R.N. Misra, J.
1. The petitioner in these two writ applications is a public limited company, having its registered office at Calcutta and its place of business at Biramitrapur, within the jurisdiction of the Sales Tax Officer, Rourkela Circle (opposite party No. 1). The petitioner is a dealer registered under the Orissa Sales Tax Act bearing Registration No. RL-177 and under the Central Sales Tax Act bearing Registration No. RLC-28. In these two applications under Article 226 of the Constitution, challenge is to the order of assessment for the year 1974-75. O.J.C. No. 450 of 1978 is related to the demand made under the Central Act, while the connected application is against the demand under the State Act.
2. The assessee is a lessee in respect of several mines belonging to the Government of Orissa and it carries on the business of mining and selling of minerals like limestone, dolomite, etc., to several steel industries like the Tata Iron and Steel Co. Ltd., the Indian Iron and Steel Co. Ltd. and the Durgapur and Rourkela Steel Plants of Messrs. Hindustan Steel Ltd. The supplies made by the petitioner are covered by regular contracts wherein there is a contracted price with an escalation clause. The escalation clause runs thus:
The basic prices prescribed in Clause 5 above are based on the rates of remuneration and benefits for labour including employer's contribution to provident fund and royalties presently current either in fact or provisionally calculated as detailed in Schedule A hereto. Any variation that may from time to time occur in such items or any change by way of additional benefits to labour or any additional cess or tax (other than a tax charged upon income by the Indian Income-tax Act, 1922, or any statutory modification or re-enactment thereof) not expressly provided for in this agreement, made or imposed upon or suffered by the sellers whether by or resulting from any statute, rule or order or any award or decision of any statutory body or board such as the Wage Board or any tribunal or conciliation proceeding or agreement therein shall be reflected by a proportionate increase or decrease, as the case may be, in basic prices whereafter the prices so adjusted shall be the basic prices. Every such modification of basic prices and the effective date thereof shall from time to time as occasion requires be mutually agreed between the sellers and the company and in the default of agreement may be referred to arbitration as hereinafter provided the intention of the parties hereto being that any modification in basic price shall take effect from the date of the variation or change giving rise to the adjustment.
There is no dispute that in all the contracts entered into by the petitioner with its buyers, there is an escalation clause, more or less embodying the aforesaid terms. According to the petitioner, ever since it began business in the early part of the sixties, it had followed the practice of drawing regular bills at the time of supplies adopting the agreed rate and, in the event of any escalation claim, it used to raise a demand separately and, as and when the claim became acceptable by the purchasers, additional bills were being raised for the higher amounts relatable to the escalation clauses and the buyers, being registered dealers either under the State Act or the Central Act, were issuing the appropriate declaration forms for buying at the concessional rate of tax. The petitioner was accounting for the escalation claims as and when bills were finally raised and the appropriate declaration forms were being issued by the purchasers. For the first time for the year 1974-75, the assessing officer declined to accept the practice by questioning the system.
For that year, the petitioner returned a gross turnover of Rs. 6,63,18,593.90 and a net turnover of Rs. 6,43,11,046.10 under the Central Sales Tax Act. Similarly, it returned a gross turnover of Rs. 95,49,187.91 and a taxable turnover of Rs. 91,50,436.48 under the State Act. According to the petitioner, a sum of Rs. 41,02,864 related to escalation claims in respect of sales made during the year. These amounts were, however, not receivable or payable before 31st March, 1975, but by the time assessment for the period came to be taken up, a sum of Rs. 12,99,889.25, out of the aforesaid sum of Rs. 41,02,864, had been cleared by the purchasers and the petitioner had drawn up regular bills in respect of the same. A revised return was accordingly filed accepting that part to be sale price for the year, but declarations issued after 1st April, 1975, were produced in support of the claim of concessional rate of tax. The assessing officer referred to the balance sheet for the year ending 31st March, 1975, wherein the sales turnover had been shown including the returned amount and the aforesaid amount of Rs. 41,02,864. According to the assessing officer, the petitioner maintained the mercantile system of accounting and it accepted the entire turnover to be of the year and there was, therefore, no justification to keep a part of the turnover to be offered for assessment in future while sales had been completed and the sale price became receivable for the entire sum. In regard to the claim to be taxed at the concessional rate in respect of the turnover of about Rs. 13 lakhs on the basis of the declaration forms, the Sales Tax Officer did not agree by holding that the turnover related to the period ending 31st March, 1975, but the declaration forms had been issued in the subsequent year and, as such, they could not be accepted as relating to that turnover.
