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Chigurupati Veeranna and Egalapati Pattabhiramana Vs. the Special Commercial Tax Officer (Evasions) and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 3125 of 1969
Judge
Reported in[1971]28STC388(AP)
AppellantChigurupati Veeranna and Egalapati Pattabhiramana
RespondentThe Special Commercial Tax Officer (Evasions) and ors.
Appellant AdvocateK.B. Krishnamurthy, Adv.
Respondent AdvocateA. Mahadev, Third Government Pleader
DispositionPetition allowed
Excerpt:
- .....referred to as 'the central act') on a turnover of rs. 5,58,662.19 as representing inter-state sales of rice and a tax of rs. 7,045.40 was levied thereof. out of that total turnover, a turnover representing an amount of rs. 4,82,986.12 relates to supplies of rice made to the state government as provided under clause 4 of the andhra pradesh paddy and rice (declaration and requisition of stocks) order, 1964 (hereinafter referred to as 'the requisition order'). on appeal, the assistant commissioner of commercial taxes confirmed the assessment order with regard to this turnover. the contention of the petitioner is that the transactions relating to this turnover cannot be said to be sales and therefore they are not exigible to any sales tax. though in the writ petition the liability.....
Judgment:

Ramachandra Raju, J.

1. The petitioner in this writ petition is a firm doing business in rice. For the assessment year 1964-65, the firm was assessed to sales tax under the provisions of the Central Sales Tax Act (hereinafter referred to as 'the Central Act') on a turnover of Rs. 5,58,662.19 as representing inter-State sales of rice and a tax of Rs. 7,045.40 was levied thereof. Out of that total turnover, a turnover representing an amount of Rs. 4,82,986.12 relates to supplies of rice made to the State Government as provided under Clause 4 of the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964 (hereinafter referred to as 'the Requisition Order'). On appeal, the Assistant Commissioner of Commercial Taxes confirmed the assessment order with regard to this turnover. The contention of the petitioner is that the transactions relating to this turnover cannot be said to be sales and therefore they are not exigible to any sales tax. Though in the writ petition the liability of the petitioner to pay additional tax of one-fourth per cent. on the entire turnover as provided under Section 5-A of the Andhra Pradesh General Sales Tax Act was questioned that contention was not pressed before us by the learned Counsel appearing for the petitioner at the time of arguments. Therefore, nothing need be considered about it in this judgment. The only point that was argued before us is with regard to the liability of the petitioner to pay sales tax on the turnover of Rs. 4,82,986.12 as mentioned above.

2. The transactions in question relating to the said turnover of Rs. 4,82,986.12 have taken place as a result of the requisitioning under the Requisition Order referred to above. In that Requisition Order the expression 'stockholder' is described as meaning every person who has in his possession or control forty quintals or more of paddy or twenty-five quintals or more of rice. It is provided under Clause 3 of the Requisition Order that every stockholder shall make a declaration of the quantity of paddy and rice in his possession or control to the officer specified. Clause 4 of the Requisition Order may be read completely which is in the following terms:

Every stockholder shall sell to the State Government or to persons appointed as their agents by the Commissioner of Civil Supplies, Hyderabad, or any District Collector at the controlled price such quantity of paddy or rice in his possession or control as may be specified in the order in writing served on the stockholder in this behalf by the Commissioner, the District Collector, the Revenue Divisional Officer, the District Supply Officer, the Grain Purchase Officer, the Tahsildar, the Civil Supplies Tahsildar, the Assistant Grain Purchase Officer, the Grain Purchase Tahsildar, the Assistant Grain Purchase Tahsildar, the Deputy Tahsildar in charge of a sub-taluk or the Grain Purchase Assistant, as the case may be.

3. It is not in dispute that the turnover of Rs. 4,82,986.12 relates to stocks of rice requisitioned by the Government as provided under Clause 4 of the Requisition Order at controlled prices and sent on its account to dealers outside the State. Therefore, the supplies of rice relating to that turnover were to the State Government which the assessee was bound to do without any option at the prices which were controlled. Therefore, the assessee had no option either in the supply of stocks or in the prices to be paid for them. Under these circumstances the question is whether those transactions can be termed as 'sales' to attract the liability of tax as if they are sales.

4. In a recent case, Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P. [1970] 26 S.T.C. 344 (S.C.), the Supreme Court came to consider whether compulsory supply made under a statutory order is a 'sale' and it is liable to sales tax. The Supreme Court there was considering the transactions relating to the U.P. Wheat Procurement (Levy) Order, 1959. Clause 3 of that Order is in the following terms:

Clause 3(1)--Every licensed dealer shall sell to the State Government at the controlled prices :

(a) Fifty (50) per cent. of wheat held in stock by him at the commencement of this Order; and

(b) Fifty (50) per cent. of wheat procured or purchased by him every day beginning with the date of commencement of this Order and until such time as the State Government otherwise directs.

