1. The assessee who is common to these petitions seeks to quash the reassessment orders relating to assessment years 1960-61 to 1964-65, and the original order of assessment for the assessment year 1965-66, bringing to tax certain transactions as sales of goods liable to charge under the provisions of the Madras General Sales Tax Act, 1959. The assessee is a registered private limited company and is a registered dealer with its registered office at Mukkudal, and carries on the business of manufacture and sale of beedies. For the year 1960-61, it made in Form A-l a return of a total turnover of Rs. 80,50,151.02 and claimed exemption on the entire turnover as representing the turnover in tobacco and its products, namely, beedies. Section 8 of the Act exempts a dealer who deals in the goods specified in the Third Schedule to the Act from payment of tax in respect of such goods, the exemption being subject to the prescribed restrictions and conditions. Item 2 in the Third Schedule covers tobacco and its products. It was in view of these provisions the assessee claimed exemption which was allowed in the first instance. But, by an order dated 26th February, 1966, the Deputy Commercial Tax Officer of Ambasamudram reopened the assessment order, determined the gross turnover ' at Rs. 1,28,14,809.76 and the taxable turnover at Rs. 21,85,393.74. The taxable turnover, according to the Deputy Commercial Tax Officer, consisted of sales of beedi leaves, fibre and root flour and was charged at 2 per cent, resulting in a tax demand of Rs. 43,707.88. The reassessment order shows that there were two kinds of transactions. The first was, the assessee supplied raw tobacco, leaves for rolling beedies, twine or fibre, old newspaper, gunnies etc. to persons called branch managers. In the books of the assessee, a certain sum was debited against them purporting to be the cost of these materials. The branch managers got the beedies rolled out of the materials supplied, and delivered manufactured beedies to the assessee. They got payment from the assessee at so much per thousand. The turnover relating to each of the materials supplied was separately calculated by the assessing officer and the total arrived at as referable to the aggregate amount of sales of these materials. The second category of transactions was this: Instead of noting in the accounts the value of the goods supplied in terms of money, the assessee showed in them goods supplied in terms of quantity and when finished products were delivered, certain amount of payment termed as wages was entered. The assessing officer calculated the prevailing market value of these materials, and, on that basis, arrived at the net taxable turnover. The assessing officer himself noted in the reassessment order for 1960-61 that the materials supplied to the contractors were for the purpose of assembling the dust and leaves into beedies. Objection was raised by the assessee before the assessing officer to bringing to tax both the categories of transactions on the ground that there was no element of sale at all in them and that the cost of the materials debited and the cost of beedies manufactured and delivered in the first category of cases were but book entries for purposes of accounting and that the differences between the cost of materials and the cost of beedies manufactured and delivered represented only the remuneration or wages paid to those who actually got the beedies rolled and delivered to the assessee, whether they were called contractors or branch managers. It was accordingly urged before the assessing officer that there was no payment of price for the goods and no passing of property in them to the contractors or branch managers. The assessing officer met this objection by stating that, in the account books of the assessee the supply of materials was shown as sales, the value being fixed in terms of money and the intention behind it was only a contract of sale and not one of contract for work and labour. In the second category of transactions the assessing officer's view was that they should be treated as some kind of barter involving transfer of property in the materials supplied in exchange for finished products of beedies. The assessing authority negatived the assessee's contention that the title in the goods was retained in him when the supply of raw materials was made for manufacture, and in so doing he reasoned out that there was no need for debiting the account of each manufacturer with a quantity of raw products supplied and to make him responsible for the goods supplied to him; further, there was no recorded proof with the assessee to support his argument that the title had not passed. While bringing to tax the said net turnover as having escaped assessment, he levied also a penalty of Rs. 65,562 which is one and a half times the tax levied on the net turnover. Though in the counter-affidavit it is made to appear that the penalty was levied under Section 12(3), it could not obviously be so as this was a case of reassessment of turnover which, according to the assessing officer, had escaped assessment or to which exemption from tax had been given but wrongly. The penalty could, therefore, only have been levied or imposed under Section 16(2).
2. The facts in the other petitions are similar except for the difference in the turnovers taxed and penalties levied and the fact that in W.P. No. 379 of 1967 relating to 1965-66, the assessment itself was made under Section 12, not a case of reopening.
