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Pratap Chand Purshottam Das Vs. State of Uttar Pradesh and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberWrit Petn. No. 341 of 1961
Judge
Reported inAIR1964All284
ActsUttar Pradesh Sales Tax Act, 1948 - Sections 2; Government of India Act, 1935; Constitution of India - Articles 19 and 226
AppellantPratap Chand Purshottam Das
RespondentState of Uttar Pradesh and anr.
Appellant AdvocateB.K. Dhaon and ;Shanker Prasad, Advs.
Respondent AdvocateUmashanker Srivastava, Standing Counsel for Opposite Parties 1 and 2
DispositionPetition allowed
Excerpt:
.....in the business of exchange of gold ornaments - charging labour charges sometimes - held, sale of goods means exchange of goods in consideration of money only - petitioner not liable to pay sales tax. - - kotwall, sales-tax officer iii, lucknow, dated the 25th september, 1961. the petitioner has prayed for a writ of certiorari quashing the order dated the 25th september, 1961, as well as for a writ of mandamus directing the sales-tax officer not to assess the petitioner in respect of the transactions which form the basis of the turnover. price' means the money consideration for a sale of goods'.thus both according to the english as well as the indian law, as existing in 1935, when the government of india act was promulgated, the expression 'sale of goods' was confined only..........of india act, 1935. the said entry authorises the provincial legislature to levy 'taxes on the sale of goods and on advertisements'. the argument of the learned counsel for the petitioner is that in the above entry the term 'sale of goods' is used in a restricted sense to cover only such sales as are made for monetary consideration.having heard the learned counsel for the parties i am of the opinion that there is force in this argument. the government of india act, 1935, was enacted by the parliament of england. it was the work of english draftsman. it is therefore, natural to presume that the term 'sale' in entry no. 48 of list ii of the seventh schedule was used in the same sense as was conveyed by it in english law. the law governing the sale of goods in england is contained in.....
Judgment:
ORDER

N.U. Beg, J.

1. The short question that arises in this writ petition is as to how far the definition of 'sale' in Section 2(h) of the U. P. Sales-tax Act, 1948 (U. P. Act No. XV of 1948), hereinafter called the Act, was ultra vires the Provincial Legislature. The petitioner in the writ petition is Sri Pratap Chand, a partner of the firm Messrs. Purshottam Das and Sons, Aminabad, LucKnow. He has been assessed to a turnover of Rs. 25,000/- for the year 1958-59 for the purpose of payment of sales tax under the Act by an order of Sri L.S. Kotwall, Sales-tax Officer III, Lucknow, dated the 25th September, 1961. The petitioner has prayed for a writ of certiorari quashing the order dated the 25th September, 1961, as well as for a writ of mandamus directing the Sales-tax Officer not to assess the petitioner in respect of the transactions which form the basis of the turnover.

The modus operandi followed by the petitioner in respect of the transactions which have been made the subject-matter of the sales-tax was that various dealers used to supply gold ornaments to him, and, in lieu thereof, he used to give an equivalent weight of gold bullion of identical weight, he also paid some amount as labour charges. In the present case the assessment of the petitioner on the amount of Rs. 25,000/- is based on an estimated turnover of gold bullion at two hundred tolas for the period under assessment. In his order the Sales-tax Officer has stated as follows:

'Purchases on Badlai System were admitted to have been made. In such transactions it has been held by the Judge (Revisions) that bullion given in exchange of purchase of ornaments is a sale.'

Following the above view of the Judge (Revisions) the Sales-tax Officer has passed the aforementioned order assessing the, petitioner on a turnover of Rs. 25,000/-. Dissatisfied with the said order the petitioner has filed the present writ petition with the abovementioned prayers. The opposite party No. 1 in the writ petition is the State of Uttar Pradesh, and the opposite party No. 2 is the Sales-tax Officer (3) Lucknow.

2. Before me the learned counsel for the petitioner has argued that in assessing the petitioner to sales tax on such transactions the Sales-tax Officer has applied the definition of 'Sale' as given in Section 2 (h) of the Act Section 2 (h) of the Act defines 'Sale' as follows:-

'Sale' means, within its grammatical variations and cognate expressions, any transfer of property in goods for cash, deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge.' (Explanations omitted)

The present case is not one of transfer of property in goods for cash nor is it a case of deferred payment. If at all, it is a transfer of goods for 'other valuable consideration'. So far as the addition of the words 'or other valuable consideration' in the above definition is concerned the contention of the learned counsel for the petitioner is that it was ultra vires the Provincial Legislature. The Act was passed by the Provincial Legislature in the year 1948, and the relevant entry under which the Legislature was empowered to enact this legislation is contained in item No. 48 of List II in the Seventh Schedule of the Government of India Act, 1935. The said entry authorises the Provincial Legislature to levy 'taxes on the sale of goods and on advertisements'. The argument of the learned counsel for the petitioner is that in the above entry the term 'sale of goods' is used in a restricted sense to cover only such sales as are made for monetary consideration.

