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Sri Vijayalakshmi Rice Mill Contractors Company Vs. the State of A.P. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberT.R.C. Nos. 27 and 66 of 1975
Judge
Reported in[1976]38STC19(AP)
AppellantSri Vijayalakshmi Rice Mill Contractors Company
RespondentThe State of A.P.
Appellant AdvocateS. Dasaratharama Reddi and ;S.R. Ashok, Advs. in T.R.C. No. 27 of 1975
Respondent AdvocateS. Dasaratharama Reddi, Adv. ;for T. Ramam, Adv. in T.R.C. No. 66 of 1975
DispositionPetition dismissed
Excerpt:
- all india services act, 1951. sections 32(c) (as amended by section 3 of amendment act, 2005] & 10 & general clauses act, 1897, section 6: [g.s. singhvi, cj, dr.g. yethirajulu, ramesh ranganathan, g.bhavani prasad, c.v. nagarjuna reddy, jj] exemption of building from applicability of provisions of act held, (per majority) section 32(c) of the act provides that the provisions of the act shall not apply to any building the rent of which as on the date of the commencement of the a.p. buildings ( lease, rent and eviction) control (amendment) act 2005 exceeds rs.3,500/- per month in the areas covered by the municipal corporations in the state and rs.2,000/- per month in other areas. there is nothing in the provisions of the amendment act which either expressly or by necessary implication.....jeevan reddy, j.1. a common question arises for decision in both these tax revision cases, which, therefore, can be disposed of by a common order.2. it would be sufficient if we state the facts in t.r.c. no. 27 of 1975. the petitioner is a rice miller at machilipatnam, dealing in paddy and rice. for the assessment year 1969-70, the assessing authority included in his total turnover a net turnover of rs. 1,33,396, pertaining to the purchase of levy paddy by the petitioner from the ryots. the said levy was payable under clause 3 of the andhra pradesh paddy procurement (levy) order, 1967, and the petitioner was one of those nominated by the government to receive, store and then deliver the said paddy, according to the instructions issued from time to time.3. the petitioner contended that the.....
Judgment:

Jeevan Reddy, J.

1. A common question arises for decision in both these tax revision cases, which, therefore, can be disposed of by a common order.

2. It would be sufficient if we state the facts in T.R.C. No. 27 of 1975. The petitioner is a rice miller at Machilipatnam, dealing in paddy and rice. For the assessment year 1969-70, the assessing authority included in his total turnover a net turnover of Rs. 1,33,396, pertaining to the purchase of levy paddy by the petitioner from the ryots. The said levy was payable under clause 3 of the Andhra Pradesh Paddy Procurement (Levy) Order, 1967, and the petitioner was one of those nominated by the Government to receive, store and then deliver the said paddy, according to the instructions issued from time to time.

3. The petitioner contended that the purchase of levy paddy is not liable to tax as the said purchase is made under compulsion and that, there is no element of 'freedom of contract' or any choice in the matter or an agreement and that, therefore, they are not 'sales' within the meaning of the Act. The said contention was, ultimately, overruled by the Sales Tax Appellate Tribunal, against which the present tax revision case is preferred.

4. Before we deal with the contentions of the parties, it would be appropriate to refer to the relevant provisions of the Levy Order. The Andhra Pradesh Paddy Procurement (Levy) Order, 1967, has since been repealed and substitued by the A.P. Paddy Procurement (Levy) Order, 1972, and since the material provisions of both the orders are identical, the counsel referred to, and we may also set out, the said provisions from the 1972 Order.

5. The expression 'agent' has been defined by clause 2, which reads as follows:

2. (a) 'Agent' means the Food Corporation of India, or any other corporation, company, co-operative society, Gram Panchayat, miller, dealer or any other person nominated by the Government or the District Collector or by any other officer authorised by the Government, who purchases stocks of paddy from the cultivator directly or otherwise for cash; and includes a sub-agent appointed by such agent.

