Anil Kumar Sen, J.
1. This rule was obtained by the two petitioners on a writ petition. The first petitioner is an association of holders of excise licences in the Calcutta Excise District, while the second petitioner is a country spirit licensee carrying on the business of retail vend of country spirit at 26, Barrackpur Trunk Road, Calcutta. They are disputing the constitutional validity of the West Bengal Taxation Laws (Amendment) Act, 1972, in so far as and to the extent to which such Act seeks to impose sales tax on the sale of country spirit by the licensees.
2. It may be recalled that when the sales tax was first introduced in the then Bengal by the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the Sales Tax Act), sale of country spirit was exempted from the incidence of such taxation by virtue of Section 6(1) read with entry 25, column 1, Schedule I, of the Act. But the West Bengal Legislature passed the West Bengal Taxation Laws (Amendment) Act, 1972 (West Bengal Act 20 of 1972) (hereinafter referred to as the Taxation Laws Amendment Act), and by Section 3(5) thereof, entry 25, column 1, of the Schedule to the Sales Tax Act, 1941, was omitted in order to bring the sale of country spirit amongst other articles under the incidence of sales tax. The said Taxation Laws (Amendment) Act had no previous sanction of the President nor did it obtain any subsequent assent of the President. It, however, obtained the assent of the Governor on 21st July, 1972, and came into effect from 7th August, 1972. Circulars were issued both by the Excise Directorate and the Directorate of Commercial Taxes intimating the licensees that the sale of country spirit would henceforth be liable to sales tax at the rate of 6 per cent.
3. On such imposition of sales tax on the sale of country spirit by licensees, the petitioners have moved this Court disputing the validity of such an imposition. According to the petitioners, Section 3(5) of the Taxation Laws (Amendment) Act is ultra vires the Constitution. It is claimed to be ultra vires, firstly, because the sale made by them as licensees is not a sale within the meaning of the Indian Sale of Goods Act, 1930, so that the State Legislature had no authority to impose the tax as proposed. Secondly, it is claimed that the imposition in the present case imposes a restriction on the freedom of trade, commerce or intercourse and yet no previous sanction of the President under Article 304(b) of the Constitution nor any subsequent assent of the President under Article 265 thereof having been taken, the enactment of the State Legislature is unconstitutional.
4. The rule is being contested by the respondents who have filed an affidavit-in-opposition. Material facts, however, are not in dispute.
5. Mr. Bose, appearing on behalf of the petitioners in support of this rule, has pressed the two points as aforesaid raised by the petitioners. Drawing my attention to the different provisions of the Bengal Excise Act, 1909, Rules, Regulations and Orders made thereunder, Mr. Bose has contended that a sale effected by a licensed retail vendor may be a sale in the popular sense, but such a sale is not a sale in the strict legal sense because one of the important ingredients, viz., consensuality or mutual consent is totally absent in the transaction. According to Mr. Bose, such a licensee can exercise no volition in effecting a sale and, on demand by the consumer, he is bound under a threat of penalty under Section 46 of the Bengal Excise Act to effect the sale of the country spirit in a manner, of a quantity, of strength (of the liquor) and at a price all prescribed and regulated by the Excise Act, Rules, Regulations and Orders made thereunder. Such a vendor has not also the option to choose his customer. In the circumstances, according to Mr. Bose, the vendor being compelled to effect the sale and there being no mutual assent, it may be a sale in the popular sense, but it is not a sale within the meaning of the Sale of Goods Act which alone could be subjected to taxation by a law made under entry 54, List II, Seventh Schedule, of the Constitution. On the second point, Mr. Bose has contended that the business of country spirit licensees is fully controlled. The prices at which such a licensee is to purchase the country spirit as also the wholesaler from whom he is to purchase are fixed and prescribed; so also the price at which the licensee can sell the country spirit to the consumers is fixed. On the prices so fixed both ways, the licensees are left with a gross profit varying between 5.7 per cent to 7.8 per cent so that imposition of a levy of 6 per cent on the sale, which the licensees cannot pass on to the consumers, would render their business totally unprofitable and such a restriction must be considered to be directly affecting their trade. Therefore, the legislation squarely comes within the purview of Articles 301 and 304(b) of the Constitution but, admittedly, there being no previous sanction nor any subsequent assent by the President the legislation must be held to be beyond the sanction of the Constitution.
