1975 (9) TMI 157 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the supply of rice under the Orissa Rice Procurement (Levy) Order, 1964, constitutes a sale for the purpose of taxation under the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Whether the supply of rice under the Orissa Rice Procurement (Levy) Order, 1964, constitutes a sale for the purpose of taxation under the Central Sales Tax Act:

The core issue revolves around the interpretation of whether the transactions under the Orissa Rice Procurement (Levy) Order, 1964, qualify as "sales" and are thus subject to sales tax under the Central Sales Tax Act. The assessee, a rice mill, argued that the transactions were not sales since they were mandated by the Levy Order, which required the mill to sell a specified percentage of rice to the government at a controlled price. This contention was initially rejected by the Sales Tax Officer and the first appellate authority but was accepted by the Tribunal based on a previous decision by the court in Bhagirath Agarwal and Brothers v. Sales Tax Officer, Ganjam I Circle, where it was held that supplies under Levy Orders cannot be treated as sales.

Clause 3 of the Levy Order:
Clause 3 of the Levy Order mandates that every licensed miller and dealer must sell a specified percentage of their rice stock to the purchase officer at a controlled price. This clause was central to the argument, as it imposed a compulsory obligation on the millers and dealers, seemingly removing the element of volition necessary for a transaction to be considered a sale.

Previous Court Decisions:
The court examined previous decisions, including Union of India v. Sales Tax Officer, Balasore, which held that compulsory acquisitions under similar procurement orders did not constitute sales. This was based on the principle that the transactions lacked the element of mutual consent and volition, key components of a sale.

Supreme Court's Decision in Salar Jung Sugar Mills Ltd. v. State of Mysore:
A larger Bench of the Supreme Court in Salar Jung Sugar Mills Ltd. v. State of Mysore reviewed the nature of transactions under control orders and concluded that despite the regulatory framework, there was sufficient room for mutual assent and volition, making such transactions sales subject to sales tax. The court noted that while the control orders regulated certain aspects of the transactions, the parties still had the freedom to negotiate terms such as delivery and price, indicating a consensual agreement.

Application to the Current Case:
The court in the current case applied the principles from the Supreme Court's decision in Salar Jung Sugar Mills Ltd. and concluded that the transactions under the Orissa Rice Procurement (Levy) Order, 1964, did constitute sales. The court noted that the parties had some degree of volition and mutual consent, fulfilling the criteria for a sale.

Conclusion:
The court answered the referred question affirmatively, stating that the supply of rice under the Orissa Rice Procurement (Levy) Order, 1964, would constitute a sale for the purpose of taxation under the Central Sales Tax Act. The decision was based on the interpretation that despite the regulatory framework, the transactions involved sufficient elements of mutual consent and volition to be considered sales. The court made no direction for costs.

Separate Judgments:
Both judges, MISRA R.N. and DAS N.K., concurred with the conclusion, delivering a unified judgment without separate opinions.