These two writ applications have, therefore, been filed challenging the two assessments.
3. In the counter-affidavit, it has been specifically pleaded that statutory appeals are provided against the assessments and since such alternate remedies are available against both the assessments and the petitioner has not availed of the same, the writ applications are not maintainable under Article 226(3) of the Constitution. Apart from the aforesaid preliminary objection, it has been pleaded that there is absolutely no justification in the stand taken by the petitioner before this Court, inasmuch as the balance sheet and the trading account clearly indicate an admission of turnover of the entire amount for the year.
4. We may first deal with the preliminary objection. It is conceded on behalf of the petitioner by Dr. Pal that the impugned demands were open to appeal. The assessee has, however, taken the stand that there is an infringement of the rights guaranteed under Article 19(1) (f) and (g) as also Article 31 of the Constitution and inasmuch as the rights guaranteed under Part III of the Constitution have been affected by the impugned demands, Sub-article (3) of Article 226 of the Constitution is not applicable. Reliance has been placed on a recent decision of the Supreme Court in support of such a stand taken by the petitioner. We are inclined to agree with the submission advanced by Dr. Pal for the petitioner that, in the facts of the case, the bar on account of alternate remedy is not applicable and, therefore, the preliminary objection should be overruled.
5. Section 2(g) of the Central Sales Tax Act defines 'sale' with its grammatical variations and cognate expressions to mean:
any transfer of property in goods by one person to another for cash or for 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.
The definition in the State Act in Section 2(g) thereof is almost on similar terms. A 'sale', therefore, can be for price paid in cash or for deferred payment. 'Sale price' has also a statutory definition in both the State and the Central Acts and, as far as relevant, the definition is again on the same line. The term means:
. . . the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof. . . .
In the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. A.I.R. 1958 S.C. 560, the court observed:
. . . Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. . . .
In the instant case, there is a contract to sell, and there is actually passing of title for consideration. The claim raised by the petitioner under the escalation clause does not become 'sale price' until the buyer consents to the fact of escalation. From the escalation clause, it is clear that the higher price becomes payable with effect from the effective date as may be mutually agreed upon between the seller and the buyer. With a view to satisfying this requirement and making the escalation provision work, the petitioner had adopted the practice of first raising a claim of escalation by maintaining that the conditions which authorise escalation have existed. Under the escalation provision, if the buyer does not accept the claim, there is a dispute available for adjudication through the arbitration machinery. Until there is either acceptance or adjudication through arbitration, the demand raised by the seller remains a claim, but the claim transforms itself to 'sale price' when the claim is accepted by the buyer or admitted by the arbitrator. We are inclined to agree with Dr. Pal's submission that until either of the eventualities contemplated in the escalation clause happens, the additional demand raised by the seller is a claim only and nothing becomes payable to the seller. There is a clear distinction between 'deferred sale price' and a 'claim for escalated price'. In the first case, there is already a contract for the rate and the payment of price, which becomes due on sale taking place, is deferred to a future date. In the second case, entitlement of the seller to a higher price is dependent upon acceptance of the claim by the buyer or, in the event of dispute, admission of the claim by the arbitrator. There is no element of payability in presenti in respect of the escalated demand when the demand is raised or the goods are delivered under the existing contract to be appropriated by the buyer. The element of payability comes in only in the two of the alternative eventualities happening and, until either of them actually happens, the demand of the higher price is actually a claim advanced by the seller. In view of the definition of 'sale price' as 'amount payable to a dealer as consideration for the sale of any goods', it would follow that the higher amount under the escalation clause is really not 'sale price' until the claim is accepted in either of the two modes indicated above. Dr. Pal, therefore, is right in his submission that at no point of time before 31st March, 1975, the claim relatable to the escalation clause was sale price in respect of which tax under the State or the Central Act, as the case may be, was payable.