Having heard the learned counsel for the parties I am of the opinion that there is force in this argument. The Government of India Act, 1935, was enacted by the Parliament of England. It was the work of English draftsman. It is therefore, natural to presume that the term 'sale' in entry No. 48 of List II of the Seventh Schedule was used in the same sense as was conveyed by it in English law. The law governing the sale of goods in England is contained in the Sale of Goods Act, 56 and 57 Vict. c. 71 which was passed in 1893. Sub-section (1) of Section 1 of the said Act states:

'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 money consideration, calledthe price. There may be a contract of sale between onepart owner and another.'

The above definition of the term 'sale' in English law gives a restricted meaning to it. Only such transactions of transfer of goods which are in lieu of money consideration are entitled to be termed 'sale'. If, therefore, the transfer of goods takes place for any other valuable consideration, i.e. consideration other than monetary consideration, it would not be a sale within the meaning of the term as used in English law.

3. The Indian Sale of Goods Act which is of the year 1930 appears to be substantially a reproduction of the above definition of 'sale' in the English law. Section 4(1) of the Indian Sale of Goods Act lays down:

'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. There may be a contract of sale between one part-owner and another.'

Section 4(3) of the Indian Sale of Goods Act provides as follows:

'Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.'

The term 'price' is defined in Section 2(1) of the Indian Sale of Goods Act as follows:

'Price' means the money consideration for a sale of goods'.

Thus both according to the English as well as the Indian law, as existing in 1935, when the Government of India Act was promulgated, the expression 'sale of goods' was confined only to such transactions as were effected for monetary consideration. Transactions for other valuable consideration were not included within the definition of the said expression either under the English law or under the Indian Law. In this context the expression 'sale of goods' used in entry No. 48 of List I! in the seventh Schedule appended to the Government of India Act, 1935 should be interpreted to cover only such transactions of transfer of goods as are effected for money consideration, and not for any other valuable consideration.

4. The above view would find support from the case of State of Madras v. Cannon Dunkerley and Co. Ltd : [1959]1SCR379 . This was a case of a building contract and the question for determination was whether in a building contract which was 'one, entire and indivisible' there was sale of goods of the building material used in the execution of the contract and, if so, whether such a transaction was taxable under the Madras General Sales Tax Act (IX of 1939). Section 2 (h) of the Madras Sales-tax Act like Section 2(h) of the U. P. Sales-tax Act, 1948 (U. P. Act No. XV of 1948) defined 'sale' as meaning

'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'.

In the year 1947 the definition of the term 'sale' used in Section 2 (h) of the Madras Sales-tax Act was further enlarged so as to include 'a transfer of property in goodsinvolved in the execution of a works contract'. In the above case after a most exhaustive discussion of the entire law on the subject, the position was summarised as follows :-

'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 a building contract which is, as in the present case, one, entire and indivisible--and that is its norm, there is no sale of goods, and it is not within the competence of the Provincial Legislature under Entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale.'

Subsequently in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Biha : AIR1963SC1207 , Section 2 (g) : AIR1963SC1207 of the Bihar Sales-tax Act (XIX of 1947) came up forconsideration before the Supreme Court. In Section 2 (g)of the Bihar Sales-tax Act the term 'sale' was definedas meaning.

'Any transfer of property in goods for cash ordeferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge......' (Provisos omitted)

Following the case of : [1959]1SCR379 mentioned above,their Lordships of the Supreme Court observed as follows :

'The Provincial Legislature by Entry 48 List II of the Seventh Schedule of the Government of India Act 1935 was invested with power to legislate in respect of 'taxes on sale of goods'. The expression 'sale of goods' was not defined in the Government of India Act, but it is now settled law that the expression has to be understood in the sense in which it is used in the Sale of Goods Act, 1930'.

5. It appears to me that the two cases of the Supreme Court mentioned above are decisive on the point, and, if the principles laid down therein are applied to the present case it must be held that the definition of the term 'sale' in the U. P. Sales-tax Act was ultra vires the Provincial Legislature in so far as it included transfer of property in goods for 'other valuable consideration' also within its purview.