Clause 3 reads as follows:

3. (1) Subject to the other provisions of this Order, every cultivator shall, on the service of a notice of the requisitioning authority under clause 4, sell and deliver to an agent or to an officer duly authorised by the Government in this behalf at the notified price and within such time and at such place as may be specified by the requisitioning authority in the notice, such quantity and variety of paddy produced by him in his land during the season in relation to which the notice is served, as may be specified in that notice, and determined in accordance with the rates of levy mentioned in the schedule to this Order.

(2) No cultivator, who is liable to sell and deliver paddy under Sub-clause (1) shall pay or be compelled to pay in terms of paddy any rent on land or interest on a loan or instalment in repayment of a loan unless and until he has sold and delivered to the Government the quantity of paddy in accordance with the provisions of this Order.

(3) Notwithstanding any agreement to the contrary, no cultivator who is liable to sell and deliver paddy under Sub-clause (1) shall be liable to pay in terms of paddy any rent on land or interest on a loan or instalment in repayment of a loan to any other person, to the extent of paddy sold and delivered to the Government under this Order.

6. Clause 4 provides that the requisitioning authority shall serve a notice on each cultivator within its jurisdiction, specifying the paddy to be delivered under clause 3, and the place at which and the time within which such delivery has to be effected.

7. Clause 5 prescribes the mode of service of such notice.

8. Clauses 6 and 7 again are relevant and may, therefore, be set out:

6. (1) The agent or officer of the Government shall subject to such general or special instructions, as may be issued from time to time, by the Government or the Commissioner of Civil Supplies or the District Collector, take delivery of the quantity of paddy sold under this Order by or on behalf of the cultivator and shall give a receipt to him as to the quantity and variety of paddy delivered by him together with the date of taking delivery thereof:

Provided that every cultivator on whom a notice under clause 4 is served, shall take all reasonable care to deliver the exact quantity and variety of paddy of fair average quality.(2) The agent or officer of the Government shall, on taking delivery of the paddy sold, pay for the quantity and variety of paddy delivered, at the notified price, subject to such deductions in the price, as are allowed in the Andhra Pradesh Paddy (Procurement Prices) Order, 1972, and obtain a receipt from the cultivator therefor.

7. Every agent taking delivery of stocks of paddy under this Order shall be responsible for the said stocks and shall weigh and check the quality of the stocks and store the stocks with due care and diligence. He shall supply the stocks of paddy or an equivalent quantity of rice in lieu of paddy, to an officer of the Government, a dealer or other person nominated by the Government, for this purpose, at the price fixed by the Government after taking into account the notified price and the reasonable incidental charges incurred by the agent, including the charges incurred by him for the weigh-ment, storage and transport of the stocks of paddy.

9. It may also be mentioned that the petitioner is also a dealer holding a licence under the Andhra Pradesh Foodgrains Dealers' Licensing Order, 1964, and, before he was nominated as an agent under the said Levy Order, he was doing his own business, both as a dealer as well as a miller.

10. The expression 'sale' has been defined by Clause (n) of Section 2 of the Andhra Pradesh General Sales Tax Act, 1957, and it reads as follows:

(n) '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 commerce, for cash, or for deferred payment, or for any other valuable consideration, and includes any transfer of materials for money consideration in the execution of a works contract, provided that the contract for the transfer of such materials can be separated from the contract for the services and the work done, although the two contracts are embodied in a single document or in the supply or distribution of goods by a society (including a co-operative society), club, firm, or association to its members, but does not include a mortgage, hypothecation or pledge of, or a charge on goods.... (Explanations omitted being unnecessary).

11. Both the counsel for the petitioner, as well as the Government Pleader for Commercial Taxes, relied upon certain decisions of the Supreme Court and this court, in support of their rival points of view, and the difficulty in this case has arisen because of the apparent inconsistency between the several judgments. We will now proceed to examine the said decisions to find out the principle, which is appropriately applicable in the facts and circumstances of these cases.

