1958 (9) TMI 61 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of despatches of sugar outside Bihar to be taxed under the Bihar Sales Tax Act.
2. Existence of a contract of sale between the assessee and the State of Madras.
3. Passing of title and appropriation of goods.
4. Applicability of the Sugar and Sugar Products Control Order, 1946.
5. Interpretation of Section 2(g) of the Bihar Sales Tax Act.
6. Reservation of jus disponendi (right of disposal).

Detailed Analysis:

1. Liability of Despatches of Sugar Outside Bihar to be Taxed:
The primary issue was whether the despatches of sugar outside Bihar, specifically to Madras, were liable to be taxed under the Bihar Sales Tax Act. The High Court concluded that the despatches of sugar made by the assessee to different States, including Madras, under the orders of the Sugar Controller, are liable to be taxed under the Bihar Sales Tax Act.

2. Existence of a Contract of Sale:
The court examined whether a contract of sale existed between the assessee and the State of Madras. It was argued that there was no offer and acceptance, and hence no consensus ad idem. However, the court held that the contract became complete as soon as the assessee appropriated the sugar in accordance with the allotment order and the despatch instructions. The court stated, "As soon as an application for allotment is made, there is an implication of an offer to purchase the quantity of sugar at the price fixed by the Controller from the producer to whom the allotment order is to be made by the Controller."

3. Passing of Title and Appropriation of Goods:
The court analyzed when the title to the goods passed from the assessee to the purchaser. It was concluded that the title passed as soon as the assessee appropriated the sugar in its factory or at the time of despatch at Hasanpur railway station. The court noted, "the contract itself became complete as soon as the goods were appropriated by the assessee in its factory, or latest at the stage when the sugar was put in the carrier at Hasanpur railway station."

4. Applicability of the Sugar and Sugar Products Control Order, 1946:
The court examined the provisions of the Sugar and Sugar Products Control Order, 1946, which regulated the production, sale, and distribution of sugar. The court emphasized that the assessee had to comply with the directions of the Controller regarding the despatch of sugar. The court stated, "Paragraph 5 of the Order requires every producer and dealer to comply with the directions of the Controller regarding the production, sale or distribution of sugar or sugar products."

5. Interpretation of Section 2(g) of the Bihar Sales Tax Act:
The court interpreted Section 2(g) of the Bihar Sales Tax Act, which defines "sale." The court held that the contract of sale was completed at the time when the goods were actually in Bihar, and thus, there was a sale within the meaning of Section 2(g) of the Bihar Sales Tax Act. The court stated, "the contract of sale was completed at the time when the goods were actually in Bihar and so there was a sale within the meaning of section 2(g) of the Bihar Sales Tax Act."

6. Reservation of Jus Disponendi:
The court addressed whether the assessee reserved the right of disposal (jus disponendi) of the sugar. It was concluded that the assessee did not reserve this right and that the title passed to the purchaser once the sugar was appropriated. The court stated, "there was no reservation of jus disponendi on the part of the assessee and so title to the purchaser passed at Hasanpur."

Conclusion:
The High Court answered the question of law in favor of the State of Bihar and against the assessee, holding that the despatches of sugar outside Bihar were liable to be taxed under the Bihar Sales Tax Act. The assessee was ordered to pay the cost of the reference, with a hearing fee of Rs. 250.