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Karam Chand Thapper and Bros. (Coal Sales) Ltd., Jaipur Vs. Sales Tax Officer, City Circle 'A' , Jaipur and Anr. (21.04.1961 - RAJHC) - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtRajasthan High Court
Decided On
Case NumberCivil Writ No. 45 of 1959
Judge
Reported inAIR1963Raj51
ActsConstitution of India - Article 226; Indian Contract Act - Sections 72; Rajasthan State Tax Act, 1954 - Sections 2
AppellantKaram Chand Thapper and Bros. (Coal Sales) Ltd., Jaipur
RespondentSales Tax Officer, City Circle 'A' , Jaipur and Anr.
Appellant Advocate V.P. Tyagi, Adv.
Respondent Advocate Kan Singh, Govt. Adv.
DispositionPetition allowed
Cases ReferredEastern Division Nagpur v. Husenali Adamji and Co.
Excerpt:
- - the petitioner had an alternative remedy by way of an appeal and the petitioner having allowed that remedy to lapse by efflux of time the present petition must fail. the term has been used without any qualification or limitation whatever, and comprises within its scope a mistake of law as well as a mistake of tact. tyagi, learned counsel for the petitioner, submits that unless the transaction between the petitioner and the state of rajas than is regarded as one for safe or purchase of coal no liability for payment of tax would arise under the sales tax act. in point of practice as well the railway receipts, a sample copy of which is ex. this part of the petitioner in the system of supply was perfectly consistent with the status of an agent on behalf of the collieries as claimed by.....beri, j.1. this is a petition under article 226 of the constitution of india wherein the petitioner has prayed for a writ of certiorari or direction in the nature thereof for quashing the order of assessment dated 20th december, 1956, and consequent demand notice by the sales tax officer, city circle, jaipur, the respondent no. 1.2. the circumstances which give rise to this petition, briefly stated, are these. the petitioner is a public limited company with its head office at calcutta and it carries on business for the supply of coal throughout india. it has a branch office at jaipur. this office at jaipur, besides the supervision of the supply of coal made directly by the collieries to the consumers through the petitioner also carries on the business of selling coal in retail. for the.....
Judgment:

Beri, J.

1. This is a petition under Article 226 of the Constitution of India wherein the petitioner has prayed for a writ of certiorari or direction in the nature thereof for quashing the order of assessment dated 20th December, 1956, and consequent demand notice by the Sales Tax Officer, City Circle, Jaipur, the respondent No. 1.

2. The circumstances which give rise to this petition, briefly stated, are these. The petitioner is a public limited Company with its head office at Calcutta and it carries on business for the supply of coal throughout India. It has a branch office at Jaipur. This office at Jaipur, besides the supervision of the supply of coal made directly by the collieries to the consumers through the petitioner also carries on the business of selling coal in retail. For the purposes-of retail sale the petitioner is registered with the Sales Tax Officer, Jaipur. On 2nd September, 1948, the petitioner entered into an agreement with the Equitame Coal Company Ltd., (hereinafter called the 'Collieries') whereby monopoly was granted to the petitioner for arranging the sale of their coal in the specified area. The collieries could effect the sale of their product through the ' petitioner and none else. According to the Colliery Control Order, 1945, the Government of India imposed certain restrictions on the sale and distribution of coal.

Inter alia it provided that no person other than the owner of a colliery shall sell, despatch or transport coal to a purchaser unless sanction was accorded by the prescribed authority of the Government of India. A colliery could charge only the price fixed under clause 4 of the Order and if a broker was employed by the colliery such brokerage was not to exceed as -/6/- per ton. Likewise, if a consumer purchased coal through a del credere agent he could also charge from the consumer certain specified commission. On 28th April, 1955, the petitioner for the first time entered into a contract with the Government of Rajaslhan for the supply of coal from collieries for consumption by the Jaipur Electric Power House. An agreement was executed between the petitioner and the Rajpramukh of Rajasthan (Ex. p-3). Until May, 1958, the petitioner continued to supply coal for Jaipur and Kota Power Houses on the terms of the agreement, the agreement having been renewed from time to time. According to the agreement the petitioner charged no commission from the State of Rajasthan but only got brokerage from the collieries @-/6/- per ton on the supply of coal made by the collieries to the various Electric Power Houses in Rajasthan directly.