12. The first case relied upon for the petitioner is New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 S.T.C. 316 (S.C.). That was a case where the manufacturers of sugar in Bihar State had despatched large quantities of sugar to different States in compliance with the directions issued by the Controller under the Sugar and Sugar Products Control Order, 1946. The procedure in that behalf, as found by the court, was that the various State Governments intimated the Sugar Controller of their requirements of sugar and, similarly, factory owners sent statements of stock of sugar held by them, to the Controller, from time to time. After considering the requirements and the said statements, the Controller made the allotments and, in accordance with it, orders were issued to the factory owner, directing him to supply a specified quantity of sugar to a State Government. Thereupon, the State Government sent detailed instructions regarding the mode of despatch of sugar to the factory owner, which were complied with. The question arose whether the sale of sugar, in those circumstances, amounted to a 'sale' within the meaning of Section 2(g) of the Bihar Sales Tax Act, 1947. It was held by Kapur and Shah, JJ. (Hidayatullah, J., dissenting), that the despatch of sugar in pursuance to the directions of the Sugar Controller was not the result of any contract of sale and that, therefore, there was no sale in the eye of law. It was held by the majority that there was no element of offer and acceptance, nor any contract between the seller and the purchaser and, therefore, the said transactions could not have been intended by the legislature to be taxed. Hidayatullah, J. (as he then was), however, held that there is no warrant for placing a narrow meaning upon the expression 'sale' and that, the freedom of contract has, in recent times, been steadily eroded in several fields, and merely because of such curtailment or regulation of the freedom to contract, the said sales do not cease to be 'sales'. The learned Judge held that in effect and substance they are sales and were understood as such by the parties and, therefore, they are liable to be taxed.

13. The next decision upon which considerable reliance has been placed for the department is Venkata Subbarao v. State of Andhra Pradesh A.I.R. 1965 S.C. 1773. It is necessary to briefly note the facts of this case and also the principle of the decision. Because of the scarcity of rice in certain districts of Madras in 1947 and 1948, the Government of Madras issued two Orders, namely, Foodgrains Procurement Order, 1946, and the Foodgrains Licensing Order, 1946, under the powers vested in it by the Essential Supplies (Temporary Powers) Act, 1946. Under the Procurement Order, every land-holder, tenant or other cultivator in possession of paddy was obliged to sell such surplus, as may be determined by the Collector, to the Collector or an agent nominated by him, at the prescribed place and price. It also prohibited any person from selling or otherwise disposing of the quantity of paddy or rice, which he was obliged to deliver to the Collector or his nominee. The appellants before the Supreme Court were some of those who were nominated by the Collector to procure rice from the cultivators. They entered into various agreements with the Government in that behalf, according to which they had to sell rice to the Government at the prices specified by the Government. The said prices were revised from time to time, with the result, that on each such revision, the appellants had with them certain quantities of paddy/rice purchased from the cultivators at the pre-existing price, but sold to the Government at the higher revised price and thus, the appellants made larger profits than what was contemplated by the Government under the said scheme. The Government directed the appellants to pay over the said extra profit to the Government, calling it 'surcharge'. The basis for such demand was that the appellants were merely procuring agents of the Government and that, because of the relationship of the principal and agent, the agent was bound to make over the said extra profit to the Government. After examining the provisions of the said Procurement Order and the contract entered into between the Government and the appellants, it was held by the Supreme Court that the appellants before it were not 'agents' of the Government. The said conclusion was arrived at because it was found as a fact that the purchases were made by the agents (appellants) out of their own funds; the stocks were stored at their own cost; the risk of any deterioration and driage or short fall was upon them only; that they were the full owners of the paddy procured and that they were entitled to and did pledge the paddy for raising funds. In other words, it was found that they were full owners of the grains purchased by them and that the fact that they entered into agreements with the Government to sell rice at the controlled market prices showed that they were not mere agents. It was also pointed out that on the sales effected by them to the Government, sales tax was also payable. Notice was also taken of the fact that they were dealers under the Madras Foodgrains Control Order and that they were doing their business subject to the regulations prescribed by the said Control Order, and it was only a case of the Government employing normal trade channels for its own purposes. It was held that the entire scheme only amounted to a mere regulation and control of foodgrains by rendering every activity, connected with it, subject to licensing and to the directions to be issued in pursuance thereof and that it was not a case where the State engaged itself directly in the foodgrains trade.

