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Union of India (Uoi) Vs. Shri Jagannathpur Rice Mill - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtOrissa High Court
Decided On
Case NumberA.H.O. No. 11 of 1971
Judge
Reported in40(1974)CLT956; [1975]36STC551(Orissa)
AppellantUnion of India (Uoi)
RespondentShri Jagannathpur Rice Mill
Appellant Advocate A. Das, Adv.
Respondent Advocate B.K. Pal, Adv.
DispositionApplication dismissed
Cases ReferredSalar Jung Sugar Mills Ltd. v. State of Mysore A.I.R.
Excerpt:
.....[air 2002 orissa 130 overruled]. - delimiting areas for transactions or parties or denoting price for transactions are all within the area of individual freedom of contract with limited choice by reason of ensuring the greatest good for the greatest number by achieving proper supply at standard or fair price to eliminate the evils of hoarding and scarcity on the one hand and availability on the other. the parties can have terms for payment in advance as well as in cash. 693, can no longer be accepted as good law and is hereby overruled. individualism was yielding to monopoly, where strange things might well be done in the name of liberty. such documents are not in themselves novelties :the classical lawyer of the mid-victorian years found himself struggling to adjust his simple..........3. levy on rice.-(1) every licensed miller shall sell to the purchase officer at the controlled price,-(a) at the commencement of this order, 50 per cent of the quantity of rice held in stock by him at such commencement; and(b) beginning with such commencement and until such time as the purchase officer otherwise directs, 50 per cent of the total quantity of rice produced or manufactured by him in his rice mill every day.(2) every licensed dealer shall sell to the purchase officer at the controlled price-(a) at the commencement of this order, 50 per cent of the quantity of rice held in stock by him at such commencement; and(b) beginning with such commencement and until such time as the purchase officer otherwise directs:-(i) fifty per cent of the total quantity of rice got milled by.....
Judgment:

G.K. Misra, C.J.

1. Plaintiff is the owner of a mill. Under the Orissa Rice Procurement (Levy) Order, 1964 (hereinafter to be referred to as the Order), the Assistant Director (Food) on behalf of the President of India took delivery of two consignments of rice under exhibits 9 and 9-a on 19th November, 1965, and under exhibits 8 and 8-a on 14th January, 1966. An undertaking was given in those documents that if the consignor (plaintiff) was made liable to pay any purchase or sales tax in accordance with the provision of law in force at a future date, the President of India would reimburse the amount of tax to the party. By exhibits 11, 12 and 13 dated 28th February, 1966, the plaintiff -was served with demand notices for payment of Central sales tax for quarters ending 31st December, 1965, 30th September, 1965, and 30th June, 1965, respectively. Assessments had been made despite contest of the plaintiff. The plaintiff did not carry any appeal against the assessment orders but paid sales tax of Rs. 9,825.24, which constituted the total demand for the three quarters. On 1st March, 1966, the plaintiff asked the defendant by letter, exhibit 7, to reimburse the tax demanded from him for payment. On 17th March, 1966, the plaintiff paid the sales tax by chalan, exhibit 2. By several letters-exhibit 5 dated 27th May, 1966, exhibit 3 dated 10th June, 1966, and exhibit 4 dated 6th July, 1966- the plaintiff asked the defendant to reimburse the sales tax so paid. As there was no response from the defendant a notice (exhibit 1) under Section 80, Civil Procedure Code, was served on 22nd August, 1966, and the suit was filed on 23rd December, 1966.

Facts averred in the plaint are not disputed in the written statement. The suit was contested on the ground that the alleged transaction did not constitute a sale and sales tax was not exigible thereon. Plaintiff should have carried the matter higher up challenging the imposition of Central sales tax and despite the undertaking given, the defendant is not liable to reimburse the plaintiff as he paid the sales tax, which is not leviable in law.