6. Mr. P.K. Sengupta, appearing on behalf of the respondents, has contested each of these two points. According to Mr. Sengupta, the sale effected by the licensees though regulated by the Bengal Excise Act, Rules, Regulations and Orders made thereunder is a sale not only in the popular sense but also in the legal sense and, as such, the State Legislature had ample legislative competence to impose sales tax as proposed by the said Taxation Laws (Amendment) Act. To answer the second point raised by Mr. Bose, Mr. Sengupta contends that the imposition of sales tax cannot be considered to be a restriction within the meaning of Article 304 and, as such, absence of a prior sanction or subsequent assent by the President would not render the legislation unconstitutional.
7. Mr. Bose has elaborately argued the first point and, in all fairness, has referred to all the relevant decisions of the Supreme Court both in his favour and against him beginning from the State of Madras v. Dunkerley A.I.R. 1958 S.C. 560 to State of Tamil Nadu v. Cement Distributors P. Ltd. A.I.R. 1973 S.C. 668 In particular, Mr. Bose has placed strong reliance on the decisions of the Supreme Court in the cases of New India Sugar Mills v. Commissioner of Sales Tax A.I.R. 1963 S.C. 1207 and Chittar Mal v. Sales Tax Commissioner A.I.R. 1970 S.C. 2000, in contending that a sale effected by the country spirit licensees is not a sale within the meaning of the Sale of Goods Act, so that such a sale cannot be subjected to any taxation by a law made under entry 54, List II, Seventh Schedule. Mr. Bose has further relied on the latest decision of the Supreme Court in the case of State of Tamil Nadu v. Cement Distributors P. Ltd A.I.R. 1973 S.C. 668., in contending that when the price at which the licensees can sell the country spirit is wholly fixed, sales effected on such fixed prices cannot be said to be sales in the legal sense. He has tried to distinguish the other decisions of the Supreme Court in the cases of Indian Steel and Wire Products v. State of Madras A.I.R. 1968 S.C. 478, Andhra Sugars v. State of Andhra Pradesh A.I.R. 1968 S.C. 599, State of Rajasthan v. Karam Chand Thappar A.I.R. 1969 S.C. 343 and Salar Jung Sugar Mills v. State of Mysore A.I.R. 1972 S.C. 87. Mr. Sengupta, on the other hand, has relied on the latter group of the Supreme Court decisions in support of his contention that notwithstanding the regulations imposed, the sale effected by the licensees is a sale in the true legal sense.
8. On the controversy so raised between the learned Advocates on the two sides, I should first try to find out the true principle and requirement in law which follows from all these decisions of the Supreme Court differently read and relied on by the two learned Advocates in support of their rival contentions. 'Sale' carries two senses. In the popular sense, it connotes any transfer of property in the goods for valuable consideration. Such, however, is not the meaning of sale in the legal sense or as it is understood in the Sale of Goods Act. In the legal sense, where under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract is called sale. Or, in other words, to constitute a sale there must be a contract of sale. Though the definition of the term 'sale' in the Sales Tax Act is wide enough to mean and include sale as in popular parlance, such a meaning cannot be given to the term because, in that event, the legislation would be beyond the legislative competence of the State Legislature. It is now well-settled that entry 48, List II, Seventh Schedule, of the Government of India Act, 193'), which corresponds to entry 54, List II, of the Seventh Schedule of the Constitution, when it refers to 'sale of goods', by 'sale' it means sale as in the Indian Sale of Goods Act, 1930. This was first laid down by the Supreme Court in the case of State of Madras v. Dunkerley A.I.R. 1958 S.C. 560, and has been accepted to be the correct position in all subsequent decisions. Therefore, notwithstanding the wide definition of the term 'sale' in the Sales Tax Act, the State Legislature having no authority under the Government of India Act, 1935, or the Constitution to legislate in respect of taxation of a transaction other than the sale of goods as understood in the Sale of Goods Act, a sale to be liable to sales tax has to fulfil the requirement of the Sale of Goods Act and the wide connotation would not fulfil such requirement.