3. The procedure for such supply as stated by the petitioner, was that the Chief Engineer, Electrical ana Mechanical Department, Government of Rajasthan, Jaipur informed the Deputy Coal Controller, Calcutta, for a monthly ad hoc allotment of coal through the petitioner. A copy was marked to the petitioner's office at Jaipur. The petitioner through its head office at Calcutta would submit a programme to the Deputy Coal Commissioner (Distribution) Calcutta, for the supply of coal from the collieries Who issued a sanction according to the programme and sent copies of such sanction to the Railway Allotment authorities so that adequate wagons might be allotted and the supplies made. On receipt of the sanction from the Deputy Coal Commissioner (Distribution), Calcutta, the collieries supplied coal directly to the Executive Engineer of the Power House concerned, in Rajasthan, and the Railway Receipt was sent to the consignee, through the petitioner, so that he might take the delivery of the coal from the Railways.

The bill for the sale of coal supplied to the State of Rajasthan along with the copies of Railway Receipts through the petitioner's head office at Calcutta reached their Jaipur office and the latter office collected the sale price from the State for the supply made to the State of Rajasthan by the collieries. The above arrangement is not disputed by the Sales Tax Department or the State. The petitioner submits that the aforesaid arrangement had the effect of making the petitioner vis-a-vis the collieries a broker and vis-a-vis the State a del credere agent.

4. For the year 1955-56 the petitioner submitted its return to the Sales Tax Officer, Jaipur. In its return the petitioner furnished information regarding its turnover under two heads (1). Regarding the supplies it made as a retail dealer and (2) the supplies it made to the Power Houses in the State of Rajasthan, which sum the petitioner showed under the heading Turn over of goods exempted without fee.' The Sales Tax Officer on the basis of that return submitted on 20th December, 1956, for the assessment year 1955-56 passed an order wherein for computing tax the Sales Tax Officer also included a sum of Rs. 7,11,941-13-3, representing the sale price of the coal supplied by the petitioner to the State of Rajasthan and assessed tax to the tune of Rs. 27,845/11/6.

The petitioner paid its tax on the retail sales effected by it as a registered dealer having realised the same from the consumers but it disputes its liability in respect of the coal supplies made by the collieries to the State of Rajaslhan and it submits that it is not liable to pay the demand of Rs. 20,346/14/9, which is the tax claimed on that supply since that was no sale at the hand of the petitioner in that respect. The petitioner approached the Government of Rajasthan, either to pay the tax demanded by the Sales Tax Officer or to pass an order exempting the supply of coal by the collieries from sales tax. Several representations were made to the Chief Engineer, Electrical and Mechanical Department, and to other authorities but without any beneficial results. The Sales Tax Officer by its order dated 8-8-1955 has levied a penalty in the sum of Rs. 7,000/- over and above sales tax. For the year 1956-57 also the petitioner submitted its return and included the price of the supply made tp the State of Rajasthan for consumption by its Power Houses under the column of Turnover of the goods exempted without fee.

The petitioner has challenged the demand of the Sales Tax Officer on the quantity of coal supplied by the collieries to the State of Rajaslhan on several grounds. It is submitted that the Sales Tax Officer has no authority under the law to demand any tax for the supply of coal under the Colliery Control Order, 1945 that under Article 286 of the Constitution the State of Rajasthan cannot enact a law imposing tax on sales or purchases of goods where such sale or purchase takes place outsids the State of Rajasthan; and that the petitioner has a fundamental right of free trade and any such illegal imposition of tax and demand, is an infringement of that right, ft has accordingly prayed for relief by way of a writ of certiorari and prohibition in regard to the two assessment years aforesaid,

5. The Sales Tax Officer and the Stale of Rajasthan have submitted a reply to the petition. They submit that the petitioner is a registered dealer under the Rajastnan Sales Tax Act. They disown any knowledge in respect of the arrangements made between the petitioner and the collieries. The Colliery Control Order, 1945, according to them merely regulates sale of coal and does not prescribe the procedure as alleged by the petitioner. They dispute the interpretation put by the petitioner on the Control Order. They contend that the petitioner alone is the contracting party with the State of Rajasthan. It is admitted that permits had to be obtained by the Government in getting supply of coal. The collieries according to them did not supply coal directly to them. It is the petitioner's company which made the supply. On the approval of the supply made by the petitioner a bill used to be submitted and the price was paid as per agreement with the Government. The Government had nothing to do with the collieries.