The trial court decreed the suit holding that the defendant was liable to reimburse the plaintiff in terms of the undertaking. Our learned brother R. N. Misra, J., held that the transaction between the plaintiff and the defendant did not constitute a sale and sales tax was not exigible thereon. He, however, dismissed the appeal of the defendant holding that the defendant was liable to reimburse the plaintiff on account of the undertaking. The A. H. O. has been filed against the judgment of the learned single Judge.

2. Mr. Das contends that sales tax is not exigible on the transaction and there being no consideration behind the undertaking the defendant is not bound to reimburse the plaintiff.

3. The first question for consideration is whether Central sales tax is exigible on the alleged transaction. To appreciate the nature of the transaction, relevant provisions of the Order may be noticed :

Clause 2. (c) 'Purchase officer' means the Joint Director (Food), Government of India, Orissa, and includes the Deputy Director (Food) or any other officer appointed by the Central Government to exercise the powers of the purchase officer under this Order;

(d) 'Licensed dealer' means a person holding a valid licence under an Order Issued by the State Government under the Essential Commodities Act 1955 (Act 10 of 1955), for the licensing of foodgrain dealers and for the time being in force;

(e) 'Licensed miller' means the owner or other person in-charge of a rice mill holding a valid licence under the Rice Milling Industry (Regulation) Act, 1958 (Act 21 of 1958) ;

(f) 'Rice' means any variety of rice produced or manufactured In a rice mill worked by power.

Clause 3. Levy on rice.-(1) Every licensed miller shall sell to the purchase officer at the controlled price,-

(a) at the commencement of this Order, 50 per cent of the quantity of rice held in stock by him at such commencement; and

(b) beginning with such commencement and until such time as the purchase officer otherwise directs, 50 per cent of the total quantity of rice produced or manufactured by him in his rice mill every day.

(2) Every licensed dealer shall sell to the purchase officer at the controlled price-

(a) at the commencement of this Order, 50 per cent of the quantity of rice held in stock by him at such commencement; and

(b) beginning with such commencement and until such time as the purchase officer otherwise directs:-

(i) fifty per cent of the total quantity of rice got milled by him every day out of his stock of paddy ; and

(ii) fifty per cent of the total quantity of rice purchased or otherwise acquired by him for the purpose of sale from persons other than licensed millers or licensed dealers.

(3) ...

(4) The rice required to be sold to the purchase officer under Sub-clause (1) or Sub-clause (2) shall be delivered by the licensed miller or the licensed dealer to the purchase officer or to such other person as may be authorised in this behalf by the purchase officer.

Clause 4.-Determination of the price.-(1) ...

(2) The price payable for the stock of rice shall be determined on the basis of the result of the analysis which shall be communicated to the miller or the dealer, as the case may be.

(3) If, within a week of the receipt by him of the result of the analysis, the miller or the dealer, as the case may be, disputes the correctness of the result, the purchase officer shall arrange to get the other sample retained in the laboratory analysed, after previous intimation to the miller or the dealer about the date and time fixed for such analysis ; the miller or the dealer may, if he so desires, depute his representative to be present at the analysis.

(4) ...

4. It will thus be seen that the Order did not control mutuality in dealing in certain matters. The Order is silent about the time, place and manner of delivery. The price payable is on the basis of the analysis made as to quality of rice. It is open to the purchase officer to reject the goods if they are found unsuitable. If the conditions prescribed in the Order cause hardship, it is open to the licensed miller not to mill or procure rice at all. The Order does not compel any miller to produce, manufacture or procure any fixed quantity of rice. As a result of raising a dispute to the quality of the rice and the correctness of the analysis, the miller has some freedom of having higher price for a particular class of rice.

5. The main contention of Mr. Das is that there cannot be mutual assent between the contracting parties under the Order as the price is fixed, the quantity for supply and delivery was determined and the parties had no choice to go to strangers or outsiders in open market. In support of his contention he relies on Chittar Mal Narain Das v. Commissioner of Sales Tax A.I.R. 1970 S.C. 2000 and a Division Bench decision of this Court in Union of India v. Sales Tax Officer, Balasore Circle (1971) 1 C.W.R. 693, which is a case directly tinder the Order. The Orissa decision followed the aforesaid Supreme Court decision which was under the U.P. Wheat Procurement (Levy) Order, 1959. The Wheat Procurement Order dealt with in Chittar MalNarain Das v. Commissioner of Sales Tax A.I.R. 1970 S.C. 2000 is in pari materia with the Order which is the subject-matter of consideration in this case. If the aforesaid Supreme Court decision applies, then the appellant's contention that the transaction is not exigible to sales tax must be accepted.