9. To constitute a valid sale in the legal sense there must be a concurrence of four elements as pointed out by Benjamin, viz., (1) parties competent to contract, (2) mutual assent, (3) a thing, the absolute or general property in which is transferred from the seller to the buyer, and (4) a price in money paid or promised. Such being the elements required in law, where the property in the goods is transferred without any offer on the one part and acceptance thereof by the other or, in other words, where there is no consensual relation, transfer of the property even if it is for a price would not constitute sale in the legal sense nor, as such, could it be subjected to taxation by a legislation made under entry 48 or 54 as aforesaid. In the absence of such a mutual assent in the cases of New India Sugar Mills A.I.R. 1963 S.C. 1207 and Chittar Mal A.I.R. 1970 S.C. 2000, the Supreme Court held that the transactions involved in those cases did not constitute sales which could be subjected to taxation imposed by a State legislation made in exercise of powers under such entry 48 or 54. Hidayatullah, J., in his dissent in the case of New India Sugar Mills A.I.R. 1963 S.C. 1207, observed that mutual assent, which is an important element, may be express or implied and that a compelled sale is nevertheless a sale. In the case of Indian Steel and Wire Products A.I.R. 1968 S.C. 478, without dissenting from the earlier view that mutual assent is an important and essential element to constitute a sale in the legal sense, the Supreme Court held that such assent when given under control or statutory regulations would still be assent to constitute a sale in the legal sense. It was observed that though, in view of the provisions of the Iron and Steel (Control of Production and Distribution) Order, 1941, the area within which there could be bargaining between the buyer and the seller was greatly reduced, that did not mean that there was no freedom of contract. So long as the transactions were not completely controlled and regulated resulting in total exclusion of mutual assent, they would still be sale liable to the incidence of taxation imposed by a State legislation made under entry 48 or 54 as aforesaid. In the case of Andhra Sugars v. State of Andhra Pradesh A.I.R. 1968 S.C. 599, the Supreme Court went a little further and it was held that even if one of the parties to the contract is compelled by the statutory regulation to enter into it on rigidly prescribed terms and conditions and has no bargaining freedom, still so long as the other party is left with such a freedom and the transaction is effected through a contract, such a contract would be a contract of sale. That was a case where the tax was imposed on purchase. Under the provisions of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, the assessee was compelled to purchase sugarcane from cane growers by entering into an agreement prescribed by the statute and for a price, minimum of which was fixed under the Sugarcane Control Order, 1966, and it was still held that such a transaction would constitute sale in the legal sense. The principle so laid down was approved and affirmed in the cases of State of Rajasthan v. Karam Chand Thqppar A.I.R. 1969 S.C. 343 and Salar Jung Sugar Mills v. State of Mysore A.I.R. 1972 S.C. 87.
10. On these decisions, the principle that emerges is that a sale to be liable to taxation by a State Legislature in exercise of its powers under entry 48 or entry 54 as aforesaid must be a sale in the legal sense and not a sale in the popular sense. Mutual assent is an essential ingredient to constitute a sale in the legal sense, where the property in the goods passes as a result of a contract of sale. So long as the parties to the transaction enter into a contract of sale, however controlled and regulated the contract may be and notwithstanding the fact that one of the parties is compelled to enter into such a contract, none the less the transaction would be a sale in the legal sense. A circumscribed assent is none the less an assent to make it a sale in the legal sense. It is only when the transfer of the property in the goods is effected without any contract, but under a levy or a statutory order of allotment, that it is not a sale in the legal sense. Mr. Bose very strongly contends that, if one of the parties is compelled to enter into the contract, it cannot be said to be a transaction on mutual assent and he submits that it is difficult to reconcile the later Supreme Court decisions in the cases of Andhra Sugars A.I.R. 1968 S.C. 599 or Salar Jung Sugar Mills A.I.R. 1972 S.C. 87 with the earlier decisions of the Supreme Court or with the principles enunciated by Benjamin. In my opinion, there lies a fine distinction which is perhaps missed by Mr. Bose and which constitutes the foundation for the later Supreme Court decisions. To constitute a sale in the legal sense it must be the result of a contract. A seller who offers himself as a seller of goods when compelled to effect a sale under statutory control as a seller on a contract cannot be said to be exercising no volition or has no assent whatsoever to render the transaction a sale in the legal sense. This is how I would reconcile the later decisions of the Supreme Court with the earlier ones and particularly with the majority decision in New India Sugar Mills case A.I.R. 1963 S.C. 1207. I would not go so far as the Kerala High Court has gone in Deputy Commissioner v. Sreedhara Shenoy  32 S.T.C. 181 in holding that, in view of the later Supreme Court decisions, presence of mutual assent is no longer a required ingredient in a sale under the Sales Tax Act. That will be going against the majority decision in the New India Sugar Mills case A.I.R. 1963 S.C. 1207, which has yet not been dissented from or overruled by the Supreme Court in its later decisions.