The respondents further submitted that the petitioner itself had placed before the Sales Tax Officer a consolidated statement of its turnover, including the price of the coal sold by it to the State of Rajasthan; and it was on the basis of this consolidated statement that the Sales Tax Officer proceeded to assess the petitioner. A copy of the consolidated statement had been submitted with the reply. The petitioner, assuming that it had a grievance, according to the respondents, ought to have filed an appropriate appeal tinder the Sales Tax Act rather than invoked the extraordinary jurisdiction of this Court. It is disputed that the sale of coal was outside the State of Rajasthan and, therefore, it is submitted that Article 226 does not appty to the case. The petitioner had an alternative remedy by way of an appeal and the petitioner having allowed that remedy to lapse by efflux of time the present petition must fail. It is submitted that the petitioner is also guilty of laches and its petition should be dismissed.

6. In its rejoinder the petitioner has endsavoured to explain the circumstances regarding the consolidated statement (Ex. A/1). It is alleged that the petitioner's manager of Jaipur office put his initial on a typed paper for purposes of keeping a record of his presence before the assessing authority. The petitioner further says that there had been some oral assurances given to it by the various officials of the State for redressing its grievance. These assurances and correspondence according to the petitioner were responsible for the delay in challenging the legality of the assessment order.

7. We have heard Shri Ved Pal Tyagi, the learned counsel for the petitioner and Shri Kan Singh, the Government Advocate on behalf of the respondents.

8. Before we proceed to examine this case on its merits it will be appropriate for us to consider and dispose of preliminary objections raised by the learned Government Advocate. Me contends that the petitioner should be refused relief because, (i) it has an alternative remedy, (ii) it is guilty of laches and (iii) also of acquiescence in submitting consolidated returns of out-turn. The petitioner's case is that the Rajasthan Sales Tax Act is not applicable in so far as it concerned the supply of coal by the collieries to the State of Rajasthan for consumption by its power houses through the petitioner. The very levy of the tax in regard to these transactions is challenged on the ground that it is without authority. Where a tax is levied without legal authority on any trade or business, it is open to the citizen aggrieved thereby to approach this Court or even the Supreme Court for a writ since his right to carry on trade and commerce is violated. Right to carry on, trade and commerce subject to certain limitations is a fundamental right and the matter has to be enquired into.

Kailash Nath v. State of U.P., (S) AIR 1957 SC 790 has been cited as an authority for the proposition that where fundamental rights are involved the existence of an alternative remedy is no ground for the refusal to issue an appropriate writ. In Himmatlal Harilal v. Stat9 of M. P., AIR 1954 SC 403 also, it was pointed out that 'The contention that because a remedy under the impugned Act was available to the appellant it was disentitled to relief under Article 226 stands negatived by the decision of this Court in State of Bombay v. United Motors (India Ltd.), AIR 1953 SC 252'. The existence of an alternative; remedy is no bar to a party who comes to this Court wife an allegation that its fundamental right has been intringed without the authority of law. In an appropriate case it may be the duty of the superior court to issue a writ of certiorari to correct the errors of an inferior court or tribunal called upon to exercise judicial or quasi judicial functions and not to relegate the petitioner to other legal remedies available to him. If it is held that the Sales Tax Act itself does not authorise any such imposition and the law is not applicable to the circumstances of the case the provision of a remedy by way of appeal under the Act cannot stand as a plea in bar.

9. The learned Government Advocate invited our attention to two cases of this Court Ram Niranjan Kedia v. I. T.Officer, 'A' Ward, Udaipur, AIR 1957 Raj 210 and Jethma:Ramswaroop v. State, 1959-10 STC 270 ; (AIR 1958 Raj 262).In Kedia's case notice under section 34(1) of the IndianIncome Tax Act was issued. An appeal was preferred againstthe order in question but because the appellate authoritiesfelt wholly powerless to stay the realisation of the demand made by the Income-tax Officer the assessee in thatcase sought relief under Article 226 of the Constitution.Wanchoo C. J., dismissing the petition observed that theIncome-tax Act wss a self-contained statute and no interference was called for under Article 226 of the Constitution.

In Jethmal's case the question whether sa'e of 'mishri', 'Patasa,' 'makhana,' 'olas' and toys made from sugar, was or was not liable for sales tax. The answer to the question depended upon an interpretation of the provisions of the Sales Tax Act. On the basis of these two cases the learned Government Advocate submitted that we should be disinclined to interfere in our extraordinary jurisdiction under Article 226 of the Constitution. We have already noticed that the petitioner in the case before us had challenged the authority of the State of Rajasthan to enact a law whereby tax on the sale of goods outside the State of Rajasthan court be levied and the application of the law itself to the circumstances of the case. The petitioner has also averred in its petition that it has a fundamental right of free trade and any such imposition infringes this right of the petitioner. We cannot, therefore, entertain the plea in bar.