6. In Chittar Mal Narain Das v. Commissioner of Sales Tax A.I.R. 1970 S.C. 2000, the definition of 'sale' as accepted in State of Madras v. Gannon Dunkerley 6- Co. A.I.R. 1958 S.C. 660 was adopted. It was laid down therein that 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 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. Mr. Das contends that though under the Order title to the goods passed from the plaintiff to the defendant, there was no contract between the parties inasmuch as the plaintiff was compelled under threat of penalty to sell the rice at the price fixed by the Order itself. No element of volition was left as between the contracting parties to settle the terms. Plaintiff had no way out but to sell the rice as directed by the defendant.

7. The nature of transaction of a sale under Control Orders was examined in Salar fung Sugar Mills Ltd. v. State of Mysore A.I.R. 1972 S.C. 87 by a Bench consisting of seven Judges. All the previous decisions in the field were reviewed. It is unnecessary to refer to, and discuss, the very decisions dealt with by the Supreme Court. It would be sufficient to extract the major conclusions of their Lordships in that case. Their Lordships observed thus:

These decisions establish that 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 restricting areas for transactions are all within the realm of planning economic needs ensuring production and distribution of essential commodities and basic necessities of community. The recent trends in these legal rules delimit the variety of structure of rights and duties which individuals may create by such acts and transactions. The complexity of modern activities and the consequent difficulty of providing for every eventuality have shaken fervour for freedom of contract as there was during the nineteenth century. The economic environment has changed. The individual freedom is to be reconciled with adequate performance by the Government of its functions in a highly organised society. Delimiting areas for transactions or parties or denoting price for transactions are all within the area of individual freedom of contract with limited choice by reason of ensuring the greatest good for the greatest number by achieving proper supply at standard or fair price to eliminate the evils of hoarding and scarcity on the one hand and availability on the other.

The Control Orders are to be kept in the forefront for appreciating the true character of transactions. It is apparent that the area is restricted. The parties are determined by the Order. The minimum price is fixed. The minimum quantity of supply is also regulated. These features do not complete the picture. The entire transaction indicates that the parties agree to buy and sell. The parties choose the terms of delivery. The parties have choice with regard to obtaining supply of a quantity higher than 95 per cent of the yield. The parties can stipulate for a price higher than the minimum. The parties can have terms for payment in advance as well as in cash. The grower may not cultivate and there may not be any yield. A factory may be closed or wound up and may not buy sugarcane. A factory can reject goods after inspection. The combination of all these features indicates that the parties entered into agreement with mutual assent and with volition for transfer of goods in consideration of price. Transactions of purchase and sale may be regulated by schemes and may be liable to restrictions as to the manner or mode of sale. Such restrictions may become necessary by reason of co-ordination between production and distribution in planning the economy of the country.

8. The aforesaid two passages lay down in unmistakable terms that if there is any volition in between the contracting parties in any sphere, however narrow or delimited it may be, then there Is a contract and the transaction amounts to sale. It is only when volition is completely excluded, the transaction may be an acquisition and not a sale though the words used may indicate that it is a sale. Each case would be governed by its own facts and the true nature and character of the transaction must be determined on an analysis of all the features arising in a case.

9. As has already been indicated in paragraph 4, there is scope for exercise of volition between the parties to the transaction and as such the transaction is a sale and is exigible to sales tax.

10. In view of the pronouncement in Salar Jung Sugar Mills Ltd. v. State of Mysore A.I.R. 1972 S.C. 87, we are unable to apply the principles laid down in Chittar Mal Narain Das v. Commissioner of Sales Tax A.I.R. 1970 S.C. 2000 to the facts of this case. Union of India v. Sales Tax Officer, Balasore Circle (1971) 1 C.W.R. 693, can no longer be accepted as good law and is hereby overruled.

