accuracy of the statements found in Benjamin's Sale of Goods or at least call for modification in their application to the present day conditions in our country. We must, therefore, proceed to examine with reference to the law of our country as declared by the Supreme Court only but however, steering clear of controversies raised by eminent authors like Seervai, which we now proceed to do.
70. The Coffee Act does not compel a person to become a grower and grow coffee against his will or volition. A person is free to become a grower of coffee or not. When a person becomes a grower of coffee which is within his own volition, he however becomes a grower subject to the provisions of the Coffee Act. What is true of a new entrant is also true of those that were growing coffee on the day the Coffee Act came into force and have continued thereafter as growers. In other words, every one agrees or undertakes to grow coffee in the country subject to the regulatory provisions of the Coffee Act. This volition exercised by the growers of coffee is analogous to the volition exercised by a person when he decides to become a trader in controlled commodities. On principle, form and substance, this volition exercised by both is one and the same and it is not possible to distinguish one from the other.
71. But, Sri Nariman has urged that the volition exercised by the grower was irrelevant and that in the trading activity of the grower, the Coffee Act leaves him no choice at all.
72. What is necessary to ascertain in all cases of compulsory sales is whether there was an element of consensuality in such sales at one or the other stage of the same. When so examined as that should be, we find no merit in this connection of Sri Nariman.
73. Section 25(2) of the Coffee Act empowers the Board to reject any coffee offered for delivery contrary to any of the directions given by it except for a defect in curing. We are of the view that this power conferred on the Board or even the right of a buyer analogous to section 37 of the Sales 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 Sir 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 Coffee Act extinguishes his title and absolutely vests the same in the Board, however, preserving his right for payment of its value or its price thereof in accordance with the provisions of that Act. The amount paid by the Board to the grower under the Act is the value or price of coffee in conformity with the detailed accounting done thereto under the Coffee Act. The amount paid to the grower is neither compensation nor dividend. The payment of price to the grower is an important element to determine the consensuality in the sale and the sale itself under section 4(1) of the Sales of Goods Act.
78. Section 34(2) of the Coffee Act confers a right on a grower to opt for immediate payment of the price of coffee delivered by him. The fact that growers have not exercised that right so far or are not likely to exercise that right has no relevance on the nature of the right conferred by the Coffee Act. The Act also ensures periodical payments of price to the growers. The Rules provide for advancing loans to growers. Without a shadow of doubt these elements lead us to hold that in the compulsory sale of coffee, there was an element of consensuality.
79. We are of the view that the aforesaid that important elements each one by itself or in combination without even reference to various other elements detailed by the learned Advocate-General clearly establish consensuality in the compulsory sale or purchase under the Coffee Act and the purchases made by the Board fall within the ratio of Vishnu Agencies' case : 2SCR433 .
80. In Bhavani Tea Produce Company Limited's case : 59ITR254(SC) a Constitution Bench of the Supreme Court had to examine whether the coffee grown and delivered by Bhavani Tea Produce Company Limited prior to 1st April, 1955 which maintained its accounts in mercantile system of accounting was exigible or not to agricultural income-tax under the Madras Plantations Agricultural Income-tax Act (Madras Act 5 of 1955) later titled as the Madras Agricultural Income-tax Act. In deciding that the Court framed the very question that arises for our determination examined all the provisions of the Coffee Act and in particular section 17 and 25 of that Act and answered the same in these words :
'....... Was there a sale to the Coffee Board The answer must be in the affirmative. The Coffee Board is neither a trustee nor even an agent of the planter. It is not accountable to the owner, except as to payment for coffee received and valued according to the differential price. 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 a cash system income would be taxable when actually received but in the mercantile system it would be taxable in the year in which the relevant entry is made about the sale of coffee to the Coffee Board.'
We are of the view that this enunciation is a complete answer to the contention urged for the petitioner and the same cannot be distinguished on any principle at all.
81. In Puthutotam Estates (1943) Limited v. Agricultural Income-tax Officer : 45ITR86(Mad) a Division Bench of the Madras High Court consisting of Rajamanner, C.J., and Jagadisan, J., had to consider the same question that arose in Bhavani Tea Produce Company Limited's case on similar facts. In answering that question, the Court speaking through Rajamannar, C.J., expressed thus :
'The cases now before us all relate to agricultural income from coffee plantations. Coffee is grown on the land and the berries collected and they are delivered to the Coffee Board. That delivery is in pursuance of a statutory sale. The sale proceeds therefore constitute the income. As the learned Advocate-General put it, the taxable event is the conversion of the coffee produce into money. This kind of income will fall under section 2(a)(2)(ii) of the Act, that is, it is income derived from land in the State by the sale by a cultivator of the produce raised by him. Now it is obvious that the transaction of sale takes place when the produce is delivered to the Coffee Board. The price is tentatively fixed at the time but it is liable to adjustment subsequently. Often it takes time before the entire sale price is realised.'