6. The conclusion arrived at by the Sales-tax Officer following the view of the Judge (Revisions) to the effect that the bullion given in exchange for purchase of ornaments in a sale seems to have been based on the definition of the term 'sale' given in Section 2 (h) of the Act as including 'other valuable consideration.' The gold bullion delivered by the petitioner in exchange for purchase of gold ornaments cannot be described as monetary consideration. It can only fall under the heading of 'other valuable consideration' comprised within the definition of 'sale' in Section 2 (h) of the Act. If this part of the definition is struck down as ultra vires the Provincial Legislature, and the definition of 'sale' is confined only to such transactions as are entered into for monetary consideration, then the purchases made by the petitioner under what is described as 'Badlai system' (i.e. exchange system) in the order of the Sales-tax Officer would fall outside the ambit of the legally permissible definition of 'sale'. The impugned order must, therefore, be held to be wrong and unjustified in view of the above conclusion arrived at by me.

7. On behalf of the opposite parties, however, it was argued that in the present case there are certain transactions in which along with gold bullion of identical weight a certain sum of money was also paid as labour charges. Thus, for example, the petitioner took gold ornaments from a representative of Messrs. Oswall, Jewellers of Delhi, on the 6th of December, 1958, weighing 3 tolas 15 as 7 ratti. In lieu thereof the petitioner gave an equivalent amount of gold, and, in addition, delivered Rs. 30/- as labour charges. Learned counsel appearing for the opposite parties argued that in so far as Rs. 30/-was the cash amount paid for labour charges the transaction should be held to be sale as having been entered into for monetary consideration.

It may be mentioned at the outset that this is not the line of reasoning on which the Sales-tax Officer has proceeded. If he had adopted this line he should have levied sales tax only on the total amount of labour charges in transactions in which such charges were actually paid. On the other hand, he has proceeded to assess the turnover in respect of all the transactions irrespective of the question whether labour charges were paid on them or not. The basis of the order passed by the Sales-tax Officer is the entire amount of bullion given in exchange for gold ornaments acquired by the petitioner. The same position is reiterated in the counter-affidavit filed on behalf of opposite party No. 2 by Sri L.S. Kotwal, Sales-tax Officer (3) Lucknow. In paragraph 2 of the said counter-affidavit he has stated as follows:

'The turnover of Rs. 25,000/- is the turnover of bullion involved in Badlai transaction as discussed in the deponent's assessment order which has been filed by the petitioner and marked Annexure I to his affidavit.'

In paragraph 3 of the counter-affidavit the statement made in paragraph 2 of the affidavit of the petitioner to the effect that the 'turnover of Rs. 25,000/- is based on an estimated turnover of gold bullion at 200 tolas for the period under assessment has been admitted by the opposite party No. 2 as correct. Paragraph 3 of the petitioner's affidavit further states as follows :-

'That the contention of the petitioner as supported by his account books before the respondent No. 2 had been that the petitioner never sold the aforesaid 200 tolas of gold bullion but gave the same In exchange to the dealers who had supplied gold ornaments of the like weight and who had been given the aforesaid 200 tolas of gold bullion in exchange.'

This paragraph is also admitted as correct in paragraph 3 of the counter-affidavit. In view of the above admissions there can be no manner of doubt that the Sales-tax Officer proceeded to assess the sales tax not on the basis of the labour charges incurred during some of the transactions entered into by the petitioner, but on the basis of the gold bullion that was given by him in exchange in all the transactions entered into by him. In this situation if the illegal portion of the definition of 'sale' in the Act is cut out, the whole foundation of the order passed by the Sales-tax Officer disappears, and the order must therefore be held to be unwarranted in law.

On the line of reasoning adopted by the Sales-tax Officer as well as bearing In mind the position taken up by the opposite party In the present case, the above plea pressed on behalf of the petitioner at the stage of arguments is not open to him. It is, therefore, unnecessary and irrelevant in the present case to enter into the question as to how far the payment of labour charges in a number of transactions will have the effect of constituting those particular transactions as sale. Whatever view might be taken on this aspect of the matter, the order of the Sales-tax Officer, as it stands, must be set aside as the whole basis of his judgment is swept away if that part of the definition of the term 'sale' in Section 2 (h) of the Act which includes 'other valuable consideration' within its purview is struck off as incompetent and Invalid.

8. As, however, the learned counsel for the opposite parties argued the point most strenuously before meI may mention that I find it difficult to accept this contention on merits as well. So far as the labour charges are concerned they cannot be described as price of goods sold. They are charges for the work which was done in respect of the gold which was supplied in the form of jewellery to the petitioner. They cannot, therefore, be strictly described as a monetary consideration or price for the transfer of property in goods to the buyer. In fact the main consideration was paid in the form of bullion and the minor amount paid as labour charges cannot have the effect of converting what was substantially not a sale into a transaction of sale so as to bring the entire consideration within the meaning of the term 'price' as used in the Sale of Goods Act or of the expressions 'cash' or 'deferred payment' within the meaning of the U. P. Sales-tax Act.