11. From the Law of Contract, 6th Edition, by Cheshire and Fifoot, certain illuminating passages relevant to the question in issue may be extracted:

As the nineteenth century waned it became ever clearer that private enterprise predicated some degree of economic equality if it was to operate without injustice. The very freedom to contract with its corollary, the freedom to compete, was merging into the freedom to combine; and in the last resort competition and combination were incompatible. Individualism was yielding to monopoly, where strange things might well be done in the name of liberty. The twentieth century has seen its progressive erosion on the one hand by opposed theory and on the other by conflicting practice. The background of the law, social, political and economic, has changed. Laissez-faire as an ideal has been supplanted by 'social security'; and social security suggests status rather than contract....

The process of mass production and distribution, which has largely supplemented if it has not supplanted individual effort, has introduced the mass contract-uniform documents which must be accepted by all who would deal with large-scale organizations. Such documents are not in themselves novelties : the classical lawyer of the mid-Victorian years found himself struggling to adjust his simple conceptions of contract to the demands of such powerful bodies as the railway companies. But in the present century, many corporations, public and private, have found it useful to adopt, as the basis of their transactions, a series of standard forms with which their customers have little to do but comply. In the complex structure of current society the device has become prevalent and pervasive. The French, though not the English, lawyers have name for it.

'The term contract d'adhesion is employed to denote the type of contract of which the conditions are fixed by one of the parties in advance and are open to acceptance by any one. The contract, which frequently contains many conditions, is presented for acceptance en bloc and is not open to discussion.'

The only choice left to the individual is to accept or decline the transaction in toto....

All these developments emphasise that to make a contract may no longer be a purely private act. It may be controlled or even dictated by legislative or economic pressure, and it may involve the courts in feats of construction akin to or borrowed from the technique of statutory interpretation. Yet it is possible to exaggerate the effect. In daily life individual contracts exist and even abound. Moreover, as has already been said, the current law of contract is essentially the creation of the nineteenth century lawyers, and it is this law which their successors have to apply even in a new and uncongenial environment. The tools of the trade remain the same if they are put to uses that their inventors neither envisaged nor desired. What must be emphasized is the external approach to the idea of contract which is so conspicuous a feature of the Common law. It is for this reason that the title of the present chapter is not Agreement but The Phenomena of Agreement, concerned not with the presence of an inward and mental assent but with its outward and visible signs. (pages 23-25)

The aforesaid passages clearly bring out the essential features of a contract in Control Orders into bold relief. The Control Order fixes various terms. With all the terms restricting the volition on the part of one party, if the other party chooses to accept the terms, then there may be a contract. As has been observed by the learned author in the underlined* sentence, the only choice left to the individual is to accept or decline the transaction in toto.

As we have already observed, under the Levy Order there is room for exercise of volition in some sphere which was even taken notice of in Chittar Mal Narain Das v. Commissioner of Sales Tax A.I.R. 1970 S.C. 2000.

Reliance was placed by Mr. Das on State of Tamil Nadu v. Cement Distributors A.I.R. 1973 S.C. 668 dealing with the provisions of the Cement Control Order, 1958. This decision does not refer to Salar Jung Sugar Mills Ltd. v. State of Mysore A.I.R. 1972 S.C. 87. We find nothing therein to take a contrary view.

12. To sum up, our conclusion is that under the Order the contracting parties have some volition in certain spheres. The transaction between the plaintiff and the defendant is exigible to sales tax. As sales tax has been paid, defendant is bound to reimburse the plaintiff as per the terms of the undertaking. It is not necsssary to examine the other question whether merely on the strength of the undertaking defendant would have been liable to reimburse if Central sales tax was not exigible.

13. On the aforesaid analysis, the appeal fails and is dismissed with costs.

P.K. Mohanti, J.

14. I agree.


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