(2) The wheat required to be sold to the State Government under Sub-clause (1) shall be delivered by the licensed dealer to the Controller or to such other person as may be authorised by the Controller to take delivery on his behalf.

5. The above clause in the U.P. Wheat Procurement (Levy) Order and Clause 4 of the Requisition Order with which we are now concerned are in similar terms so far as the liability of the dealers is concerned to supply the requisitioned stocks at controlled prices. The question that arose in that case before the Supreme Court was whether the assessees, who were dealers in foodgrains, were liable to sales tax under the U.P. Sales Tax Act, 1948, on the value of the quantities of wheat supplied by them to the Regional Food Controller in compliance with the Order. The Supreme Court held that the Order ignored the volition of the dealer, and the source of the obligation to deliver the specified quantities of wheat and to pay for them was not in any contract but in the statutory Order. The Supreme Court said that assuming that the Controller might designate the place of delivery and place of payment of price at the controlled rate, and the licensed dealer acquiesced in them, the transaction of supply of wheat pursuant to Clause 3 of the Order and acceptance thereof did not result in a contract of sale. The supplies of wheat made by the assessees under the Order were not sales within the meaning of the definition in Section 2(h) of the U.P. Sales Tax Act, 1948, and the assessees were not liable to pay sales tax thereon. The Supreme Court further observed that a sale predicates a contract of sale of goods between persons competent to contract for a price paid or promised; a transaction in which an obligation to supply goods is imposed, and which does not involve an obligation to enter into a contract, cannot be called a 'sale', even if the person supplying goods is declared entitled to the value of goods, which is determined or determinable in the manner prescribed.

6. In the present case also from Clause 4 of the Requisition Order, it is clear that it does not require the State Government to enter into even an informal contract with the dealers. The dealers have no volition either in the matter of supply or with regard to its price. They are bound to supply rice at the requisitioned quantities and at prices arrived at, not as a result of bargain between the dealers and the Government but at prices fixed by the Government. If that is so, the supplies made by the assessee to the State Government or to persons appointed as their agents, as per the provision contained in Clause 4 of the Requisition Order cannot be termed as 'sales' because the very essential conditions of a sale are not present. In the Central Sales Tax Act with which we are concerned in the present case the term 'sale' is defined as follows:

'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods.

7. It is not doubted that the concept of sale under the above Central Act has to be understood as a 'sale of goods' within the meaning of Section 4 of the Sale of Goods Act. The expression 'sale of goods' within the meaning of Section 4 of the Sale of Goods Act is a composite expression consisting of various ingredients or elements. They are elements of a bargain or contract of sale, the payment or promise of payment of price, the delivery of goods and the actual passing of title. Each of the above elements is essential to a transaction of sale.

8. The Supreme Court in its judgment referred to above has also considered the cases, Indian Steel & Wire Products Ltd. v. State of Madras [1968] 21 S.T.C. 138 (S.C.) and Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 S.T.C. 212 (S.C) about which reference was made in the order of the Assistant Commissioner of Commercial Taxes. In Indian Steel and Wire Products Ltd. v. State of Madras [1968] 21 S.T.C. 138 (S.C.) the taxpayer supplied certain steel products to various persons in the State of Madras pursuant to the directions given by the State Controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order, 1941. The authorities of the State of Madras assessed the turnover of the taxpayer resulting from these transactions to sales tax under the Madras Sales Tax Act. The taxpayer contended that the transactions of supply did not result in sales and were on that account not exposed to sales tax, because steel products were supplied pursuant to the directions of the Iron and Steel Controller, there being no mutual assent between the parties to the transaction. The Supreme Court found that liberty of contract in a large measure was reserved to the producer or stockholder and to the purchaser in the matter of disposal of iron and steel. Under those circumstances the Supreme Court observed that it would be incorrect to contend that because law imposes some restrictions on freedom to contract, there is no contract at all. So long as mutual assent is not completely excluded in any dealing, in law it is a contract. Therefore, on the facts of that case the Supreme Court held that there is an element of contract in those transactions and it is not possible to accept the contention that nothing was left to be decided by mutual assent and therefore it cannot be said that they are not sales. The Supreme Court in the decision, Chittar Mai Narain Das v. Commissioner of Sales Tax [1970] 26 S.T.C. 344 (S.C) has observed that the decision in Indian Steel & Wire Products Ltd.'s case [1968] 21 S.T.C. 138 (S.C.) does not justify the view that even if the liberty of contract in relation to the fundamentals of the transaction is completely excluded a transaction of supply of goods pursuant to directions issued under a Control Order may be regarded as a sale. As already discussed above even in the case with which we are now dealing, the liberty of contract in relation to the fundamentals of the transaction is completely absent.