9. Reference in this connection might be made tothe case of Collector of Sales-tax v. Kanthadbhai and Popatlal, (1959) 10 STC 516 (Bom) in which a Divisional Bench of the Bombay High Court held that where theassessees merely charged their customers labour charges for making the ornaments, the transactions between the assessees and their customers could not be described assales within the meaning of Section 2(13) of the Bombay Sales-tax Act, 1953. In the case of the South India Metal Works and Rolling Mills v. State of Madras, (1960)11 STC 507 (Mad) a Division Bench of the Madras High Court held that where an assessee collected scrapmetal from his customers, and, after melting and converting them into new sheets and rings gave them back to his customers the transaction cannot be described as sale. The customer merely paid the labour charges, and such charges did not attract any liability to sales tax.

The facts of the present case are not quite similar to the two aforementioned cases. Certain observations made therein were, however, relied on by the learned counsel for the petitioner, and it was argued by the learned counsel that if the assessee had given his own gold to the jewellers for converting it into jewellery and paid labour charges in respect of the work done by them, then it would have to be conceded that the transaction couldnot be one of sale of goods. In the present case whathas happened is that instead of giving his own gold prior to the work being done by the jewellers, he hasgiven an equivalent amount of gold subsequent to it. Thus in substance the position is the same.

10. In the end the learned counsel for the oppositeparties contended that an alternative remedy was opento the petitioner by way of appeal under Section 9 of the U. P. Sales-tax Act. In fact it is stated that an appeal is already pending before the appellate authority. Afterthe matter is disposed of in appeal, a revision can also be filed before the Judge (Revisions) under Section 10 of the Act. The present writ petition is, therefore, not maintainable, 1 am, however, not inclined to give effect to this objection. Relief in writ proceedings is discretionary, and the existence of an alternative statutory remedy cannot always be treated as a bar to the grant of a relief by way of writ vide Collector of Monghyr v. Keshav Prasad Goenka : [1963]1SCR98 and Venkateswaran v. Ramchand Sobhraj Wadhwani : 1983ECR2151D(SC) . Further the alternative relief in the present case cannot be considered as equally adequate and efficacious, because, under the proviso to Section 9 of the Act the petitioner is required to deposit the entire amount of tax before his appeal can be entertained. The alternative relief, therefore, is more onerous. Moreover, in the present case the Judge (Revisions) has already taken a view which is fatal to the case of the petitioner. This view was referred to by the Sales-tax Officer in his order, and followed by him. It would, therefore, be futile to constrain the petitioner to follow the same circuitous route. Moreover, the imposition of sales tax on a business-man affects his fundamental rights to hold property guaranteed by Article 19(f) as well as his fundamental right to carry on his trade or business guaranteed by Article 19(g) of the Constitution of India vide Tata Iron and Steel Co. Ltd. Bombay v. S.R. Sarkar : [1961]1SCR379 . Where the action of an authority is found to infringe a fundamental or a constitutional right of a citizen, the existence of an alternative remedy should not be treated as a bar to relief by way of writ vide K.K. Kochunni v. State of Madras : AIR1959SC725 , Kailash Nath v. State of U. P : AIR1957SC790 , Bengal Immunity Co. Ltd. v. State of Bihar : [1955]2SCR603 and Himmat Lal Harilal Mehta v. State of Madhya Pradesh : [1954]1SCR1122 . .

11. In any case, bearing in mind the circumstances of the present case I am of the opinion that a writ would provide a more appropriate relief. The sales tax authorities would be more concerned with the construction of the provisions of the Act as it stands. For the purpose of obtaining a declaration that a certain provision of the Act is ultra vires the Legislature relief by way of writ would be a more proper proceeding. Dealing with a preliminary objection relating to the maintainability ?f a writ petition in a case like this, their Lordships of the Supreme Court have in the case of Firm A. T. R. Mehtab Majid and Co. v. State of Madras : AIR1963SC928 observed as follows:

'Lastly, we may refer to the preliminary objection raised on behalf of the respondent to the maintainability of this petition, in view of the decision of this Court in Ujjam Bai v. State of Uttar Pradesh AIR 1962 SC 1621. This petition does not come within that decision. This is not a case in which the tax has been levied by the Deputy Commercial Tax Officer by mis-construing certain provisions of a valid Act, but is a case where the taxing officer had no jurisdiction to assess the tax on account of the invalidity of the rule under which the tax was assessed.'

In the present case also the attack on behalf of the petitioner is based not on the misconstruction of any provision of the Act but on its invalidity. I am, therefore, of the opinion that the present case is an eminently fit one for interference by way of writ jurisdiction.

12. I accordingly allow this petition and quash the order of -the Sales-tax Officer dated the 25th of September, 1961 and further direct that a mandamus shallissue directing him not to assess the petitioner in respect of the supply of gold bullion in lieu of delivery ofgold ornaments to him. The petitioner will be entitledto his costs.


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