1977 (12) TMI 118 - SC - VAT and Sales Tax

Whether what is conveniently, though somewhat loosely, called a compulsory sale is exigible to sales tax? Held that - Appeal dismissed. The conclusion which therefore emerges is that the transactions between the appellant, M/s. Vishnu Agencies (Pvt.) Ltd., and the allottees are sales within the meaning of section 2(g) of the Bengal Finance (Sales Tax) Act, 1941. For the same reasons, transactions between the growers and procuring agents as also those between the rice millers on the one hand and the wholesalers or retailers on the other are sales within the meaning of section 2(n) of the Andhra Pradesh General Sales Tax Act, 1957. The turnover is accordingly exigible to sales tax or purchase tax as the case may be.

Issues Involved:
1. Definition and scope of "sale" under Sales Tax Acts.
2. Legislative competence of Provincial and State Legislatures to define "sale."
3. Consensuality and volition in transactions under regulatory orders.
4. Applicability of previous case law on compulsory sales and regulatory transactions.

Issue-wise Detailed Analysis:

1. Definition and Scope of "Sale" Under Sales Tax Acts:
The primary issue was whether transactions regulated by statutory orders, such as those under the Essential Commodities Act, 1955, and similar state laws, constituted "sales" under the Bengal Finance (Sales Tax) Act, 1941, and the Andhra Pradesh General Sales Tax Act, 1957. The court examined the statutory definitions of "sale" in these Acts, which included any transfer of property in goods for valuable consideration. The court concluded that these transactions are indeed "sales" because the property in goods was transferred for cash consideration, fulfilling the statutory definition.

2. Legislative Competence of Provincial and State Legislatures to Define "Sale":
The appellants contended that the word "sale" in the Sales Tax Acts must receive the same meaning as in the Sale of Goods Act, 1930, to remain within the legislative competence of the Provincial and State Legislatures. The court, however, upheld the broader interpretation of legislative entries, emphasizing that constitutional provisions conferring legislative powers must receive a broad and liberal construction. The court referred to established precedents, including Gannon Dunkerley, which interpreted "sale of goods" in a legal sense, requiring an agreement, consideration, and transfer of property.

3. Consensuality and Volition in Transactions Under Regulatory Orders:
A significant point of contention was whether transactions under regulatory orders, which restrict the freedom to bargain, could still be considered consensual sales. The court examined previous judgments, including Indian Steel and Wire Products Ltd. v. State of Madras and Andhra Sugars Ltd. v. State of Andhra Pradesh, which held that even transactions under regulatory orders could retain the essential character of a sale if mutual assent was not completely excluded. The court concluded that the transactions in question were consensual because the parties, by their conduct, agreed to enter into the transactions on statutory terms, reflecting mutual assent.

4. Applicability of Previous Case Law on Compulsory Sales and Regulatory Transactions:
The court reviewed various precedents, including New India Sugar Mills v. Commissioner of Sales Tax and Chittar Mal Narain Das v. Commissioner of Sales Tax, to determine the applicability of their principles to the present cases. The court distinguished between compulsory acquisitions and regulatory transactions, emphasizing that the latter could still involve consensual agreements. The court also clarified that the majority judgment in New India Sugar Mills was not good law, preferring the minority view that recognized implied consent in regulatory transactions.

Conclusion:
The court held that the transactions between the appellants and the allottees were sales within the meaning of the relevant Sales Tax Acts. The turnover from these transactions was therefore exigible to sales tax or purchase tax. The appeals were dismissed with costs, affirming the judgments of the lower courts that had upheld the imposition of sales tax on these transactions.

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