3. Sri V. K. Thiruvenkatachari, for the petitioner, contends that both the reassessments as well as the assessment are illegal inasmuch as there was no element of sale in either of the two categories of transactions. He also submits that in any case, the levy of penalty, be it under Section 12(3) or Section 16(2), was unjustifiable. Before we deal with these contentions we may observe that normally this Court will decline to act under Article 226 of the Constitution to quash orders of assessment or reassessment for which statutory remedies are available. No one can be allowed to bypass those remedies and resort to this Court unless a question of vires of a statute or a rule, or an error of jurisdiction is involved. Certiorari, of course, will be available to correct an error apparent on the face of the record, but if it is an error which is within the competence of the appellate or revisional authority to correct, there will be no jurisdiction for direct application to this Court. Occasionally, when patent injustice appears to have been done, and compelling the aggrieved party to resort to statutory remedies will involve not only long delay but harassment, it will be in the discretion of this Court to entertain a petition under Article 226 of the Constitution. The language of that article is so wide that by itself it places no limitations as we have just now mentioned, and the reference therein to certain forms of Crown Writs is only by way of illustration. Wide as the powers of this Court are under the article, it has, for that very reason, to place certain restrictions upon itself, the applicability of which is entirely left to its discretion.
4. In this case, the second category of transactions at least is patently clear as not being liable to tax, as we shall presently show. If this category involves no element of sale at all, the assessing officer in that case, in bringing them to tax, will be acting in excess of his power and jurisdiction under the provisions of the Act. In the first category of transactions, the assessing officer does not also appear to have kept in view the correct principles which should be applied in determining whether given transactions amount to sale of goods liable to charge under the Act. We are of opinion, therefore, that the objection to the entertainability of the petitions should be overruled.
5. We shall now proceed-to deal with the first of the contentions of the petitioner. What is a sale of goods Section 4(1) of the Sale of Goods Act defines it as a contract of sale of goods whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a price. The essential elements of a sale are: (1) goods, (2) seller and purchaser, (3) agreement between them for sale and purchase, (4) transfer of property in the goods from seller to buyer as a result of the agreement between them, and (5) the price being the consideration for the transfer of property under the agreement. In each case, the facts will have to be examined to see whether all these elements are present. If any one or more of them is absent, the conclusion is inevitable that the facts do not constitute a sale of goods. A mere nomenclature or description of the transaction as sale will not be conclusive. In most cases it may be prima facie evidence of sale. But where the character of the transaction as a sale of goods is in question, it becomes necessary to go behind the description of the transaction as a sale and examine the facts in the light of the essential elements required to make up a sale of goods. In this case the assessee's objection before the assessing officer was that the materials were supplied by the assessee only for the purpose of the recipient of these materials assembling them into finished beedies and delivering to the assessee the manufactured beedies. Whether this is so or not has to be examined. It is of course for the assessee who is in possession of the necessary evidence to place it before the assessing officer. There is no presumption that, a given transaction is a sale of goods. But when a party describes it so in the account books or other documents, the assessing officer may justifiably proceed on that basis. When objection is, however, taken by the party that the description of the transaction as a sale is not correct and that in view of certain reasons it is not in fact a sale, it is then incumbent upon the assessing authority to probe further and satisfy himself that the transaction, by reason of the fact that it contains all the elements of sale, is a sale. This is necessary because it is only a sale of goods which attracts charge and is taxable under the provisions of the Act.
6. What is stated before us is that the trade or manufacture of beedies and sale thereof has, in the industry, taken a particular pattern over a number of years and it is this pattern which is followed by the assessee. Our attention has been invited to a Government Memorandum No. 62536/N/48-3 dated 20th June, 1949, addressed to the Board of Revenue (Commercial Taxes), Madras, which reads :
The Board of Revenue is informed that the leaves and thread are issued by the beedi factories together with the tobacco dust only for the purpose of assembling the dust into beedies, and are actually used only for that purpose and no other. Under Section 4 of the Madras General Sales Tax Act, 1939, the tobacco dust and the beedies are not liable to sales tax. The leaves and thread which are used only for making the beedies may also be regarded as exempt from such taxation.
