1985 (7) TMI 330 - SC - VAT and Sales Tax

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? Held that - Appeal allowed. Answer the question referred in the affirmative, in favour of the Union Territory of Chandigarh and against the respondent. This Court came to the firm conclusion that notwithstanding the conditions imposed by the statutory framework within which the dealer operated the transactions effected by it must clearly be regarded as sales.

Summary

Issues:
- Interpretation of the term "sale" under the Punjab General Sales Tax Act, 1948.
- Application of the Essential Commodities Act, 1955 and the Control Order issued under it.
- Determination of whether transactions involving the supply of wheat products constitute sales for tax purposes.

Analysis:
The case involved appeals against the judgment of the High Court of Punjab and Haryana regarding the assessment of sales tax under the Punjab General Sales Tax Act, 1948 on transactions by a registered dealer supplying wheat products under the Wheat Roller Flour Mills (Licensing and Control) Order, 1957. The primary issue was whether these transactions constituted sales under the Act. The High Court considered the Control Order issued under the Essential Commodities Act, 1955, which regulated the production, supply, and distribution of essential commodities. The Control Order required the licensee to follow directions regarding the purchase, extraction, and distribution of wheat products. The High Court, relying on its precedent in Food Corporation of India case, held that there was no sale due to the lack of freedom to contract and mutual assent in the transactions.

The appellants argued that the transactions should be considered sales based on the definition in the Act, which includes the transfer of property in goods for valuable consideration. They contended that the elements of a sale, such as mutual assent and transfer of goods, were present. The Supreme Court analyzed previous judgments, including Food Corporation of India and Vishnu Agencies cases, which dealt with similar regulatory frameworks governing transactions. The Court distinguished the present case from Food Corporation of India, stating that it aligned more with the principles established in Vishnu Agencies case, where transactions under a controlled regime were still deemed as sales.

Ultimately, the Supreme Court allowed the appeals, overturning the High Court's judgment. The Court held that the transactions in question constituted sales under the Punjab General Sales Tax Act, 1948. The decision was based on the interpretation of the term "sale" in the Act and the application of relevant legal principles from previous cases. The Court's ruling favored the Union Territory of Chandigarh, concluding that sales tax was applicable to the transactions.