11. Having found out the principle to be applied I would now proceed to consider the nature of the transaction gone into by a licensee when he effects sale of country spirit. In the first place, I would refer to the necessary provisions of the Bengal Excise Act, 1909. Under Section 4, the State Government is to declare by notification what is country spirit. Section 5 authorises the State Government to specify the quantity of such an intoxicant as the limit of a retail sale. Under Section 13, no such intoxicant can be manufactured except under the authority and subject to the terms and conditions of a licence. Under Section 16, none can store such intoxicant except on licence and Section 18 provides that no person shall have in his possession any intoxicant which has not been obtained from a licensed vendor. Section 19 provides that none but a licensee can possess any quantity of intoxicant in excess of the quantity prescribed under Section 5 except on a permit. Section 20 is important and it provides that no such intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence. Under Section 22, the State Government may grant exclusive privilege of manufacture and sale of such intoxicant which is, however, not assignable. Section 24 provides that a person manufacturing or selling an intoxicant is to maintain measure, weight and instruments prescribed by the Commissioner. Section 25 provides prohibition to the employment of children and women in the matter of manufacture or sale of such intoxicant. Under Section 40, every licensee is to execute a counterpart agreement in conformity with the tenor of his licence and furnish security for due performance of the agreement. Section 46 provides that any contravention of the Act or any rule, notification or order or licence, permit or pass granted under the Act would render the defaulter liable to imprisonment for a term which may extend to 6 months or to fine to the extent of Rs. 1,000 or both.
12. Next, I proceed to consider the restrictions imposed by the rules, notifications and orders. Rule 72 prohibits sale of intoxicant to certain classes of persons like railway servants, members of the police force, soldiers, etc.; Clause 12 of the licence prohibits sale of such intoxicant to a child. Rule 213 is important. It imposes three obligations, viz., (1) the licensee must keep open the licensed premises during the hours prescribed, (2) he shall meet the demand of every customer entitled to be served who tenders payment, and (3) he must maintain sufficient stock to meet the local requirements. Rule 196 prohibits sale except for cash. Under Rule 245 the sale price is so fixed that the licensee must effect the sale at a price not in excess of or below the price so fixed. Under Rule 4 the limit of retail sale has been prescribed at 24 drums throughout West Bengal except the districts of jalpaiguri and Darjeeling, for which districts such limit being 16 drums. Rule 54 enjoins that the licensees are to take their supplies from warehouses of the area and at such strength as is prescribed; under Rules 193 and 194, the licensee is precluded from employing in his establishment any person convicted of non-bailable offence or an offence under the Excise Act and opium laws except with the permission of the Collector and every salesman employed must be approved by the Collector or the Superintendent whose name should be endorsed on the licence.