With these principles the Supreme Court in Bhavani Tea Produce Company Limited's case : 59ITR254(SC) has expressed its occurrence. In Amalgamated Coffee Estate Limited v. State of Kerala : 45ITR353(Ker) the Kerala High Court concurring with the views expressed by the Madras High Court in Puthutotam Estates' case : 45ITR86(Mad) has taken a similar view with which also he Supreme Court has expressed its concurrence in Bhavani Tea Produce Company Limited's case.
82. In the First Coffee Board's case  5 STC 292 the Court dealt with the taxability or otherwise of the Board under the Madras General Sales Tax Act of 1939 (Madras Act IX of 1939) that was then in force analogous to the KST Act. In that case the Court speaking through Satyanarayana Rao, J., examining the Madras 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 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 purchase tax under section 6 of the Act.
86. We first consider it useful to broadly notice the coffee deliveries to the Board and their exports from this country.
87. All coffee compulsorily delivered by the growers in the country to the board without reference to the rival contentions urged before us, which we have earlier dealt, which is unnecessary to repeat, are pooled by the Board by storing the same at one or the other storing centres in the country. At the stage of pooling or initial purchase with which only we are concerned coffee is not purchased for internal or external or export sales. All the coffee so pooled is not earmarked or specified for intra-State, inter-State or export sales. All the pooled coffee is graded and their sale in and outside the country are then regulated by the Board. The Board sells considerable quantities to authorised exporters under a tightly regulated system called 'export auctions' and those auction purchaser export the same in terms of prior agreements with foreign buyers. In addition to all these the Board directly exports considerable quantities of coffee to foreign buyer from out of the pooled coffee. But, in all this, the Board does not purchase or take delivery of any specific coffee or goods of any grower and export the same under prior contracts of sale. The Board does not purchase any specific coffee of any specific grower for purchase of direct exports at all. In the very nature of things that is not also possible to do for the Board. With this brief analysis of the operations which necessarily include direct exports by the Board, we will examine whether such direct export sales earn the exemption from payment of purchase tax under article 286 of the Constitution of India or not.
88. Article 286 of the Constitution that places certain restrictions on the taxing power of State, in the course of imports, exports and inter-State sales empowers Parliament to formulate the principles for determination on all of them and levies to be made thereon. The CST Act enacted by the Parliament after the 4th Amendment to the Constitution formulates the principle for determining in the course of import of goods into and export of goods out of the territory of India.
89. In Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras : 3SCR147 (to be hereafter referred to as Second Coffee Board'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. There in 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 'occasion' 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 export' or 'during export'. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two, for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer.
Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer.
The course of export may be established by agreement or by force of law. To be the former the agreement between the seller and the buyer must envisage an export out of India who then become exporter and importer respectively. By force of law a person selling the goods may be compelled to sell them only in an export sale but that too is not essentially different from the first. In either case there is a seller and a buyer who by reason of the sale also become exporter and importer respectively. Any other buyer who is not himself the importer buys for export even if export ultimately results. It is to bring out these results that Parliament has recognised only two cases of sale in the course of import : (a) where the sale is effected by a transfer of documents of title to goods after the goods have crossed the customs frontiers that is to say the goods are already on the way to the importer and (b) when the sale itself causes the export to take place that is to say the exporter and importer negotiate and complete a sale which without more would result in the export of the goods. No other sale can quality for the exemption under section 5(1) read with article 286(1)(b).'
These principles again reiterated in Mohd. Serajuddin v. State of Orissa  36 STC (SC) in any event, decidedly govern the period of assessments prior to 31st March, 1976. On these principles 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 quality for exemption provided by article 286 of the Constitution.
