UNION TERRITORY OF CHANDIGARH versus M/S. AMRIT ROLLER FLOUR MILLS

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UNION TERRITORY OF CHANDIGARH v. M/S. AMR.IT ROLLER FLOUR MILLS

JULY 8, 1985

(R.S. PATHAK & E.S. VENKATARAMIAH, JJ.j

Punjab General Sales Tax Act 1948, Section 2(h)

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Roller Flour Mi1ls - Licence holder under Wheat Roller Flour Mills (Licensing and Control) Order 1957 - Sale of maida, Suji and rawa to permit holders - Transactions whether constitute sale - Whether liable to be. taxed.

The respondent-Firm was a Roller Flour Mills and held a licence under (Licensing and the Wheat Roller Flour Mills Control) Order, 1957. Clause 3 of the said Order provides that ao owner or person in charge of a roller Mill shall manufacture or cause to be manufactured any wheat product eY.cept under and in accordance with the terms and conditions of a licence issued under the Order. The licence was an annual licence renewable from year to year and liable to suspension or cancellation in the event of contravention of the Control Order or any of the condi tions of the licence. The licensee was required to abide by any directions to purchase of wheat, the extraction of maida, suji and rawa and also in regard to the distribution or disposal of the wheat pro ducts.

licensing authority

in regard

issued by

the

Wheat is supplied to the respondent under the orders of the Government of India. The respondent grinds the wheat and supplies maida and suji emerging from that process to the holders of permits issued by the District Food and Supplies Officer.

The

the

turnover of

the years 1964-65

respondent was assessed for

to 1967-68 to sales tax under the Punjab General Sales Tax Act, 1948 the supplies. effected by it. During the on assessment proceedings it was contended that the transactions en tered into by it did not constitute "sales" within the meaning of the Act and as such sales tax should not be levied. The assessing the decision in the Ezciee and Taxation authority relying on Officer (Assessing Authority) Hissar and Another v. Jaswant Siugb (1971] 27 s.r.c. 582 rejected the pntention and assessed the firm. The assessment orders were maintained in appeal and in second appeal also.

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U.T. CHANDIGARH v. AMRIT ROLLER FLOUR MILLS [PATHAK, J]

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At the instance of the assessee, the High Court called for a reference and held that as the respondent was obliged to follow the instructions of the concerned authority in regard to the pur chase of wheat, or the extraction of maids, suji and raws as well as in regard to the distribution and disposal of such products, it followed the decision in Food Corporation of India & Another v. State of Punjab & Others [1971] 27 s.T.c. 582 and took the view that there was no •sale • •

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In the appeal to this Court on the question whether the transaction afffected by the respondent fall within the definiti on of "sale" under Clause (h) of Sec. 2 of the Punjab General Sales Tax Act, 1948.

Allowing the appeals

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the conditions imposed by

In VishW Agencies (Pvt.) Ltd. etc. v. CoHercial Tax Officer & Others etc. [1978] 2 s.c.R; 433, this Court held the statutory that notwithstanding framework of the Control Order within which the dealer operated the transaction effected by him must clearly be regardi.d as sales. The instant case is covered by that decision. The trans actions effected by the respondent are 'sales' ·liable to tax. The Judgment of the High Court is set aside. The question ref err ed to the High Court is answered in the affirmative in favour of the appellant and against the respondent. [19 D-F]

CIVIL APPELLATE JURISDICTION

of 1978.

Civil Appeal Nos. 404-407

From the Judgment and Order dated 13.10.1976 of the Punjab and llaryana High Court in General Sales Tax Reference No. 15,17, 18 and 19 of 1974.

P.A. Francis, S ,p. Nayar and Miss A. Subhashini for .the

Appellant

S.T. Desai and R.S. Sodhi for the Respondent.

The Judgment of the Court was delivered by

PATHAK, J, These appeals by special leave are directed against the judgment of the High Court of Punjab and Haryana disposing of four references under the Punjab General Sales Tax Act, 1948.