13. On those provisions and on the conditions of licence, it is, therefore, quite evident that the business of the licensee is highly regulated. Perhaps it could not have been otherwise because the business is in respect of noxious article likely to harm the society unless controlled. It is also established that, in the matter of effecting the sale, he has no choice of the customer inasmuch as whoever steps in and offers the price fixed must be provided with the intoxicant in the prescribed strength, in the prescribed quantity and on the fixed price, provided only the customer is not ineligible in law to purchase. Therefore, there is no doubt that the licensee is obliged to effect sale within such statutory restrictions that it nearly amounts to statutory compulsion but, none the less, the sale effected is the result of a contract, because the customer who steps in makes an offer to purchase which is accepted by the licensee and the sale follows. When the licensee offers himself as a seller, opens the shop and invites customers, it cannot be said that there is no assent on his part altogether though the sale that follows is a controlled or regulated one. At least, the customer had a free option either to purchase or to choose his seller and the transaction is made through a contract which is a contract of sale as laid down by the Supreme Court in the case of Andhra Sugars v. The State of Andhra Pradesh A.I.R. 1968 S.C. 599 and the other cases referred to hereinbefore. For reasons aforesaid, I cannot accept the contention of Mr. Bose that the sale effected by a country spirit licensee is not a sale in the legal sense.
14. One other aspect of this point as raised by Mr. Bose has to be considered. Strong reliance is placed by Mr. Bose on the decision of the Supreme Court in the case of State of Tamil Nadu v. Cement Distributors P. Ltd. A.I.R. 1973 S.C. 668, in contending that the sale price of the country spirit being wholly controlled, the transaction cannot be said to be a sale. It is not in dispute that the sale price in the present case is wholly controlled and absolutely fixed, so that the licensee cannot effect a sale at a price either above or below the amount specified under Rule 245. The observation of the Supreme Court in State of Tamil Nadu v. Cement Distributors P. Ltd. A.I.R. 1973 S.C. 668 if read bereft of the context may support a contention that if the selling price is wholly controlled then the transaction is not a sale. But, in my view, that observation of the Supreme Court must be read along with the context. In that case, the assessee had delivered cement to the State Trading Corporation in terms of the provisions of the Control Order. Paragraph 6(4) of that Control Order provided for the manner in which cement is to be packed and also prescribed the amount that would be payable for such packing. The transaction in the supply of cement was admitted not to be a sale but the price paid for the gunny packing was sought to be subjected to sales tax. In the circumstances, the Supreme Court held that the packing provided at a price wholly controlled or fixed did not constitute any sale. On facts, it is quite established that there was no sale of gunny packing, but the packing was a part of the transaction of supply of cement. It is, in that context, that it was observed that if the price is wholly controlled then the supply is not a sale. This observation, however, cannot be held to be an authority for a wide proposition that, in every case, where price is fixed or otherwise wholly controlled, sale of commodities with such fixed prices would not constitute sale in the legal sense. Such a proposition will run counter to the earlier decisions of the Supreme Court where, notwithstanding the price being fixed, the transactions were held to be sales as in the cases of Indian Steel and Wire Products A.I.R. 1968 S.C. 478, Andhra Sugars A.I.R. 1968 S.C. 599, State of Rajasthan v. Karam Chand Thappar A.I.R. 1969 S.C. 343 and Salar Jung Sugar Mills A.I.R. 1972 S.C. 87. For reasons aforesaid, I am unable to accept the first contention raised by Mr. Bose.
15. The second point raised by Mr. Bose requires serious consideration. According to him, on the facts of the present case, it is quite evident that the impost wipes out practically the entire gross profit and renders the business so unprofitable that none can carry on the trade. Therefore, Section 3(5) of the Taxation Laws (Amendment) Act directly affects free flow of trade and, as it does not fulfil the other requirements of Article 304, it must be held to be ultra vires the Constitution. Mr. Sengupta, on the other hand, contends that the impugned provision merely imposes a tax on the sale and such a taxing statute does not come within the purview of Part XIII of the Constitution.
16. In my view, the position in law is quite settled by several decisions of the Supreme Court. In the case of Atiabari Tea Co. v. State of Assam A.I.R. 1961 S.C. 232, the majority decision laid down in clear terms that tax laws are as well subject to the restrictions imposed by Part XIII of the Constitution. It was also laid down therein that freedom of trade as protected by Part XIII is not only in respect of inter-State trade but also in respect of intra-State trade. But the majority decision further explained the true scope of the guarantee under Article 301 by pointing out that, in order to come within the prohibition of Article 301, such restrictions must directly and immediately restrict or impede the free flow of trade. It was observed :
Restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301.