90. In Consolidated Coffee Limited v. Coffee Board, Bangalore : 3SCR625 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 : 3SCR147 and the Mohd. Serajuddin's case : AIR1975SC1564 . 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 meaning of section 5(1) on the ground there were two sales, one by the Coffee Board to the intermediary (registered exporter) and the other by the intermediary to the importer and that the first sale was not 'in the course of export' for the export began from the intermediary and ended with the importer and that the introduction of the intermediary (registered exporter) between the seller (Coffee Board) and the importing buyer broke the link. This Court laid down the test that there must be a single sale which itself caused the export and there was no room for two or more sales being 'in the course of export'. In other words, notwithstanding the compulsion to export arising from clauses 26, 30 and 31 of the auction conditions the penultimate sale was held to be not in the course of export. The latter case [Mohd. Serajuddin's case : AIR1975SC1564 ] was stronger than the Coffee Board's case : 3SCR147 inasmuch as the penultimate sales (two contracts for sale of mineral ore entered into by Mohd. Serajuddin with the State Trading Corporation) were so inextricably connected with the final sales (two corresponding contracts for sale of the identical goods entered into by the S.T.C. with the foreign buyers) that the former were to stand cancelled if the latter for any reason fell through and vice versa and further the penultimate sales were effected to implement the contract with the foreign buyers and even then following the ratio of the Coffee board's case : 3SCR147 this Court held that the penultimate sales (Mohd. Serajuddin's contracts with the S.T.C.) were not sales in the course of export. Negativing the contentions that the contracts between Mohd. Serajuddin and the S.T.C. and the contracts between the S.T.C. and the foreign buyer formed integrated activities in the course of export, this Court took the view that the crucial words in section 5(1) showed that only if a sale occasioned the export, it would be in the course of export and that the two sets of contracts were separate and independent and Mohd. Serajuddin was under the contractual obligation to the foreign buyer either directly or indirectly and that his rights and obligations were only against the S.T.C. It will thus appear clear that even when the S.T.C. had with it foreign buyer's contracts and Mohd. Serajuddin's contracts with the S.T.C. had been entered into for the purpose 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. In 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 :
'Accounting to section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can quality as a sale in the course of export of the goods out of the territory of Indian 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 : AIR1975SC1564 ] 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 Order exports of certain goods can be made only by specified agencies such as the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods exceeding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export.' Two things become clear from this statement : first, the Mohd. Serajuddin's decision  36 STC (SC) is specifically referred to as necessitating the amendment and secondly penultimate sales made by small and medium scale manufacturers to an export canalising agency or private export house to enable the latter to export those goods in compliance with existing contracts or orders are regarded as inextricably connected with the export of the goods and hence earmarked for conferral of the benefit of the exemption. But here again, 'existing contract' with whom is not clarified. In other words, on this crucial point the statement is silent and does not throw light on whether the existing contract should be with a foreign buyer or will include any agreement with a local party containing a covenant to export. Therefore, the question will again depend upon proper construction and, as we have said above, in the matter of construction the two aspects discussed earlier show that 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 by the Coffee Board to the registered exporters) taken place, i.e., becomes complete by the passing of he 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 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 conducted by the Coffee Board) the property in the coffee sold thereat passes to the buyer immediately upon payment of full price, weighment and setting apart of the coffee for delivery to the buyer under clauses 19 and 20 of the auction conditions and it would be at this stage, i.e., just before this stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attract section 5(3) of the Central Sales Tax Act, 1956.'
At any rate these principles govern cases of last sales or penultimate sales by small exporters through the established export organisations like State Trading Corporation or the Board that satisfy the requirements of section 5(3) of the CST Act as amended by Act No. 103 of 1976 and their claim for exemption from payment of sales tax under the sales tax laws of the country. On the application of these principles that govern the assessments made on and after 1st April, 1976 the position of the Board unfortunately had not altered and has remained the same. From this is follows that the purchases made and exports made would still be 'for export' only and not 'in the course of export' to earn exemption under article 286 of the Constitution.
91. Consolidated Coffee Limited's case : 3SCR625 is not an authority for the claim of the petitioner to claim exemption on its purchases, their pooling and their ultimate export from payment of purchase tax under section 6 of the KST Act. When closely examined, this case, which only reiterates the earlier cases of Second Coffee Board's : 3SCR147 and Serajuddin's : AIR1975SC1564 , except to the extent that the principles enunciated stood modified by the amendments made to the CST Act, on the true scope of which is now a direct authority, far from supporting the case of the petitioner supports the case of the respondents.
92. In Consolidated Coffee Limited's case : 3SCR625 , the Supreme Court did not consider the exigibility or otherwise of the export sales to purchase tax under section 6 of the KST Act. But, that fact as pointed out by the Supreme Court in Smt. Somawanti v. State of Punjab : 2SCR774 does not in any way affect its binding nature under article 141 of the Constitution. We cannot, therefore, examine any of the questions that are concluded against the petitioner in these 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 the 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 : 1SCR38 .
95. In P. P. M. Thangiah Nadar v. State of Tamil Nadu  46 STC 67 followed in P. S. Sankaralina Nadar v. Commissioner for Commercial Taxes, Board of Revenue, Madras-5  49 STC 302 and D. A. Sathyanarayana Chettiar v. State of Tamil Nadu  49 STC 303 all of which have been decided by one and the same Bench of the Madras High Court consisting of Sethuraman and Balasubrahmanyan, JJ., of the Madras High Court on 19th November, 1979 and 22nd November, 1979 which were characterised by one of the learned counsel as not consistent and even contradictory, but which is not so, the question as has arisen did not arise and, therefore, those rulings are of no assistant to the petitioner.
96. On the foregoing discussion, we hold that the direct export sales made by the petitioner for the period in challenge were not 'in the course of export' and they do not quality for exemption of purchase tax under section 6 of the KST Act.
