1980 (4) TMI 288 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the compulsory sale of foodgrains to the Government under the levy procurement scheme constitutes a taxable sale under the Sales Tax Act.
2. The correctness of the Division Bench decision in Food Corporation of India v. State of Punjab in light of the Supreme Court decision in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer.
3. The validity of the instructions issued by the Government of Haryana to treat compulsory sales under the levy procurement scheme as taxable sales.

Issue-wise Detailed Analysis:

1. Compulsory Sale of Foodgrains as Taxable Sale:
The primary issue was whether the compulsory sale of rice to the Government under the Haryana Rice Procurement (Levy) Order, 1979, constitutes a taxable sale under the Haryana General Sales Tax Act, 1973, and the Central Sales Tax Act, 1956. The petitioners, being millers and registered dealers, argued against the imposition of sales tax on such transactions. The Court referred to the Supreme Court's decision in Chittar Mal Narain Das v. Commissioner of Sales Tax, which held that compulsory acquisition by the State does not constitute a sale as it lacks the element of consensuality or a contract. The Court observed that the Haryana Levy Order mandates the delivery of rice to the Government at a fixed price, which aligns with the compulsory acquisition framework discussed in Chittar Mal's case.

2. Correctness of Division Bench Decision in Food Corporation of India v. State of Punjab:
The Court examined whether the Division Bench decision in Food Corporation of India v. State of Punjab, which followed the Chittar Mal judgment, was still valid in light of the Supreme Court's later decision in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer. The Vishnu Agencies case dealt with the Cement Control Order and Andhra Pradesh Paddy Procurement Orders, where the Supreme Court found an element of consensuality in transactions under these orders, thus constituting a sale. However, the Court noted that the Control Orders in Vishnu Agencies were different from the Haryana Levy Order, which is more aligned with the compulsory acquisition model discussed in Chittar Mal's case. The Court concluded that the Division Bench decision in Food Corporation of India remained valid as it correctly applied the principles of Chittar Mal.

3. Validity of Haryana Government Instructions:
The Government of Haryana issued instructions to the Assessing Authorities to treat compulsory sales under the levy procurement scheme as taxable sales, based on the Vishnu Agencies judgment. The Court found these instructions invalid, as they misinterpreted the applicability of the Vishnu Agencies decision to the Haryana Levy Order. The Court emphasized that the Haryana Levy Order involves compulsory acquisition, which does not constitute a sale under the Sales Tax Act. Consequently, the instructions were quashed.

Conclusion:
The Court allowed the petition, quashing the Haryana Government's instructions and upholding the Division Bench decision in Food Corporation of India v. State of Punjab. The compulsory sale of rice to the Government under the Haryana Rice Procurement (Levy) Order, 1979, does not constitute a sale and is not taxable under the Sales Tax Act. The Court awarded costs to the petitioners, including counsel's fee of Rs. 250.