9. In Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 S.T.C. 212 (S.C.) also, the Supreme Court on the facts of that case found that liberty of contract between parties to the transactions relating to supply of sugarcane was not ruled out. It was found there that the cane-grower in the factory zone was free to make or not to make an offer of sale of cane to the occupier of the factory; if the cane-grower made an offer, though the occupier of the factory was bound to accept it an agreement resulting therefrom was recorded in writing and was signed by the parties. Under those circumstances, the Supreme Court held in that case that the agreements entered into between the occupier of the factory and the cane-grower were contracts of sale as defined in Section 4 of the Indian Sale of Goods Act. This decision also was distinguished on facts by the Supreme Court in Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P. [1970] 26 S.T.C. 344 (S.C.)

10. In this connection the learned Government. Pleader has brought to our notice a Bench decision of this Court dated 31st March, 1970, rendered in Kotha Narasimham Amburi Kotaiah and Ors. v. State of Andhra Pradesh and Ors. [1971] 27 S.T.C. 191 (W.P. Nos. 1981 of 1966 etc. batch dated 31st March, 1970). There also the learned Judges were considering supplies made as a result of the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964. On the facts and the circumstances obtaining in those transactions, the learned Judges came to the conclusion that the rice millers (the assessees) and the retail dealers to whom the supplies were made were entitled to mutually agree amongst themselves in respect of the supplies, time and the manner of transport and the delivery of the goods and the prices payable under the contract and, therefore, though the agreements to purchase rice by the retailers and the sale by the rice millers were superimposed by the Control Order, the transactions must none the less be held to be sales as they were entered into by the parties according to law but not vitiated by any fraud, misrepresentation or coercion. It was further observed in that judgment that the consent of the parties to the agreement of sale of rice in those cases can by no stretch of reasoning be held to be void or voidable though they are obliged under the Control Orders to enter into such agreements. In coming to the above conclusion the learned Judges placed reliance on the Supreme Court decisions, Indian Steel & Wire Products Ltd. v. State of Madras [1968] 21 S.T.C. 138 (S.C.) and Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 S.T.C. 212 (S.C.) which were referred to above, and were distinguished by the Supreme Court in the later decision, Chittar Mal Narain Das v. Commissioner of Sales Tax [1970] 26 S.T.C. 344 (S.C.). In the judgment the learned Judges also observed that the decision of the Supreme Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax [1963] 14 S.T.C. 316 (S.C.) is an authority for the proposition that where all the ingredients or elements constituting the expression 'sale of goods' are controlled or regulated by the control orders or any statute without any scope for mutual agreement between the transacting parties, such transaction is not a 'sale' within the meaning of Section 4 of the Sale of Goods Act.

11. In the case before us the purchaser is the Government through its agents, the Grain Purchase Officer and the District Supply Officer, Kakinada. It has not been brought to our notice that there were any separate agreements entered into between the assessee and the dealers to whom the deliveries were made outside the State through the Grain Purchase Officer and the District Supply Officer with regard to any of the essential ingredients of a 'sale'. It is evident from the order of the assessing authority that the transactions in question were held covering form 'D' of the Central Sales Tax (Registration and Turnover) Rules, 1957. The heading of this form reads as follows: 'Form of Certificate for Making Government Purchases'. Therefore, the purchaser with regard to these transactions is only the State Government though as per the directions given by the concerned officers of the Government the deliveries were made to some dealers outside the State. It has not been brought to our notice that, apart from the Requisition Orders issued by the concerned officers of the Government for making the supplies, any separate agreements were entered into between the assessee and the dealers to whom the deliveries were made with regard to any of the essentials of ' sale '. When the supplies were made to the Government under the provisions of the Requisition Order in question there is no element of contract because they were made compulsorily and at prices controlled without any option on the part of the assessee either with regard to the quantities or the prices at which they have to be supplied. That means there is no volition or choice on the part of the assessee with regard to the fundamentals of a sale transaction. If that is so, from the discussion of the Supreme Court decisions, particularly the decision in Chittar Mal Narain Das v. Commissioner of Sales Tax [1970] 26 S.T.C. 344 (S.C.) it is clear that the transactions relating to the turnover in question did not become sales exigible to any sales tax.

12. Accordingly we hold that the petitioner is not liable to pay sales tax on the turnover of Rs. 4,82,986.12. In the result, the writ petition is allowed and the order of the assessing authority as confirmed by the Assistant Commissioner of Commercial Taxes to the extent indicated above is quashed. The respondents will pay the costs of the petitioner in this writ petition.


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