C.J. Jaganmohan Reddy, J.
1. The short question in these tax revision cases is whether the collection and supply of the Gulmohva flower, a base used for preparation of alcohol, to the Government distilleries at Narayanaguda and Kamareddi, in terms of the contract between the Government and the assessee-respondent amounts to sale or is it merely a contract for work and labour as held by the Sales Tax Appellate Tribunal.
2. The assessments, with respect to which this question arises relate to 1952-53 and 1953-54 in which years the assessee entered into a contract with the Excise Department of Hyderabad for the collection and supply of the Gulmohva flower to the distilleries aforementioned, at a rate fixed in the contract varying with the grade of the flower to be supplied. According to the terms of the contract, the assessee has to collect the flower, store it in his godowns, and transport the same to the above distilleries at his expense and is to be paid for all these at a particular rate fixed in the schedule for each grade of flower supplied. If the flower is picked from the patta lands, he is bound to pay compensation to the pattadar up to the extent of one fourth of the rate, while that picked from the Government land is apparently not subject to any charge. The particulars of these terms will be specified later. For the present, however, it may be stated that the assessing authority omitted to assess the turnover in respect of this transaction under the impression that it was not liable to sales tax, but subsequently a notice was issued within the period fixed, viz., two years, to the respondent under Rule 32 on the ground that the turnover escaped assessment. The assessing authority not only assessed the assessee on these turnovers, but also imposed a penalty for these years under Section 19-B of the Hyderabad Sales Tax Act for non-disclosure of turnover. But on appeal the Deputy Commissioner set aside the penalty on the view that the non-disclosure is not a wilful default and was due to a bona fide impression on the part of the assessee that the turnover for these years was not liable to tax. This impression was evident from the fact that for the years 1950 and 1951, the Sales Tax Officer himself had held that the turnover was not assessable. The Deputy Commissioner, however, confirmed the assessments with some modifications. Against this order, the assessee appealed to the Tribunal which, after examining in detail the provisions of the contract between the respondent and the Government and on certain decisions referred to before it, thought that the transaction did not contain any element of sale ; as such it held that the assessments were not valid.
3. The Tribunal apparently was mostly influenced in arriving at this conclusion by the consideration that the assessee was not to pay the Government anything for picking the flower from the Government lands which was the Government property and since the transaction is collection and supply of Government flower to the Government, there was no element of sale. Considerable emphasis seems to have been laid on the element of transfer of ownership of the flower to the contractor before even the sale would take place. The following passage typifies the considerations which prevailed with the Tribunal.
Unless the property in the Gulmohva flowers is transferred to the contractor there cannot be in law a sale by the contractor to the Government at a later stage,
The Government's original title in the Gulmohva flower can stand transferred to the contractor either by sale or by gift. There is nothing in Exhibit A-1 to Exhibit A-4 to show that the appellant purchased the Gulmohva from the Government. He is simply referred to as 'contract holder or the person who 'acquired the contract for picking and supply of Gulmohva' and not as purchaser of Gulmohva. In fact there was no payment of any price by the contractor. Where there is no payment of price there cannot be a sale. There is no question of gift of Gulmohva by the Government to the appellant because there is no motive for gift such as natural love and affection that may exist in the case of gifts between the close relations.
4. We may at once say that the Tribunal is in error in basing its decision mainly upon this consideration. In determining whether a particular transaction is a sale or a contract for work and labour, one has to look into the real nature of the transaction and not merely confine oneself to an undue emphasis of any one aspect of the matter. The question that has to be determined in this case is whether, having regard to the terms of the contract, the assessee sold the mohva flower for a price to the Government. As we see the transaction, it appears to us that under the terms of the contract, whether the flower is picked from the patta lands or from the Government lands, it becomes the property of the contractor ; in the former case on payment of certain consideration to the pattadar from whose lands the flower has been picked, and in the latter without any consideration. It is not, however, a contract of supply to the Government of its own property simpliciter. The contractor under the terms of the contract has many obligations ; firstly, he must collect the flower, store it, grade it and then transport it to the Government distilleries and supply certain quantity agreed to under the terms of the contract, irrespective of the fact whether the quantity available in the area was sufficient for the supply of the required quantity. If he fails to supply the flower, or if the flower is destroyed before it is picked, or he fails to supply the required quantity or it is damaged after it is stored, the assessee none the less has an obligation to supply the quantity from elsewhere failing which the Government is entitled to purchase from other sources on his behalf and recover from him the difference between the price they have paid and the price fixed under the contract. These very terms militate against the conclusion that the transaction is one for work and labour. If this was not so, where was the question of the contractor being liable for non-supply of Government property which is destroyed due to natural causes or for causes not within his control, nor is there any meaning in the contractor supplying flower to the Government at a particular price or at a particular rate. It is not as if the rate has been fixed by any reference to the labour charges and charges for transport. Even so, if it is purely supply of Government property to the Government, there is no meaning in the Government having to purchase from elsewhere and make the contractor liable for non-supply of Government property by collecting the difference between the rate paid by them and the rate agreed to under the contract.
5. It is true that in Exhibit A-I there is a frequent reference to 'contract for picking and supply of Gulmohva' and 'conditions of picking and supply of Gulmohva' ; but these terms do not determine the real nature of the transaction, nor is there any significance in the condition in para. 8 prohibiting successful tenderer from picking the flower before executing the acceptance deed, because the Mohva flower being used for distillation of alcohol, the picking and transport have to be controlled. It is for this reason that the tenderers are prohibited from dealing with the flower before a tender is accepted and they have bound themselves by the terms of the contract. There are other and similar prohibitory conditions which are in accordance with the provisions of the Abkari Act. Para. 9 of Exhibit A-I deals with the situation arising from the death of the contractor during the pendency of the contract. The heirs of the deceased are given option to continue the contract and should they choose not to, the Commissioner is authorised to make alternative arrangements to complete or fulfil the contract. It is significant to note that the loss, if any, incurred by the Government is to be recovered from the estate of the deceased and his heirs and if there is any profit, the heirs who have not chosen to continue the contract will not be entitled to it. These conditions are not consistent with the theory that the contract is one for work and labour. The Tribunal seems to have been impressed by the fact that whatever profit or loss derived from the sale of the Mohva flower ought to have gone to the contractor if the flower belonged to him. In our view, there is a fallacy in this assumption, because it is not the Mohva flower that is picked by the contractor that is being supplied after the death of the deceased, but the Mohva flower picked by some other agency which has stepped into the shoes of the deceased. The cases cited before the Tribunal are not helpful. We do not find any justification in the Tribunal applying the principle enunciated in Krishna Chandra Acharya v. Board of Revenue, Orissa 1955 16 S.T.C. 400, to the facts of the instant case. That was a case of a contract for the repair of embankments by putting new earth which was supplied by the Government from their lands and the contract consisted in removing the earth to the embankments. In these circumstances, it was held that the contract was one for pure supply of labour and did not involve any element of sale or supply of goods. In our view, there is no analogy between the facts of that case and the present case, though the Tribunal thought that if the Mohva flower is substituted for earth, the principle of that decision would become applicable.
6. We have already sufficiently indicated the considerations that have prevailed with us in holding that the transaction in question is not one purely of a contract for supply of Government flower to the Government, but, on the other hand, is one of sale.
7. In this view, we allow these petitions with costs. Advocate's fee Rs. 100. One set.