14. The learned Government Pleader for Commercial Taxes strenuously contended that the provisions of the said Madras Procurement Order are substantially identical with the Andhra Pradesh Orders now under consideration and that, in the cases before us also, it was a case of the Government employing normal trade channels for regulation and control of the trade in grains and that, since the agents purchased paddy/rice from the cultivators and then sold it to the Government at the prices respectively prescribed by the Government, the principle of the said Supreme Court decision clearly applies to this case.

15. The case in Indian Steel and Wire Products Ltd. v. State of Madras [1968] 21 S.T.C. 138 (S.C.), pertained to the sale of iron and steel products in pursuance to the allotments made by the Iron and Steel Controller, Calcutta. The procedure adopted in that case was that the purchaser placed the order for materials, according to the specifications given by him through the Iron and Steel Controller, whereunder the purchaser agreed that the indent was placed subject to the provisions of the sale price schedule and also subject to the terms and conditions of business and general understanding followed by the manufacturer. The indent was forwarded to the manufacturer for delivery of material in accordance with the general or special directions of the Controller. The Controller only fixed the base price, and nothing more. It was found in that case that the parties were free to decide their own terms by mutual consent and that the supply of goods was at the convenience of the appellant, and the appellant could agree with its customers regarding the date of delivery, etc., in accordance with the terms of business and general understanding. In other words, it was found that the transactions were not completely regulated and controlled by the Controller so as not to leave any room for mutual assent and that, therefore, it was a case of a sale exigible to tax. The decision in State of Madras v. Gannon Dunkerley and Company [1958] 9 S.T.C. 353 (S.C.), was referred to and applied, while distinguishing the decision of the Supreme Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 S.T.C. 316 (S.C.).

16. The next decision is Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 S.T.C. 212 (S.C.). The appellant before the Supreme Court was a sugar factory, which had to purchase sugarcane from the zone prescribed for that factory under the provisions of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961. Under the provisions of the said Act, the cane-growers within a particular zone were prohibited from supplying or selling cane to any factory or person other than the specified factory and such factory was obliged to purchase the cane so offered by the growers. Under the Rules framed under the said Act, the cane-growers or a cane-growers' co-operative society might, within fourteen days of the notification of the factory zone, offer to supply cane, grown in that area, to the factory and, if such an offer was made, the factory was bound to enter into an agreement for the purchase of the cane offered. The parties, thereupon, were obliged to enter into an agreement which provided for supply and purchase of the sugarcane at the minimum price notified by the Government from time to time and upon terms and conditions mentioned therein. Contravention of the provisions of the said Act or the Rules made thereunder was made punishable. Under Section 21 of the Act, the Government was entitled to levy a tax, not exceeding a certain amount per metric tonne, on the purchase of cane required for use, consumption or sale in a factory. On such tax being levied, the factory owners challenged the validity of the said tax on the ground that there was no sale of sugarcane so as to attract the said tax. It was, however, held by the Supreme Court, after examining the provisions of the Act and the agreement, that a cane-grower in a factory zone was free to make or not to make an offer for sale of cane to the factory and that, only if such an offer was made, was the factory owner bound to accept it, and the resulting agreement was to be reduced to writing. It was held that there was no coercion or compulsion within the meaning of Section 15 of the Contract Act so as to vitiate the said contract and that, in law, the agreement entered into between the factory owner and the grower was freely entered into for lawful consideration and for a lawful object and was enforceable in law. It was, therefore, held that there was a sale of sugarcane and hence the levy of tax on such sale was unobjectionable. While dealing with the decision in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 S.T.C. 316 (S.C.), it was held that the decision in that case should not be treated as an authority for the proposition that there can be no contract of sale under compulsion of statute and that the majority decision in that case must be understood in, and confined to, the particular facts of that case.