10. The petitioner has also in our opinion adequately explained the delay in seeking relief from this court. The petitioner has alleged, and this allegation has not been controverted, that the Secretary of the Government, Public Works Department, submitted a proposal to the Council on 30th December, 1957, recommending that the transactions under dispute be exempted from the levy of tales tax. The Council passed a resolution to that effect on 30th January, 1958, but since the papers were not submitted through the Finance Department the decision of the Council could not .be implemented. This decision was verbally communicated to the petitioner and, therefore, the petitioner did not move this Court earlier. In our opinion, in view of these uncontroverted facts, the petitioner was justified in not rushing to this Court.

11. So far as the plea of acquiescence is concerned we night refer to a decision in Sales Tax Officer v. Kanhaiya Lal, AIR 1959 SC 135. This was also a case under the Sates Tax Act where the petitioner had deposited the sales tax for three years. Later the High Court of Allahabad held the levy of sales tax on forward transactions to be ultra vires. Thereupon, the assessee asked for 3 refund of the amount of the sales tax paid. The same was refused. The assessee moved the High Court of Allahabad praying for a writ of certiorari for quashing the aforesaid assessment orders and for a writ of mandamus requiring the sales tax authorities to refund the aforesaid amount paid by till assessee. The High Court held that the State was bound to refund the monies unlawfully received by it Iran the assessee by way of sales tax.

The State preferred an appeal before the Supreme Court and it was held that Section 72 of the Indian Conjtract Act makes no distinction between a mistake of law ana a mistake of fact. The term has been used without any qualification or limitation whatever, and comprises within Its scope a mistake of law as well as a mistake of tact. 'The true principle enunciated is that if one party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitled the party paying the money to recover it back from the party receiving the same it was also held that,

'No question of estoppel can ever arise where both the parties, as in the present case, are labouring under the mistake of law and one party is not more to blame than the other. Estoppel arises only when the plaintiff by his acts or conduct makes a representation to the defendant of a certain state of facts which is acted upon by the defendant to his detriment; it is only then that the plaintiff is estopped from setting up a different state of facts,'

The circumstances in the aforesaid case of the Supreme Court lead a step further than the one before us. In the Supreme Court case the tax was paid without demur and later on discovering that it was ultra vires for the State to levy a tax of that kind a claim for refund was made. Even then the fact of payment was not held to constitute any estoppel against the assessee. in our case the petitioner-assessee included in his return the amount relating to the supply of coal through it under the head 'Turnover of goods exempted without fee.' It agitated the question before the Department and the State. The assessee, therefore, on account of a mere submission of a consolidated statement in his return (Ex. A/1) cannot be regarded as hairing acquiesced in the levy of the tax, the legality or Which it is challenging before us.

Even if we do not accept the explanation offered by the Manager of the petitioner's company that he signed the consolidated statement to evidence his presence the mere inclusion of an item in the return on which no tax is leviable under the law would not create an estoppel against an assessee. It is plain that tax can only be levied and collected on the authority of law. In this view of the matter the preliminary objections raised by the learned Government Advocate, in our opinion, have no substance and must be overruled.

12. Mr. Tyagi, learned counsel for the petitioner, submits that unless the transaction between the petitioner and the State of Rajas than is regarded as one for safe or purchase of coal no liability for payment of tax would arise under the Sales Tax Act. According to the learned counsel in view of the provisions of the Colliery Control Order, 1945 (hereinafter referred to as the Control Order) the petitioner was a mere broker, entitled to commission and the transaction between the petitioner and the State could in no sense be characterised as sale. This is borne out, urged the learned counsel by the agreement dated 28th April, 1955, between the State of Rajasthan and petitioner (Ex. P/3), wherein the petitioner was described as a mere contractor. Price for the sale as per clause (6) of the agreement was to be at the controlled rate.