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SUPREME COURT REPORTS

[1985] SUPP. 2 s.c.R. ~

The respondent firm, Messrs. Amrit Roller Flour Mills, It is registered as a dealer carries on business at Chandigarh. under the Punjab General Sales Tax Act, 1948 (hereinafter called It holds a licence under the Wheat Roller Flour the "Act"). Mills (Licensing and Control) Order, 1957 (hereinafter referred to as the "Control Order"). Wheat is supplied to the respondent under the orders of the Government of India. The respondent grinds the wheat and supplies the atta, maida and suji emerging from the issued by District Food and Supplies Officer under the Control Order.

that process to the holders of permits

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The

tax under

the Act on

respondent was assessed for

the years 1964-65 the turnover of

to 1967-68 to sales the supplies effected by it. During the assessment proceedings it into by it did not contended that the transactions entered constitute sales within the meaning of the Act and consequently no sales tax could be levied. The contention was rejected. The assessing authority relied on 'lbe Excise and Taxation Officer (Assessing Authority), Hissar and Another v. Jaswant Singh. [1971] 27 s.T.c. 582. The assessment orders were maintained in appeal and therea.ter in second appeal also. At the instance of the asses see, the following questioJ of law in each of the four cases:

th<' High Court called for a reference on

"Whether on the facts and in the circumstances of the case, the sale of wheat products against permits issued by the District Food and Supplies Controller, Chandigarh, is liable to be taxed under the Punjab General Sales Tax Act, 1948?"

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The High Court referred tc the provisions of s.3 of th~ Essential Commodities Act, 1955, under which the Control Order had been issued, and to clause V of the Licence under which the respondent carried on his business, and holding that the respondent was obliged to follow the instructions of the concerned authority in regard to the purchase of wheat, or the extraction of maida, suji and rawa as well as in regard to the distribution and disposal of such products, the High Court took the view that there was no sale. In adopting that view the High Court preferred to follow its decision in The Food Corporation of IDdia and Another v. State of Punjab and Others [1976] 38 S.T.C. 144.

In these appeals by the Union Territory of Chandigarh, the sole question is whether the transactions effected by the respon dent fall within definition of "sale" under the Act. Clause(h)

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U.T. CHANDIGARH v. AMRIT ROLLER FLOUR MILLS (PATHAK, J]

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of s.2 of the Act defines a "sale" to mean "any transfer of pro perty in goods •••••• for cash or deferred payment or other valu able consideration, but does not include a mortgage, hypothe cation, charge or pledge." The broad basis on which the High Court has proceeded is that a sale necessarily implies the freedom to contract, and that all the four elements, that is to say, that the parties should be competent to contract, that there should be mutual assent, that property or goods should pass from the seller to the buyer and that the price in money should be inasmuch as paid or promised must all exist together, and they do not so exist in the transactions in question, it must be held that there is no sale.

that

The Essential Commodities Act, 1955, under which the Control Order was issued, is an Act to provide, in the interest of the general public, for the control of the production, supply and distribution of and trade and commerce in, certain commodi - ties. Sub-s.(l) of s.3 empowers the State Government to make prders providing for regulating or prohibiting the production, supply and distribution of an essential commodity, and trade and coomerce in such commodity, if it is . of opinion that it is necessairy or expedient so to do for maintaining or increasing supplies of such essential commodity, of securing its equitable distribution and availability at fair prices or for securing such essential commodity for the Defence of India or the efficient conduct of military operations. Sub-s.(2) of s.3 details that an order under sub-a. (1) may provide for controlling the price at which any essential commodity may be bought or sold, and for regulating by licences, permits or otherwise the storage, trans port., distribution, disposal, acquisition, use or consumption of any essential commodity and for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling, of any essential commodity, to sell the whole or a specified part of the quantity held in stock or produced or received by him, or likely to be produced or received by him, to the Central Government or a State Govenunent or such other person In the exercise of that power as may be specified in the Order. the Central Government made the Control Order with which we are that no owner or concerned. Clause 3 of the Order provides person in charge of a roller mill shall manufacture, or cause to be manufactured, any, wheat product except under and in accordance with the terms and conditions of a licence issued under that Order. The licence was It was an annual licence renewable from year to year, and liable to suspension or cancellation in the event of a contravention of the Control Order

to be in Form II.