According to the petitioner, the total escalated claim for the relevant year was around Rs. 41 lakhs. Before actual assessment for the year was taken up by the assessing officer for a part of the claim (i.e., for a sum of about Rs. 13 lakhs) there was acceptance by the buyer. The petitioner, therefore, raised bills treating the same as sale price and obtained declaration forms under the Central Act for concessional rate of tax. According to the petitioner, the entire amount of Rs. 41 lakhs relating to the escalation claim has been accepted by the buyers in due course and in an additional affidavit placed before us by way of rejoinder the petitioner has maintained that on the entire sale price, tax has already been paid.
6. The real dispute, therefore, is ultimately not one relating to whether any portion of the sum is 'sale price' but as to when the amount became payable by way of sale price to the petitioner. Keeping the escalation clause in the contracts and the relevant definitions in both the statutes in view, there can be no two opinions that before 31st March, 1975, no part of the escalated demand became sale price in respect of which tax could be demanded. The Sales Tax Officer relied heavily on the balance sheet and the trading account of the petitioner for the relevant year. Admittedly, therein the entire amount including the sum of Rs. 41 lakhs covered by the escalation demand had been shown as the turnover. From this feature, the Sales Tax Officer has proceeded to find that it had been the intention of the parties to consider the escalation demand to be a part of the sale price. There is no dispute that the balance sheet and the trading account reflect the escalated demand, but the conduct of the assessee cannot convert the escalated demand to sale price. If, according to law, the demand raised by the petitioner could not be 'sale price', by showing it in the trading account, the escalated demand would not change its character. Reliance has been placed on two decisions of the Supreme Court in support of this view. In the case of Commissioner of Income-tax, West Bengal-I v. India Discount Co. Ltd.  75 I.T.R. 191 (S.C.), the court observed:
It was said that the assessee had itself credited the amount of Rs. 43,925 to the profit and loss appropriation account and thereafter transferred the same to a reserve fund in the accounting year ending September 30, 1966. No adjustment was made in the share purchase account on account of the receipt of dividend. But it is well-established that a receipt which in law cannot be regarded as income cannot become so merely because the assessee erroneously credited it to the profit and loss account: see Commissioner of Income-tax v. Shoorji Vallabhdas and Co.  46 I.T.R. 144 (S.C.) The assessee's case had all along been that the amount of arrear dividends received could not be treated as income of the assessee liable to tax for the assessment year 1956-57 . . .
In the case of Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta 82 I.T.R. 363 (S.C.), the court observed:
The main contention of the learned Solicitor-General is that the assessee failed to debit the liability in its books of account and, therefore, it was debarred from claiming the same as deduction either under Section 10(1) or under Section 10(2)(xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. . . .
We are inclined to agree with Dr. Pal that the ratio of these decisions supports the stand of the petitioner. In law, the escalated claim did not constitute sale price and no sales tax under either Act became exigible and merely because the petitioner had in its balance sheet and trading account shown the entire amount (the sale price plus the escalated claim) as the sales turnover, the amount did not truly represent at that time the sale price and it was not open to the Sales Tax Officer to raise a demand of sales tax in relation to the escalated claim.
7. The learned standing counsel placed reliance on a Bench decision of the Kerala High Court in the case of Aluminium Industries Ltd. v. State of Kerala  42 S.T.C. 72. In the case before the Kerala High Court, there was also a clause for price variation, as in the contracts in question. The learned Chief Justice referring to 'turnover' and 'sale price' as defined in the Central Sales Tax Act proceeded to say:
According to the definition, 'sale price' is not only what is actually received, but even what is 'receivable' by the dealer. We entertained no doubt that by reason of the price variation clause the amount was actually 'receivable' by the dealer. It was contended by the assessee that the amount is receivable only when a supplementary bill is raised and served on the customer and only then it can be included as turnover and assessed. We are unable to accept this argument in the light of the definition of the term 'turnover'. Besides, the contract itself not being before us, there is no foundation for the argument that the amount consequent on price variation can be collected only when a supplementary bill is raised and served on the customer. . . .
