1970 (12) TMI 74 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the petitioner to pay sales tax on the turnover of Rs. 4,82,986.12.
2. Whether the transactions under the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964, constitute "sales" under the Central Sales Tax Act.

Detailed Analysis:

1. Liability of the Petitioner to Pay Sales Tax on the Turnover of Rs. 4,82,986.12:
The petitioner firm, engaged in the rice business, was assessed to sales tax for the assessment year 1964-65 under the Central Sales Tax Act on a turnover of Rs. 5,58,662.19, which included Rs. 4,82,986.12 for supplies made to the State Government under the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964. The petitioner contended that these transactions should not be considered sales and therefore should not be subject to sales tax. The Assistant Commissioner of Commercial Taxes had confirmed the assessment order regarding this turnover.

2. Whether the Transactions Constitute "Sales" under the Central Sales Tax Act:
The transactions in question were conducted under clause 4 of the Requisition Order, which mandated stockholders to sell specified quantities of rice to the State Government or its agents at controlled prices. The petitioner argued that these transactions were not voluntary sales but compulsory supplies, lacking the essential elements of a sale, such as mutual assent and contractual agreement.

The court examined the Supreme Court's decision in Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P., which dealt with similar compulsory supply under the U.P. Wheat Procurement (Levy) Order, 1959. The Supreme Court had held that such compulsory supplies did not constitute sales as they lacked mutual assent and were imposed by statutory order rather than arising from a contract.

Applying this reasoning, the court noted that clause 4 of the Requisition Order did not require the State Government to enter into a contract with the dealers. The dealers had no choice in the supply of stocks or the prices, which were controlled by the government. Therefore, the transactions lacked the essential elements of a sale, such as a bargain or contract, payment or promise of payment, delivery of goods, and the passing of title.

The court also referred to other relevant Supreme Court cases, such as Indian Steel & Wire Products Ltd. v. State of Madras and Andhra Sugars Ltd. v. State of Andhra Pradesh, distinguishing them based on the presence of mutual assent in those cases, which was absent in the present case.

The court concluded that the transactions under the Requisition Order did not constitute sales as defined under the Central Sales Tax Act and the Sale of Goods Act. Consequently, the petitioner was not liable to pay sales tax on the turnover of Rs. 4,82,986.12.

Conclusion:
The writ petition was allowed, and the order of the assessing authority, as confirmed by the Assistant Commissioner of Commercial Taxes, was quashed to the extent of the turnover in question. The respondents were ordered to pay the costs of the petitioner.