7. This memorandum has been produced before this Court on behalf of the respondent on a petition taken out for the purpose. It appears from the records produced that before issuing this memorandum, the Government had before it the reports from the Deputy Commissioners of Commercial Taxes in respect of the matter and also the representations of the trade. The same view in respect of the character of the supply of the materials appears to have been taken in some of the cases decided in the context of the provisions of the Factories Act.
8. In J. S. Ahmed Hussain & Sons v. Secretary, United Beedi Workers' Union A.I.R. 1959 Mad. 221, the facts were these: There were certain proprietors engaged in the manufacture and sale of beedies. The beedi rolling work was done by certain persons engaged by contracts called intermediaries. The work of rolling beedies was not done in any of the premises belonging to, or at the disposal of the proprietors, but in the premises of the intermediaries with whom the proprietors had entered into written contracts. The contracts provided for supply by the proprietors to the intermediaries of tobacco and beedi leaves. The intermediary should engage premises of his own and obtain the requisite licence to carry on the work of having the beedies rolled in such premises. The intermediary should meet all the incidental charges of rolling the beedies, including the cost of thread and the remuneration paid to the beedi rollers. A further term in the contract was that for every unit of thousand beedies rolled and delivered by the intermediary to the proprietors, the latter should pay the stipulated amount after deducting the cost of the tobacco and the beedi leaves supplied by the proprietors. The intermediaries were forbidden under the contract from entering into similar engagements for any other industrial concern. The evidence in that case brought out that it was left to the discretion of the proprietors to supply or not further material for the manufacture of beedies. The intermediaries could not compel the proprietors to ensure either that the intermediaries or those that work for them were provided with work and the intermediaries had to meet their charges out of what was payable to them for the unit of thousand beedies rolled and delivered to the proprietors. The legal liability to meet all the charges for rolling the beedies in their premises was on the intermediaries and their only right under the contract was to get from the proprietors payment at the stipulated rate, less the cost of the raw materials for every unit of thousand beedies. An industrial dispute arising out of a cut introduced in the rate payable to the beedi rollers was referred to the Tribunal, who passed an award restoring the rate payable to the beedi rollers. Rajagopalan, J., disagreeing with the Tribunal, was of the view that the jural relationship between the intermediary and the proprietor was not that of master and servant and that the intermediary himself was not a workman employed by the proprietor in his industry within the meaning of Section 2(s) of the Industrial Disputes Act. The learned Judge, therefore, held that the Tribunal had no jurisdiction to direct the proprietors to pay the beedi rollers at the rate specified in the award. When the matter was taken up in appeal, a Division Bench of this Court in United Beedi Workers' Union v. Janab S. Ahmed Hussain & Sons  I L.L.J. 285 reversed that judgment and upheld the view of the Tribunal as to the jural relationship between the proprietors and contractors. The learned Judges interpreted the facts and came to the conclusion that the intermediaries were but branch managers of the proprietors and the persons employed by the intermediaries for beedi rolling were workmen qua the proprietors. In other words, their view was the proprietors were manufacturers of beedies. They went on to observe ;
The amount paid by the management for the beedies delivered to them covers all the expenses incurred by the intermediary and a small margin is also left by way of remuneration for his services. The contract is practically one-sided in that the proprietor can at his choice supply beedi leaves or refuse to do so. The intermediary has no right to insist upon the supply of beedi leaves to him.
Nay more : evidence reveals that the management takes the real hand in settling all matters relating to the workers, and the intermediary is a mere cipher.
9. The implication is that the relationship between the proprietors and the intermediaries was not that of vendor and purchaser and that, therefore, the transaction between them involved no element of sale.