17. In Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P. [1970] 26 S.T.C. 344 (S.C.), it was held that the sale of foodgrains effected by the dealers under clause 3 of the U.P. Wheat Procurement (Levy) Order, 1959, under the directions of the State Government, at controlled prices, to the Government was not a sale, inasmuch as the said Order left no volition to the dealer in the matter and that the quantity to be delivered, the price thereof, and the place of delivery were all determined by the statute and were not the result of any agreement between the parties. It was held that the law did not contemplate any agreement to be entered into between the parties. It was further observed that if there be any contract, the restrictions imposed by the statute would not vitiate the consent and that, in the absence of a contract, it cannot be assumed.

18. We may then examine the decision of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.). This was again a case of sale of sugarcane regulated by the Mysore Sugarcane (Regulation and Supply) Order, 1963. Under the said Order, a minimum price of sugarcane was fixed, areas where sugarcane was grown were reserved to the factories, the annual quantity of sugarcane required for the factories was determined, and the factories were made to secure the quantity of sugarcane so determined from the areas respectively reserved for them. The sugarcane growers in the reserved areas were to supply 95 per cent of the sugarcane grown by them to the respective factories. The growers and the factories were further required to enter into agreements for supply and purchase of sugarcane and the delivery was to be at the factory and in such lots, on such dates and at such times as may be agreed upon between the parties under the said agreement. The grower was entitled to ask for advance payment, and the sugarcane was to be accepted after inspection and there was also scope for rejection of goods by the factory on such inspection. The agreement also provided the variety of sugarcane to be cultivated. On the said facts, the manufacturers contended that there was no sale of sugarcane to them, so as to attract sales tax and that the said sale was under a compulsion of law, leaving no room for any mutual consent or bargain in the process. The Supreme Court considered the various decisions on the subject, rendered by it earlier, and also three English decisions in Newcastle Breweries Ltd. v. Inland Revenue Commissioners (1927) 96 L.J.K.B. 735, Kirkness (Inspector of Taxes) v. John Hudson & Company Ltd. [1955] A.C. 696, and Ridge Nominees Ltd, v. Inland Revenue Commissioners [1962] Ch. 376. on the meaning of the words 'compulsory sale'. After examining the said decisions, it was held that the statutory orders regulating the supply and distribution of goods by and between the parties under Control Orders in a State do not absolutely impinge on the freedom to enter into contract. Legislative measures or statutory provisions fixing the price, delivery, supply and restricting the areas for transactions, are all within the realm of planning economic needs ensuring production and distribution of essential commodities and basic necessities of community. It was further held that the obligations of a welfare State and its duty to ensure and maintain the essential supplies, require the State to regulate, restrict and curtail the freedom of choice available to the parties and, because of that, it cannot be said that there is no contract of sale. Referring to the facts of that case, it was held that the parties to the sale were defined, and the property in the goods was transferred from one party to another for consideration, and the mere fact that the parties had no choice to go to strangers or in the open market, was held not to militate against the mutual assent, evidenced by the agreement entered into between the parties in the case before the Supreme Court. It was held that the agreement contained intrinsic evidence that the growers agreed to sell and the factory agreed to buy goods. The fact that the parties had the choice to increase the quantity to be supplied above 95 per cent of the production and the freedom of agreement with respect to date, time and place, and mode of delivery, and the further fact that the grower can bargain for a price higher than the minimum prescribed, and his right to ask for advance in cash and kind, and the freedom given to the factory owner to inspect and reject the goods, were all held to be elements indicating mutuality and, for that reason, it was held that the transactions in question were 'sales' within the meaning of the said expression in the Mysore Sales Tax Act.

19. Now coming to the decisions of this court, we may first notice the decision in Chigurupati Veeranna v. Special Commercial Tax Officer, Kaki-nada [1971] 28 S.T.C. 388, arising with reference to the provisions of the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964, which provided that every stockholder should sell to the State Government or to the appointed agents, such quantity of paddy or rice in his possession or control as might be specified in the order served upon him, at the controlled price. The turnover relating to the stocks of rice so requisitioned by the Government were included in the turnover of the assessee which was objected to. It was held by this court that in the said transactions there was no element of contract and that they were made compulsorily and at controlled prices, without any option on the part of the assessee either with regard to the quantities or prices, and hence they were not sales attracting sales tax.