We may also point out that the definition of 'sale price' in Section 2(h) of the Act again brings out the idea that the amount 'payable' to the dealer as consideration for the sale of goods also constitutes 'sale price', as much as the amount actually paid. The definition of 'sale' in Section 2(g) again shows that the payment for the transaction may be in cash or as deferred payment. Having regard to these elements in the definition of the various terms we are of the opinion that the view taken by the Tribunal is correct.
8. We have already made an analysis of the provisions in the statute referred to by the learned Chief Justice except the definition of 'turnover'. 'Turnover' in Section 2(j) of the Act, as has been used in relation to any dealer liable to tax under the Act, means:
The aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in accordance with the provisions of this Act and the Rules made thereunder.
The distinction, which we have drawn between payability in presenti and payability dependent upon certain other contingencies stipulated under the contract, if kept in view, would clearly indicate why the rule laid down in the case cannot be accepted. In fact, as pointed out by the learned Chief Justice, the contract itself not being before the court, the foundation for the argument that the amount consequent on price variation could not be collected in presenti could not be asserted. The observation made by the learned Chief Justice would in fact mean that, if the terms of the escalation clause were before the court, the position would have been different. At any rate, if the amount could not be collected without raising a supplementary bill, even in the opinion of the learned Chief Justice, there would have been a difference.
9. The learned standing counsel next relied upon another passage of the same decision, where it was indicated:
In paragraph 10 of its order, the Tribunal has noticed that, according to the assessee, a sum of Rs. 45,14,106.73 is the actual amount of price variation due to them during the year of assessment. Out of this, according to the assessee, there is no intimation to the customer that an amount of Rs. 12,35,531.41 is payable and this amount is only a provision for anticipated price variation and its anticipated variation receipt and does not represent actual receipt since the assessee had not drawn or issued any price variation bills for this amount. The Tribunal, in our opinion, rightly pointed out that, although the bills might not have been issued, the assessee had included the amount in the balance sheet and, therefore, that will form part of the sale price, and the fact that bills had not been issued to the customers is immaterial for the purpose of assessment. The Tribunal observed that what was material was not actual collection of the sale price but the receivability of the amount . . .
In view of what we have already said with reference to the two decisions of the Supreme Court, we think, no importance can be attached to the inclusion of the sum covered by the escalated claim in the balance sheet or the trading account.
10. When exactly then would liability for payment of tax accrue in respect of the escalated claim is the next question for consideration. According to Dr. Pal for the petitionsr, the liability accrues when the buyer accepts the claim or the arbitrator admits the same. On either eventuality happening, the petitioner draws up a bill and since there is an agreed basis for claiming the higher rate from the effective date, the entire claim becomes sale price and the amount not claimed and paid earlier becomes available for demand of tax. Where the assessment has not been made, it would be open to the assessee to file a revised return under Section 11(2) of the Orissa Act provided it is within the period indicated therein. Otherwise, there would be no scope for a revised return and the turnover should be made available for assessment during the year when the bill is raised.
11. Admittedly, both under the Central Act as also under the State Act, when the purchaser is a registered dealer, there is a concessional rate of tax. It would not be possible for the buyer to issue a declaration in the prescribed form at any stage before the escalated claim is accepted by it. Therefore, there is force in Dr. Pal's submission that the Sales Tax Officer was not justified in refusing to accept the declarations furnished in respect of the turnover of Rs. 13 lakhs and round figures being a part of the escalated claim, merely on the ground that the turnover related to the year 1974-75, but the declarations related to the period of 1975-76.
12. As we have already indicated, the petitioner's stand is that the entire turnover has been duly returned. That is a matter which can only be appropriately examined by the Sales Tax Officer and we would express no view. For the reasons we have indicated above, it is appropriate that the present demands in both the cases should be vacated and the Sales Tax Officer should be directed to reframe the assessments after giving full opportunity to the petitioner to represent its case and support the stand taken by it. In doing so, the Sales Tax Officer would act in accordance with law and the guideline indicated in relation to the question as to when the escalated claim becomes sale price as also in relation to acceptance of the declaration forms. Both the writ applications are allowed to the extent indicated above. We make no order for costs.
P.K. Mohanti, J.