97. Sri Raman has urged that sales tax and the consequent purchase tax on coffee was leviable only on coffee that was fit for human consumption at the rates stipulated from time to time under section 5(1) of the KST Act and not at the rates specified in section 5(2) of that Act.
98. As pointed out by the Supreme Court in Kandaswami's case : 1SCR38 purchase tax is leviable on goods that are subject to sales tax but are not so subjected to tax on the taxable person. For determining taxable goods and the rates, we must necessarily fall back on section 5 of the KST Act.
99. Entry No. 43 of the Second Schedule to the KST Act providing for levy of sales tax on coffee at all material times at the rate of 10 per cent. does not make any distinction and difference on raw coffee, cured coffee and roasted coffee. On the other hand, the entry 'coffee' takes in itself all kinds of coffee including coffee beans. On the plain language of entry No. 43 of the Second Schedule we cannot hold that only roasted or powdered or coffee only fit or ready for human consumption was taxable under section 5(3) of the Act, which has to be the basis for levy of purchase tax under section 6 of the KST Act.
100. Section 5(1) of the Act applies to cases which are not covered by the succeeding provisions and the schedules appended to the Act. The levy of sales tax on coffee falls under entry No. 43 of the Second Schedule and is governed by section 5(3)(a) of the KST Act and not by section 5(1) of that Act.
101. We are concerned with the levy of purchase tax from 1st April, 1974 and onwards. From 1st April, 1974 and onwards, the 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 contentions urged for the petitioner fail these writ petitions are liable to be dismissed. We, therefore, dismiss these writ petitions and discharge the rule issued in all these cases. But, in the circumstances of the cases, we direct the parties to bear their own costs.
Order on the oral application made by the petitioner for certificate of fitness to appeal to the Supreme Court under article 133 and 134A of the Constitution.
Immediately after we pronounced our order dismissing these writ petitions Sri Babu seeks for a certificate of fitness to appeal to the Supreme Court of India under articles 133(1) and 134A of the Constitution on the ground that the questions raised and decided by me are substantial questions of law of general importance and they need to be decided by the Supreme Court of India.
2. Sri Hegde in opposing the oral application made by Sri Babu contends that the questions raised and decided are concluded by the Supreme Court.
3. We are of the view that the two questions, whether the compulsory deliveries of coffee to the petitioner by the growers under the Coffee Act, a unique Act in the country with no comparison are compulsory acquisitions or compulsory sales and whether in the compulsory sales there was consensuality or not, raised and decided in these that have not so far been decided by the Supreme Court and likely to arise in other States also, are substantial questions of law of general importance and they need to be decided by the Supreme Court of India. We, therefore, allow the oral applications made by the petitioner in these cases and grant a certificate of fitness to appeal to the Supreme Court under article 133(1) and 134A of the Constitution of India and direct the Registrar to issue the necessary certificates thereto to the petitioner.
Order of the oral application made by the petitioner for stay.
Sri Baby prays for stay of the operation of our order for a period of 12 weeks from this day.
Sri Hegde prays for time till 21st August, 1985 to ascertain factual details and make his submissions. We grant this request of Sri Hegde and direct these cases to be posted before this Bench on 21st August, 1985 at 10-30 a.m. to consider the prayer of the petitioner for stay.
Order on the oral application made by the petitioner for stay.
(22nd August, 1985.)
We have again heard the parties on the prayer made for stay of the operation of our order.
2. For the assessment year 1974-75, the Commissioner has issued notice under section 22-A of the KST Act proposing to revise the assessment order for the said year for the reasons stated therein. As we have upheld the case urged for the Revenue, we do not see any justification to stay the proceedings before the Commissioner for the assessment year 1974-75. We, therefore, reject the prayer of the petitioner for stay of the proceedings before the Commissioner for the assessment year 1974-75.
3. Sri Babu, in our opinion, very rightly submits that the Board is in custody of a sum of Rupees two crores eight laks contacted either as contingency deposit or as balance amount remaining in the pool fund account corresponding to the assessment years 1975 to 1981. We do not see any justification for the Board with holding the payment of the aforesaid sum to the State. Sri Babu prays for one month's time for payment of this sum to the State. We are of the view that this request of Sri Babu is fair and reasonable and we grant the same.
4. Sri Hegde, in our opinion, very fairly and rightly submits that the respondents will not enforce the demands for the outstanding amounts for a period of ten weeks from this day to enable the petitioner to obtain necessary certified copies and certificate of fitness and move for stay before the Supreme Court. We record this submission of Sri Hegde. In view of this submission of Sri Hegde, we do not consider it necessary to stay the operation of our order in respect of the outstanding amounts.
5. We need hardly say that all payments made by the petitioner to the respondents will be subject to the orders to be made by the Supreme Court of India.
6. We dispose of the prayer of the petitioner for stay in the above terms.