17. This view was further reaffirmed in two later decisions in the cases of Automobile Transport Ltd. v. State of Rajasthan A.I.R. 1962 S.C. 1406 and State of Madras v. Nataraja Mudaliar A.I.R. 1969 S.C. 147. In the case of Automobile Transport Ltd. A.I.R. 1962 S.C. 1406, the majority of the learned Judges took the view that a tax, to become a prohibited tax, has to be a direct tax--the effect of which is to hinder the movement part of trade, but the provisions of the Rajasthan Motor Vehicles Taxation Act impugned before them were held to be regulatory and, as such, it was held by them that regulatory and compensatory taxes do not operate as hindrance to free trade and do not come within the prohibition of Article 301. Three learned Judges, however, took a contrary view that Section 4(1) of that Act did impede free trade and, Article 304(b) not being complied with, was ultra vires the Constitution. In the case of State of Madras v. Nataraja Mudaliar A.I.R. 1969 S.C. 147, the Supreme Court was considering a sales tax legislation. Though the views expressed by Bachawat, J., may somewhat support the contention of Mr. Sengupta, that was not the majority view. The majority proceeded on the earlier views that a tax including sales tax may in certain cases directly and immediately restrict or hinder the flow of trade, but every imposition of tax does not do so. On the legislation there under consideration, the majority, however, overruled the decision of. the Madras High Court and held that the statute permitting imposition of varying rates of tax in different States does not necessarily impede free flow of trade.
18. Proceeding on the above principle laid down by the Supreme Court, I have now to consider the point raised by Mr. Bose on the facts and circumstances of the present case. In order to come within the prohibition of Article 301, which may require compliance with the other provisions of Part XIII, it has first to be seen whether Section 3(5) of the Taxation Laws (Amendment) Act directly and immediately affects free flow of trade or not. On this point, I feel inclined to accept the contention of Mr. Bose. It is not in dispute that trade and business in country spirit are fully controlled and regulated. No business can be done except on a licence. Under the provisions of the Bengal Excise Act, Rules, Regulations and Orders made thereunder, a licensee has to purchase the country spirit which he is to sell at prices fixed from source also prescribed. The price at which he can sell is also so fixed that the licensee can neither charge more nor less than the price so fixed. Thus, a fixed amount of gross profit is left with the licensee. In paragraph 3 of the writ petition, the petitioners have said that the gross profit left is 5.7 per cent and the net profit left is less than 2 per cent. This statement has not been specifically denied in the affidavit-in-opposition. In the representations made to the authorities, the petitioners pointed out that the gross profit left with licensees vary between 5.7 per cent to 7.8 per cent. Such profit being gross, an imposition of sales tax at 6 per cent would certainly render the business so unprofitable that no one can carry on such trade unless he can pass on the imposition to consumers.
19. But the tax imposed is on the sale and has to be paid by the seller, i.e., the licensees. Though ordinarily sellers do pass on the imposition to consumers by adding a near amount to the price, that is not permissible in the present case because that would amount to infringement of Rule 245 punishable under Section 46 of the Bengal Excise Act. This position was quite known to the State Legislature when it enacted Section 3(5) of the Taxation Laws (Amendment) Act and no steps were taken to suitably reduce the rigour and the restriction on the licensees when the sales tax was imposed. Therefore, in my view, here the imposition directly restricts and impedes the free flow of trade, and the requirement under Article 304(b) not having admittedly been complied with, must be held to be ultra vires the Constitution.
20. On the conclusions as above, this application succeeds and the rule is made absolute. Section 3(5) of the West Bengal Taxation Laws (Amendment) Act, 1972, in so far as it deletes country spirit from entry 25, Schedule I, to the Bengal Finance (Sales Tax) Act, 1941, and imposes sales tax on the sale of country spirit is declared ultra vires the Constitution.
21. Let a writ in the nature of mandamus do issue directing the respondents not to give any effect to the said provision in respect of the sale of country spirit.
22. Let the operation of this order of mine remain stayed for a period of one month from this date.