10. One of the proprietors then took the matter in appeal to the Supreme Court in D.C. Dewan Mohideen Sahib and Sons v. United Beedi Workers' Union  II L.L.J. 633, but unsuccessfully. The view in United Beedi Workers' Union v. S. Ahmed Hussain & Sons  I L.L.J. 285 was confirmed. In the course of its judgment the Supreme Court said:
The sale of raw . materials to the so-called independent contractor and resale by him of the manufactured beedies is also a mere camouflage, the nature of which is apparent from the fact that the so-called contractor never paid for the materials. All that happens is that when the manufactured beedies are delivered by him to the appellants, amounts due for the so-called sale of raw materials are deducted from the so-called price fixed for the beedies. In effect, all that happened is that the so-called independent contractor is supplied with tobacco and leaves and is paid certain amounts for the wages of the workers employed and for his own trouble. We can, therefore, see no difficulty in holding that the so-called contractor is merely an employee or an agent of the appellants as held by the appeal court and as such employee or agent he employs workers to roll beedies on behalf of the appellants.... But there can be no doubt that the workers employed by the so-called contractors are really the workmen of the appellants who are employed through their agents or servants whom they choose to call independent contractors.
11. It is clear on the facts in these cases that the proprietors supplied raw materials to the intermediaries, who were their employees or agents, got beedies rolled and delivered by them, that the difference between the cost of materials and cost of the manufactured beedies represented but the remuneration or wages payable to such intermediaries, their agents or employees and that, therefore, there was no element of sale involved in the transactions between the proprietors and the intermediaries. With reference to the Government memorandum and these decided cases it is urged before us that the petition is not different on facts in the instant petitions.
12. It seems to us that inasmuch as the assessing authority was merely led by the use of the word 'sale' in the account books without reference to other relevant facts relating to the elements that go to make up a sale of goods, the impugned orders are liable to be quashed. So far as the first category of transactions is concerned, the assessing authority should find out whether apart from the use of the word 'sale' in the account books in the context of debiting the cost of materials supplied, there, was transfer of property in the goods under an agreement for a price paid or promised therefor. It will be relevant to see in the absence of any agreement produced by the assessee whether the entries in the account books themselves bear intrinsic evidence as to' whether at any time the intermediaries to whom the goods are supplied have paid any amount by way of price therefor and there has been transfer of property in such goods to them. If the entries in the account books invariably show that in every case the materials supplied have been used in assembling of beedies and such manufactured beedies have been delivered to the assessee, it will be a reasonable inference to make that there has been no transfer of property, especially in the context of the balancing of cost of the materials and cost of the manufactured goods debited and the difference being paid to the intermediaries by way of remuneration. It will also be noteworthy to enquire as far as possible whether in any case the intermediaries have transferred the materials supplied to them to their parties and if there is no such instance this circumstance may strengthen the said inference that no sale of goods was involved in the supply of materials by the assessee to the intermediaries.
13. In the second category of transactions we see no difficulty in holding that there is no element of sale at all on the face of the entries in the account books. There is not even any room to justify the view of the assessing officer that the transactions amounted to barter. It seems to us that the assessing officer has applied his imagination and spelt out a sale from a transaction which in fact is not a sale of goods. We do not think that the assessing officer was justified in imputing a sale in the second category of transactions and arriving at the turnover on the probable market value of the materials at the relevant dates.
14. As to the penalty levied, this is, in our opinion, totally unjustified. The learned Special Government Pleader sought to support it under Section 12(3). If a return is filed beyond the prescribed period but before assessment has been made, the assessing officer is not free to treat such return as no return at all and proceed to apply his best judgment. He is in that case bound to take notice of the return. We have held to that effect in State of Madras v. M. S. K. Shahul Hameed T.C. No. 350 of 1966. Apart from that, where no return is filed on the view that a certain transaction does not amount to sale of goods and such a point of view is arguable, we do not think that Section 12(3) will be attracted to such a case. Actually, except W. P. No. 379 of 1967, the rest of the cases are cases of reopening of original assessments. Hardly will Section 12(3) be applicable to cases of reopening assessments. Returns were filed in those cases but claiming that the transactions did not amount to sale of goods and, therefore, no tax would be payable. The department apparently accepted that view in the first instance. That being the case, the reassessment orders in those petitions should be regarded as having been made under Section 16. Unless the assessing officer finds that there was wilful default in not making a return or in making an incorrect return there will be no liability to penalty under Section 16(2). . We are, therefore, of the view that the penalty levied in all these cases is unsustainable.
15. The petitions are allowed with costs (one set). The assessing officer will be entitled to re-examine the first category of transactions in the light of the evidence placed before him, and this judgment. Court-fee fixed at Rs. 250.