In point of practice as well the Railway Receipts, a sample copy of which is Ex. P/2, the consignor was Rampur Colliery and the consignee was described as the Executive Engineer (Generation) Electrical and Mechanical Department. The procedure of supply according to the Control Order was as stated in paragraph 9 of the petition. In actual practice the Deputy Coal Commissioner (Distribution) Calcutta, used to sanction an allotment of coal in favour of the Chief Engineer, Electrical and Mechanical Department, Rajasthan, Jaipur, as would be apparent from Ex. P/4, a sample allotment order. The petitioner was, therefore, a mere broker or del credere agent and not a seller. The sale took place outside the State. In spite of the socalled admission by the petitioner's Manager in giving the consolidated statement of sales for the assessment year 1955-56, it was the bounden duty of the Sales Tax Officer to take notice of the Control Order and the agreement between the parties under which there could be no tax liability against the petitioner and the assessment order as also the order imposing penalty deserved to be quashed.

13. The learned Government Advocate submitted that according to Clause (5) of the agreement though the coal was supplied by colliery, only that part of supply was to be paid which was accepted by Jaipur power House as per specification. Thus the State retained a right to accept or reject the goods at Jaipur. Therefore, the sale should be deemed to have taken place at Jaipur. The petitioner on its own showing is a registered dealer, which according to its definition under the Rajasthan Sales 'ax Act, Section 2 Sub-section (f) includes a person who carries on business of supplying goods in the State whether en commission or for remuneration or otherwise. The petitioner, therefore, was a dealer whose turn over in respect of the sale or supply of the goods was liable to taxation.

Even as an agent of the collieries outside the State of Rajasthan he fell within the extended meaning of the term 'dealer'. The mere necessity of obtaining a permit could not alter the nature of the transaction. The argument of mistake is necessarily of one of fact and in view of the admission contained in the consolidated statement as also the letter dated 10th April, 1957, on behalf of the petitioner, it was futile to suggest that the petitioner was labouring under any mistake. In effect on the terms of the agreement it was either one of sale by the petitioner in Rajasthan or of two sales one by the collieries to the petitioner and the other by the petitioner to toe State. In either case the petitioner was liable to pay tax.

14. Before we examine the respective contentions of the parties it will be appropriate to briefly review the provisions of the Control Order in so far as they affect the case before us. These provisions have an important bearing in the solution of the controversy. Clause 4 of the Control Order provides that the Central Government, may by notification in the Gazette of India fix the price at which coal may be sold by colliery owners. Clause 5 prohibits a colliery owner from selling or agreeing to sell, or offering to sell, coal at a price different from the price fixed under clause 4 of the Control Order. No agreement to the contrary shall be operative unless the same is modified in regard to price as fixed under clause 4.

Clause 6 of the Control Order inter alia provides that where a colliery owner has signified to the Deputy Coal Commissioner (Distribution) in writing his willingness to sell direct to consumers and an allotment is made by the Deputy Coal Commissioner (Distribution) to a consumer with his consent for such direct sale, the coal shall be delivered to the consumer at 'the price fixed under Clause 4, and no commission or other charges shall be paid in addition thereto, except where a broker is employed, a brokerage not exceeding six annas per ton may be paid by the colliery owner to the broker. Where the coal is purchased through a del credere agent then what he is entitled to receive is also specified in Clause 6 of the Control Order. Under Clause 12E no person shall acquire or purchase or agree to acquire or purchase any coal from a colliery and no colliery owner or his agent shall despatch or agree to despatch or transport any coal from the colliery except under the authority and in accordance with the conditions contained in the general and special authority of the Central Government.

15. In the case before us we find that by a letter dated 2nd September, 1948, the colliery granted the petitioner a monopoly for the sale of the coal produced by the collieries in the various areas mentioned in that letter (Ex. P1). Rajputana, as Rajasthan was popularly known in 1948, was one of the areas for which monopoly was granted to the petitioner. The letter is not of much importance because here the nature of the transaction has to be determined on the conditions contained In the control Order and the actual procedure followed by the parties in the sale and supply of coal. The petitioner entered into an agreement with the State of Rajasthan wherein the petitioner stands designated as a contractor to supply coal of certain specifications to the Rajasthan Power House at Jaipur and deposited Rs. 10,000/- by way of security for due performance of the terms of the agreement It is true that if the goods were not in accordance with the specifications contained in the agreement they could be rejected.

Certain quantities were fixed for supply and the price was to be in accordance with the controlled rate. It is obvious, therefore, that at the time of the execution of this agreement the parties had within their minds what they have described as 'controlled rate' and this obviously related to the rates notified under the Control Order. Therefore, it will be apparent that the coal was to be sold in accordance with the provisions of the Control Order. We nave already noticed that under Clause 12E of the Control Order no person could acquire or purchase any coal from a colliery and no colliery could despatch any coal except under the authority and in accordance with the conditions contained in a general or special sanction granted by the Central Government. It is not disputed that the Executive Engineer (Generation) Electrical and Mechanical Department, Rajasthan, Jaipur, used to be granted sanction to obtain coal for the Power House by the Deputy Coal Commissioner (Distribution).