20. Writ Petitions Nos. 610 and 614 of 1970 dated 4th March, 1971, were cases arising with reference to the Andhra Pradesh Paddy Procurement (Levy) Order, 1967, and the Andhra Pradesh Rice Procurement (Levy) and Restriction on Sale Order, 1967. It was held by a Bench of this Court, consisting of Kondaiah and Sriramulu, JJ., that there was no agreement to purchase paddy between the assessee and its vendor and that the obligation squarely arose under the statute and, therefore, the transactions do not amount to a sale in law.

21. In Writ Petitions Nos. 3198 and 3981 of 1969 dated 22nd February, 1971, a Division Bench of this Court, to which one of us (i.e., the Hon'ble the Chief Justice) was a party, remanded the cases to the Deputy Commissioner to find out whether the sales were made pursuant to the orders of requisition issued by the Government, holding that if they were so made, they are not liable to sales tax.

22. To the similar effect is the decision of a learned single Judge of this court, viz., Chinnappa Reddy, J., in Bodhan Co-operative Marketing Society Ltd. v. State of Andhra Pradesh Writ Petition No. 2018 of 1974 decided on 13th November, 1975 (Andhra Pradesh High Court). The learned Judge referred to the latest case of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.), and held that the sales effected under the Andhra Pradesh Paddy Procurement (Levy) Order, 1972, do not attract sales tax, not being 'sales' as defined by the said Act.

23. Now let us consider the position obtaining under the Order in question. We must stress the fact that, in these cases, we are dealing with the agents nominated under the said Order, and not with the sales or deliveries effected to and in favour of an officer authorised by the Government, since the difference is vital and significant. Though, in the definition of the expression 'agent' contained in Clause (a) of Rule 2 of the said Order, an officer authorised by the Government is treated on the same par with the dealer or any other person nominated by the Government, yet, the distinction between them becomes obvious when we look to Rule 7. It is further no doubt true that a cultivator has to deliver paddy to such agent as may be specified by the Government, but, where he delivers/sells paddy to an officer of the Government, there cannot be a further sale by such officer to the Government. In those cases, it is a sale to the Government directly. But, in cases where a dealer or any other person is nominated as 'agent' by the Government, the rules make it clear that the cultivator sells it, at the specified price, to such agent, and such agent, in turn, sells the paddy or its equivalent rice to the Government at the notified price, which is fixed providing a reasonable margin of profit, to such dealer. Rule 7 further makes it clear that the agent taking delivery of paddy shall be responsible for the said stocks, and shall weigh and check the quality of the stocks and store the same with due care and diligence. Further, he is not bound to supply the same paddy, which he has received from the cultivator. He is entitled to supply equivalent quantity of rice in lieu of paddy, and he is paid not only the price of such paddy or rice, but also the reasonable incidental charges incurred by him, including the charges towards weighment, storage, and transport of the stocks. These provisions make it clear that the dealer becomes the owner of the stocks purchased by him from the cultivators. He is not merely an agent of the Government, in the sense understood in the law of contract, though he is defined as an 'agent' under the said Order. As pointed out by the Supreme Court in Venkata Subba rao v. State of Andhra Pradesh A.I.R. 1965 S.C. 1773, merely designating such dealers as agents dose not make them 'agents' as understood under the law of contract, nor such description is conclusive. Just as under the Madras Procurement Order, 1946, so under the present Order, an agent is entitled to inspect, verify and accept the stocks and pay the price to the cultivator from out of his own funds and so, undoubtedly, he becomes the owner of such stocks. He is responsible for the storage, weighment and transport of such stocks. If there is any loss or damage on account of any accident or theft, it is he who is responsible, and not the Government. The very fact that he sells the said stocks to the Government at a notified price, again reaffirms the said position. Further, as stressed in the aforesaid Supreme Court case, it must also be noted that before the petitioners herein were nominated as agents under the said Order, they were dealers in foodgrains, holding a licence under the A.P. Food-grains Dealers' Licensing Order, and were doing business in accordance with the said Order and other relevant statutory provisions. They were carrying on the said business with their own funds, by agreeing to purchase the stocks from the cultivators and other dealers and selling the same in such manner and at such price, as they chose.

