1998 (12) TMI 588 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of rice supplied to the Food Corporation of India and the Andhra Pradesh State Civil Supplies Corporation is subject to sales tax.
2. Whether the Andhra Pradesh Rice Procurement (Levy) Order, 1984, leaves any scope for bargaining, thus determining if the transaction is a sale or a compulsory acquisition.

Issue-wise Detailed Analysis:

1. Subject to Sales Tax:
The petitioner, a dealer in paddy and rice, filed monthly returns for the year 1983-84 showing a turnover of Rs. 12,34,302 for rice supplies to the Food Corporation of India and the Andhra Pradesh State Civil Supplies Corporation. The petitioner claimed exemption on this turnover, arguing that these were involuntary sales. However, the respondents subjected the turnover to sales tax. The petitioner filed Writ Petition No. 7101 of 1985 seeking a direction to the respondents not to collect sales tax on this turnover. Similar writ petitions were filed for the assessment years 1984-85 and 1985-86.

The High Court initially dismissed these writ petitions, relying on the Supreme Court judgment in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer [1978] 42 STC 31, which held that such turnover is liable to tax. The petitioner then appealed to the Supreme Court, which remanded the matter to the High Court to decide on the limited issue of whether the Andhra Pradesh Rice Procurement (Levy) Order, 1984, left any scope for bargaining.

2. Scope for Bargaining:
The main argument from the petitioner's counsel was that the Procurement Order did not allow any scope for bargaining between the petitioner and the Government. Under the Procurement Order, the petitioner, a licensed miller, was required to sell 50% of the total quantity of each variety of rice to the Food Corporation/State Corporation at a price fixed by the Government. The petitioner contended that this constituted a compulsory sale, invoking the ratio from Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P. [1970] 26 STC 344.

The State's Special Counsel argued that the Supreme Court in Vishnu Agencies case [1978] 42 STC 31 (SC) overruled Chittar Mal's case, establishing that transactions under statutory sales involve implied consent and thus are sales, not compulsory acquisitions. The Supreme Court in Vishnu Agencies held that mutual assent is not totally excluded in such transactions, making them sales rather than compulsory acquisitions.

Detailed Examination of the Rice Procurement Order:
The High Court examined whether the Rice Procurement Order allowed any scope for mutual assent. The Court referred to the Vishnu Agencies case, which indicated that even minimal scope for bargaining makes a transaction consensual. The Court analyzed various clauses of the Rice Procurement Order:

- Clause 3(c): Licensed millers must sell 50% of their rice to the Corporations at a price fixed by the Government, with no option but to comply.
- Clause 6: This clause provides for the delivery and payment process, including the right of the miller to dispute the analysis of the rice quality and request re-analysis, indicating minimal scope for bargaining.

The Court concluded that the Procurement Order allowed minimal scope for bargaining, particularly regarding the quality and analysis of rice, making the transaction a sale rather than compulsory acquisition.

Supplementary Reasons:
The judgment was supplemented with additional reasons:
- Sub-clause (8) and (9) of Clause 6: These clauses provide for incidental charges and packing specifications, indicating some level of negotiation.
- Schedules II, III, and V: These schedules outline rice classifications, prices, and quality specifications, allowing for some bargaining regarding the classification and quality of rice.

The Court held that the minimal scope for bargaining under the Procurement Order meant that the transactions were sales within the meaning of the Andhra Pradesh General Sales Tax Act and not compulsory acquisitions. Thus, the writ petitions were dismissed, and the petitioner was liable to pay sales tax on the turnover of rice supplied to the said Corporations.