A sample copy of such sanction has been placed he-fore us (Ex P/4). The Government of India, Central Water and Power Commissioner, (Power Wing) Simla, used to allot certain quota of coal to the Executive Engineer (Generation) of the Rajasthan State. (Ex. P/5). A sample railway receipt admittedly indicates that the consignee used to be the Executive Engineer, Power House, Jaipur. This railway receipt, in practice, was sent to the consignee through the petitioner. The bill for the sale price of the coal supplied along with the copies of railway receipts were sent by the head office to its Jaipur office of the petitioner for collection of the price. Respondents' contention in their reply that they had nothing to do with the collieries does not appear to be correct. In this state of facts we have to ascertain whether the petitjener ever came to acquire any right or title in the coal received by the State of Rajasthan.

We have it on record that the Deputy Coal Commissioner (Distribution) sanctioned the allotment of coal to the State Engineer. In the absence of any such sanction the collieries could not supply the coal to the petitioner nor could the petitioner purchase the coal from tne collieries. The sanction was necessary before the collieries could, under the Control Order, sell or despatch any ceal. Thereafter the collieries despatched by rail the coal, so sanctioned directly to the State Power House through its Engineer. The consignee of the railway receipt was the Engineer and not the petitioner. Thus at no stage title in goods despatched by the collieries passed or could pass to the petitioner. In view of the Control Order the collieries could not sell or despatch coal to a party other than the one in whose favour the sanction was accorded by the Central Government. No sanction in favour of the petitioner was ever granted in respect of the coal despatched to the State, and consumed by it.

The delivery of the goods could be only made to the consignee. The petitioner merely received from the collieries the Railway Receipts of the coal despatched which were to be handed over to the State of Rajasthan, and the price collected. This part of the petitioner in the system of supply was perfectly consistent with the status of an agent on behalf of the collieries as claimed by the petitioner. It had not the effect of passing any title in the goods (coal) to the petitioner. The price of the coal so supplied to the State was the one that was 'controlled' namely, it was In accordance with the notification under clause 4 of the Control Order. The petitioner could claim nothing in addition to this price as by way of sale tax from the consumer except perhaps it fixed remuneration as a del credere agent. In fact, the petitioner merely collected brokerage from the collieries as per the provisions of the Control Order.

It never acquired the position of an owner capable of transferring title in the goods by means of sale. The petitioner collected the price from the State and this it could very well do as an agent. In our opinion, therefore, at no point of time, right from the moment the coal lay ready for despatch from the collieries down to the time it went into the furnace cf the power houses at Jaipur or Kota, the petitioner, in view of the agreement and the Control Order, had any right or title to transfer by way of sale in the coal supplied to the State. Therefore, it could not purport to sell the coal. If no sale could be or was effected by the petitioner, no liability to 'sales tax arose against the petitioner. The words sale and supply go together and the tax operates upon sales and not on any other kind of supply where, the person and through whom the supply is made has no title in the goods at all.

Under the Constitution also the State can legislate for imposing tax on the sale of goods, otherwise the imposition would be illegal.

In this connection we might refer to the decision in State of Bombay v. Ratilal Vadilal and Bros. 1951-12 STC 18; (AIR 1961 SC 1106) which is a case very much in point. The facts were that Ralilal Vadilal and Bros., were commission agents through whom 22 tons of coal were obtained by a brick manufacturer. The colliery supplied the coal to the brick manufacturer directly. The consignment was in the name of the brick manufacturer. The bill was sent by the colliery to Ratiial Vadilal and Bros., to collect the price of the coal supplied together with their commission. The liability to pay the colliery rested upon Ratilal Vadilal and Bros. The question arose whether in the circumstances Ratilal Vadilal and Bros., was or was not a dealer within the meaning of the Bombay Sales Tax Act, 1953. The Supreme Court held:--

'The scheme of the Control Order shows that no sale of coal could take place except to a person holding a certificate. A sale otherwise was in contravention of the Control Order. The certificate which has been produced in the case, though made out in the name of the respondents, shows the consumer as the consignee. It is thus plain that there was no sale by the colliery to the respondents, but directly to Karsandas, though through the agency of the respondents. The respondents also, when they made out the bill to Karsandas, mentioned that he was the consignee, and that they were only charging their 'middlemen' commission, in these circumstances, it is difficult to hold that the colliery sold coal to the respondents, and that they, in turn, sold it to Karsan Das. There were no two sales involved; there was only one sale, and that was by the colliery to the consumer. The respondents never became owners by purchase from the colliery, because the colliery would not have sold coal to them, nor could they have bought it unless they had obtained a certificate. The position of the respondents was merely that of agents, arranging the sale to disclosea purchaser, though guaranteeing payment to the colliery on behalf of their principal.'