24. The question then is whether the sales of such stocks to them by the cultivators, which, in turn, have to be sold by such agents to the Government, make the said sales in their favour any the less 'sales' in the eye of law. It may also be noted that there is no prohibition, even now, against such agents dealing in foodgrains, including paddy and rice, in the normal course as they were doing earlier.

25. As pointed out by the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.), and, in earlier decisions, the regulation of a trade or business in certain commodities need not, necessarily, exclude the mutuality between the parties altogether. Merely because the parties are determined, price is fixed, place and time of delivery are determined, and areas of transactions are restricted, it does not mean that the mutuality is totally eliminated. So long as there is room for some mutuality, and so long as there is agreement, and scope for such agreement with respect to some aspects of the transactions, it cannot be said that there is no mutuality. As pointed out by Hidayatullah, J., in his dissenting judgment in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 S.T.C. 316 (S.C.), 'the affairs of the world are very complicated, and sales are not always in their elementary forms. Due to short supply or non-distribution of goods, controls have to be imposed. There are permits, price controls, rationing, and shops which are licensed. Can it be said that there is no sale because mutuality is lost on one account or another ?...The entry should be interpreted in a liberal spirit and not cut down by narrow and technical considerations....' We may also refer to the decision in Ridge Nominees Ltd. v. Inland Revenue Commissioners [1962] Ch. 376, the principle of which decision has been referred to by the Supreme Court with approval in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.). The question in that case was, whether the sale of shares of a non-consenting shareholder by the company, by virtue of the power vesting in the company under Section 209 of the English Companies Act, amounts to a 'sale'. The contention was that, since the concerned shareholder was not an assenting party, and also because the sale was brought about against her consent and by someone else on her behalf in exercise of a statutory power, there was no mutuality and hence no sale. That contention was overruled and it was held that, notwithstanding her lack of consent, the transaction had, in truth and in substance, all the essential characteristics of a transfer/sale of stocks. The following observations of Danckwerts, L.J., was quoted with approval by the Supreme Court:.It seems to me that a sale may not always require the consensual element mentioned in Benjamin on Sale, 8th Ed., 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. The effect of the statute in such a case is to say that the absence of the transferor's consent does not matter and the sale is to proceed without it.

26. Now, if we examine the ratio of the decision of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.), and the position obtaining in these cases, it becomes clear that the situation is substantially identical. The only difference appears to be that, while the Mysore Sugarcane (Regulation of Supply) Order required the grower and the factory to enter into an agreement in writing, stipulating the place and time of delivery, and the variety of sugarcane, the Andhra Pradesh Order does not specifically provide for such a written agreement, but leaves the said matters to be agreed upon between the parties. Such an agreement between the parties may be oral, or may be in writing, or it may be a case of a mere understanding. Even under the Andhra Pradesh Order, the requisition served upon the cultivator under rule 4 only directs him to sell a particular quantity of paddy at a particular place, and within a particular time specified in the said notice. The variety is not specified; the quality is not specified; the time of delivery is not specified (only the last date of delivery is specified). On the stocks being brought, the agent has to weigh them, check the quality and, after such checking, he may accept the paddy or not. The variety or quality of the paddy has to be determined by agreement between the parties. It is quite possible that, while the cultivator may claim that it is the best quality of paddy, the agent may not agree, and there may be bargaining on that aspect. In this context, it would be useful to refer to the provisions of the Andhra Pradesh Paddy (Procurement Prices) Order, 1972, which categorises and classifies the paddy under several heads, and provides for several varieties and grades of paddy and different prices therefor. There may also be cases where paddy of two different varieties or grades is mixed up, and a dispute may arise regarding its categorisation or classification. Further, if all the cultivators within the area specified for an agent, bring their stocks on a single day, he is not bound to, and he cannot accept the deliveries of, all such stocks on the same day. He has, necessarily, got to space them. In the circumstances, therefore, it is reasonable to presume that there has to be some understanding or agreement between the agent and the cultivators in the relevant area, regarding the time and mode of delivery. It may also happen that the cultivator may choose to offer more stock than that specified by the Government and, in such a case, the agent may or may not accept the said stock. Applying the test adopted by the Supreme Court in the aforesaid decision, even in the cases before us, the parties are certain and defined; the grower is delivering and supplying the stocks and the agent is accepting the same; the property in the goods is transferred from the grower to the agent; the transaction is not a gift, nor an exchange, nor a hypothecation, nor a loan. There is consideration for the transfer. There is room and scope for mutual agreement in the matter of fixing of quality, time and mode of delivery, time and mode of payment, and there is also scope for rejection of goods, which will be accepted only after inspection by the agent. In other words, the stocks will be accepted by an agent after inspection, and the price would be paid on delivery. The mutual assent is implicit. In fact, the Supreme Court recognised that the mutual assent can be implicit, and need not be explicit. We are, therefore, of the opinion that, so long as there is room for mutual agreement and assent in respect of some aspects of the transaction, it is a sale. It is not necessary that there should be a contract in writing; and that, such an agreement may be oral and may be in the nature of an understanding arrived at between the parties.