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SUPREME COURT REPORTS

[1985] SUPP.2 s.c.R.

or any of the conditions of the licence. the licence required the licensee to abide by any directions issued by the Hcensing authority in regard to the purchase of wheat, the extraction of maida, suji and rawa and also in regard to the distribution or disposal of the wheat products.

Paragaraph V of

Now the High Court considered

the matter and found itself obliged to follow its decision in 1be Food Corporation of India (supra). That was a case under the Punjab Rice Procurement (Levy) Order, 1958 where rice was procured by the State Govern ment and its officers from licensed dealers and licensed millers and then supplied to the Food Corporation of India, which in turn made: supplies to various State Governments. The Food Corporation of India was assessed to sales tax under the Punjab General Sales Tax Act. The High Court held that the chain of transactions between the miller and the dealer on the one hand and the State Government on the other and thereafter between the State Govern ment and the Corporation and then between the Corporation and the other States was a single composite process originating in art arrangement between the Central Government and the State Govern ments. under which the State Governments were required to contri bute to a central pool a certain percentage of f oodgrains inten ded for supply to deficit States through the agency of the Cor the poration, that there was no profit motive at any Corporation did not act as a dealer in the legal sense when it passed on the goods to other. States. Accordingly, the Food Cor poration of India, the High Court concluded, could not be said to sell the rice and was therefore not liable to pay sales tax, there being no freedom of contract within the meaning of the law laid down in Salar Jung Sugar Mills Ltd. v. State of Mysore [l972J 29 S.T.C. 246 and the element of mutual assent, implicit or explicit, being non-existent. The High Court observed that the facts of the case brought it within the law explained by this Court in Chit tar Mall Narain Das v. Commissioner of Sales Tax, [1970] 26 S.T.C. 344.

stage and

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I We think that the case before us is distinguishable from The Food Corporation of India (supra). It is a case which falls more appropriately within the rule laid down by in Vishnu Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer & Ors. etc. [1978) 2 s.c.R. 433 where the majority judgment discussed the earlier the entire case in Salar Jung su8ar Mills Ltd.(supra) as well as decisions Chittar Mall Narain Das in Vishnu Agencies (Pvt.) Ltd. (supra) had carried on business as agents

(supra). The appellants

the subject,

this Court

including

law on

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u.r. CHANDIGARH v •. AMKIT ROLLER FLOUR MILLS [PATHAK, J]

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the Control Order made

and distributors of 'cement in the State of West Bengal. The distribution of cement was regulated by the West Bengal Cement Control Act, 1948 and by thereunder. Sub-s.(1) of s.3 of the Cement Control Act is framed in language analogous to sub-s.(l)· of s.3 of the Essential Commodities Act, 1955. And under the Cement Control Order, 1948 issued under - that Act, no sale or purchase of cement can be made, except in accordance with conditions contained in a written order issued by a specified statutory authority and at a price not exceeding the notified price. The appellant, who was a licensed stockist of cement was permitted to stock cement in its godown and to supply it to persons in whose favour allotment orders were issued and at the price stipulated and in accordance with the ~onditions in the permits issued by the authorities. Pursuant to the allotment orders the appellant supplied· cement to various allottees from ti.me to time in accordance with the terms of the licence obtained by it. The appellant was assessed to Sales tax, and in appeal it contended that there was· no sale because having regard to the stringent provisions of the Cement Control Order no violation or bargaining power was left to it and there was no element of mutual consent or agreement between l t and the allot tees. This Court ceme the cond.iti.ons imposed by the statutory framework within -which the. dealer operated the transactions effected by it must clearly be regarded as sales. After the decision by this Court in Vishnu Agencies (Pvt.) Ltd. (supra) we do not feel called upon to enter into the question arising in the present case in any detail. We the facts of the present case the are satisfied that upon question is concluded by the view taken by this Court in Vishnu Agencies (Pvt.) Ltd. (supra) and that the transactions effected· by the appellant must be regarded as sales.

that notwithstanding

the firm conclusion

to

Accordingly, we allow the appeals, set aside the judgment of the High Court of Punjab and Haryana and answer the question referred to the High Court in the affirmative, in favour of the Union Territory of Chandigarh and against the respondent. In the circumstances, there is no order as ·ta costs.

Appeals allowed.

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