16. This case lays down the principle on which the liability for sales tax in transactions of this character can be ascertained. If at all the case before us is slightly better as both the certificate and railway receipts were drawn in favour of the Power House Engineer of the State of Rajasthan.

17. It was, however, urged that the tern 'dealer' as defined in the Rajasthan Sales Tax Act includes not only a transaction of sale but also of 'supply'. On this ground the above Supreme Court decision was sought to be distinguished. It was argued that in the Bombay Sales Tax Act in the definition of the term 'dealer' the word 'supply' was missing. In the State of Bihar v. The Bengal Chemical and Pharmaceutical Works Ltd., 1954-5 STC 28: {AIR 1954 Pat 14) the significance of the word 'supply has been considered in great detail. The definition of a 'dealer' in the Bihar Sales Tax Act, 1944, was practically identical with the definition as given in the Rajasthan Sales Tax Act. The majority opinion expressed in the case is by Ramaswami and Dass JJ. Ramaswami J., observed:--

'In my opinion, the word 'supply' cannot be interpreted in its literal absolute sense, but must be given a limited and qualified sense. In a case of this description, the rule of interpretation is noscitur a sociis. The words as they were, take colour and meaning from their context, that is to say, the more general word is restricted to a sense analogous to the less general word. In the present case, therefore, I hold that the word 'supply' in section 2 (c) of the Act must be interpreted as they include the conception of sale.'

To the same effect is the view of Dass, J.

18. In Karamchand Thapar and Bros. v. State of Bihar, 1956-7 STC 58 (Pat), the word 'supply' in the Bihar Sales Tax Act again came to be considered and Das, C. J., and Kanhaiya Singh, J., held that the word 'supply' in the definition of dealer in section 2 (c] of the Bihar Sales Tax Act was not to be given its literal meaning but must be interpreted in a qualified sense. 'Supply' is merely a form of sale and despatch, and unless there was sale there was no supply of goods. In this case as Well the petitioner did not deal in coal but merely acted as a middleman and arranged for the despatch of coal from the collieries to the intending buyers. The sales tax authorities held that the assessee being a registered dealer and the registration being in operation it was liable to pay tax on its sale of coal. The High Court held that merely because an assessee is a registered dealer it will be erronous to say that even the transactions carried on by it as a middle-man will be included in its taxable turnover.

19. We are in respectful agreement with the above principles and are of the view that the word 'supply' in the definition of the term 'dealer' has a limited meaning which partakes elements of sale. There is an additional reason in our opinion for accepting such an interpretation. The relevant entry in the. State list (Entry 54 -- List 11 to the Seventh Schedule of the Constitution) authorises imposition of tax on sale or purchase of goods other than newspapers, presumption being in favour of constitutionality of a statute, when the legislature employed the word 'supply' it could not have done so in a sense where elements of a sale as understood in law were wanting. Therefore, the decision of Ratilal Vadilal would appear to govern the case before us notwithstanding the use of the additional word 'supply' in dealer's definition in the Rajasthan Sales Tax Act.

20. Our attention was however, invited to two cases of the Supreme Court -- Bayyana Bhimayya v. Government of Andhra Pradesh, 1961-12 STC 147 : (AIR 1961 S C 1065) and Commissioner Sales Tax, Eastern Division Nagpur v. Husenali Adamji and Co., (1959) 10 STC 297 : (AIR 1959 SC 887). These cases are clearly distinguishable and do not support the contention that the liability to pay sale tax would attach to a person who has supplied goods merely as a broker or commission agent.