27. The choice of the parties is further indicated from the following circumstances, which may be present even in the cases before us, as they could be in the case dealt with by the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.). The mill or the premises of the agent may be closed; the grower might not tender the goods; or the agent might not accept delivery. We are, therefore, of the opinion that there is, in substance and in principle, no difference between the facts in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.), and the present cases and, therefore, we have to hold that the sales of paddy by the cultivators to the petitioners amount to 'sales' in the eye of law, and are exigible to tax.

28. Though we are taking a view different from the one taken by the two earlier Benches of this Court, we do not think it necessary to refer the matter to a Full Bench, since we are of the opinion that the said decisions are no longer good law in view of the decision of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C. 246 (S.C.), which is, incidentally, a decision of a larger Bench of seven Judges. In Chigurupati Veeranna v. Special Commercial Tax Officer, Kakinada [1971] 28 S.T.C. 388, main reliance appears to be on the decision in Chittar MalNarain Das v. Commissioner of Sales Tax, U.P. [1970] 26 S.T.C. 344 (S.C.), arising under the U.P. Wheat Procurement (Levy) Order, 1959. But, it may be noted that, under the said order, the sale was directly to and in favour of the Government by the dealers, while that is not the case before us. Similarly, in Writ Petitions Nos. 610 and 614 of 1970 dated 4th March, 1971, again, the main reliance was upon the same case. The sales directly to and in favour of the Government do stand on a different footing; the distinction between the agent and the Government, which was emphasised in Venkata Subbarao v. State of Andhra Pradesh A.I.R. 1965 S.C. 1773, was neither referred to nor kept in view. In Writ Petitions Nos. 3198 and 3981 of 1969 dated 22nd February, 1971, there is no discussion of the subject, and it was assumed, following the earlier judgment of this court, that paddy sold in pursuance to requisition notices do not amount to 'sales'. However, in the decision of Chinnappa Reddy, J., in Bodhan Co-operative Marketing Society Ltd. v. State of Andhra Pradesh Writ Petition No. 2018 of 1974 decided on 13th November, 1975 -- (Andhra Pradesh High Court), the latest decision of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 29 S.T.C, 246 (S.C.), is referred to; but, the learned Judge found, after examining the provisions of the Andhra Pradesh Paddy Procurement (Levy) Order, 1972, that there is 'no freedom of contract of the slightest degree' given to the parties. However, as we have pointed out above, there is room for mutual agreement and contract on some aspects of the transactions, and since the mutuality is not totally excluded, the said transactions amount to 'sales'. We must, therefore, hold that W.P. No. 2018 of 1974 was not correctly decided.

The result, therefore, is that these T.R. Cs. are dismissed but, in the circumstances, without costs. Advocate's fee, Rs. 100 in each.


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