21. In the Andhra Pradesh case the facts were that the assessees were dealing in gunnies. They entered into a contract with two mills agreeing to purchase gunnies at certain rate for future delivery. The mills agreed to deliver the goods to third parties if requested by the assessees. The mills, however, did not accept the third parties as contracting parties but only as agents of the assessees. Before the date of delivery the assessees entered into an agreement with third parties by which they charged something extra from them and handed over to the third parties delivery orders. The mills delivered the goods against these delivery orders along with an invoice and a bill, and collected the sales tax from the third parties. The assessees contended that there was only one transaction of sale between the mills and the third parties and that the transaction between the assessees and the third parties could not be treated as a sale.

The Supreme Court held that there were two transactions of sale and sales tax was payable on both these points. We have already noticed that the agreement of sale and purchase was between the assessees and the mills. The mills refused to recognise, the third parties as contracting parties. That transaction which took place between the assessees and the third parties was again a transfer of property in the goods and constituted sale. In the case before us there was no sale at any point of time by the collieries to the petitioner. The certificate of allotment was granted to the Executive Engineer, Rajastnan, Jaipur, the engineer was designated as the consignee in the railway receipt, the petitioner merely passed on that railway receipt to the Enginaer for the purchases (sic) of taking delivery from the railway and added nothing by way of profit. Therefore the case before us contains no element of sale between the collieries and the petitioner.

22. The facts of the sacond case from Nagpur were that the assessee was assessed to sales tax on the sale of logs to a company at Ambernath in the State of Bombay. The contract of sale between the assessee and the Company inter alia provided that the logs on arrival at Ambernath were liable to be rejected by the company's factory manager if the logs did not conform to the specifications, notwithstanding the fact that such logs might have been accepted by the company's representative before being railed to Ambernath. The assessee railed the goods from railway station in the Chanda district and the railway receipts were made out in the name of the company as consignee. The logs on arrival at Ambernath were inspected and measured by the company's factory manager and prices, which were F. 0. R. Ambernath, were then paid by the company to the assessee's agent at Bombay.

It was conceded by the department that the contract was for the sale of unascertained goods. It was held by the Supreme Court that the property in the goods did not pass to the company until the logs arrived at Ambernath and the sale, therefore, did not take place in the Central Provinces and the assessees were not liable. This was a case where the territorial nexus of the sale was to be ascertained. The learned Government Advocate, However, relied on this case for more than one reason. He submitted that according to the agreement between the State of Rajasthan and the assessee the former had a right to reject the goods if they were not in accordance with the specifications. This they could do at Jaipur. Therefore, it was urged that the sale in the present case took place at Jaipur and therefore, it was liable to tax.

Further according to the Rajasthan Sales Tax Act the collieries being outside the State of Rajasthan, their agent, the petitioner before us, is a 'dealer' in view of the explanation given in the Act, and therefore, liable to pay tax. In the Nagpur case before the Supreme Court as we have already noticed it was conceded by the department that the contract was for the sale of unascertained goods. In the case before us the quality of the coal has been mentioned in the agreement. The quantity of the coal used to be regulated by allotment orders. All that the Rajasthan State reserved unto itself was the right to reject if the quality other than the one specified in the agreement was supplied, then it could refuse to accept the same. Thus the contract before us is not one for sale of unascertained goods. Moreover, the petitioner not only acted as the agent for the collieries but had also actec as the agent for the State of Rajasthan. Broker's position according to Wharton in his Law-Lexicon is in the following terms;

'The engagement of a broker is like that of a proxy, a factor, and other agent; but with this difference, that the broker being employed by persons who nave opposite interests to manage, he is, as it were, agent both for the one and the other, to negotiate the commerce or affair in which he concerns himself. Thus his engagement is twofold, and consists in being faithful to all the parties, in the execution of what each one of them entrusts him with, and his power is not a trust, but to explain the intentions of both parties, and to negotiate in such a manner as to put those who employ him in a condition to treat together personally.'

23. In this view of the matter we are of the opinion that the petitioner acted merely as a broker, a middleman who affected no sale or supply in the nature of sale or transferred any title in the property. In fact at no point of time he had any title to pass. The price paid by the State to the collieries could not be included in the taxable turnover of the petitioner. The order of the Sales Tax Officer, dated 20th December, 1956, is, therefore, not authorised by law to the extent it relates to the price paid by the State of Rajasthan to the collieries for supply of coal. To that extent only the order dated 20th December, 1956, is quashed. As a logical corollary the order imposing penalty for the non-payment of tax on this part of the turn-over is also quashed. We make no orders regarding future assessments for we hope they will be made in the light of this decision.

24. We allow this petition but in the circumstances of this case leave the parties to bear their own costs.


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