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TMI Blog1962 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... arbhanga, rejected the plea of the assessees that despatches of sugar to the Province of Madras in compliance with the instructions of the Controller were not liable to be included in the taxable turnover, and ordered the assessees to pay sales tax on a taxable turnover of Rs. 27,62,226. The order of assessment was confirmed by the Deputy Commissioner, but the Board of Revenue exercising jurisdiction in revision set aside the order, in so far as it related to the inclusion into the taxable turnover the value of sugar despatched to the Province of Madras. The Board of Revenue observed that the "Controller passed orders in exercise of statutory powers, which, as a result of mere compliance, could not create a contract in law," and there was no evidence justifying the view that there could "possibly be any contract between the assessees and some dealers in Madras or between the assessees and the Sugar Controller". The Board of Revenue under the direction of the High Court of Judicature at Patna submitted under section 25(3) of the Bihar Sales Tax Act, 1947, the following question for the opinion of the High Court: "Whether in the facts and circumstances of the case, the disposal of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travening the provisions of the Order, without prejudice to any other punishment to which he may be liable, an order of forfeiture of any stocks of sugar in respect of which the Court trying the offence was satisfied that the offence was committed, may be passed. By sub-rule (4) of rule 81 of the Defence of India Rules, 1939, contravention of orders made under the rule was liable to be punished with imprisonment for a term which may extend to three years or with fine or with both. The course of dealings between the assessees and the State of Madras to which sugar was, under the directions of the Controller, supplied by the assessees is stated by the High Court as follows: "The admitted course of dealing between the parties was that the Government of various consuming States used to intimate to Sugar Controller of India from time to time their requirement of sugar, and similarly the factory owners used to send to the Sugar Controller of India statements of stock of sugar held by them. On a consideration of the requisitions received from the various State Governments and also the statements of stock received from the various factories, the Sugar Controller used to make allotments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of the price, be deemed to be a sale; Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930) the sale of any goods which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have been made in Bihar." Apparently in the first paragraph of the definition a transaction (other than a transaction expressly specified) in which there is a transfer of property in goods for valuable consideration, was included as a sale within the meaning of the Act. By the first proviso transfers of goods on hire-purchase or other instalment system of payment are to be deemed sales. The second proviso (which has since been repealed) dealt with the situs of the sale and was not in truth a part of the definition of sale. What constituted a sale, the second proviso did not purport to say: it merely fixed for the purpose of the Bihar Sales Tax Act the place of sale, in the circumstances mentioned therein. Tax is leviable under the Bihar Sales Tax Act on the gross turn- over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where for money consideration property in goods is transferred under a contract of sale. Section 4 of the Sale of Goods Act was borrowed almost verbatim from section 1 of the English Sale of Goods Act, 56 and 57 Vict. c. 71. As observed by Benjamin in the 8th Edn. of his work on "Sale", "to constitute a valid sale there must be a concurrence of the following elements, viz., (1) parties competent to contract; (2) mutul assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised." The Provincial Legislature by Entry 48, List II, of the Seventh Schedule of the Government of India Act, 1935, was invested with power to legislate in respect of "taxes on sale of goods ". The expression "sale of goods" was not defined in the Government of India Act, but it is now settled law that the expression has to be understood in the sense in which it is used in the Sale of Goods Act, 1930. In State of Madras v. Gannon Dunkerley and Co. [1959] S.C.R. 379; 9 S.T.C. 353., this Court in considering whether section 2(i), Explanation 1(i), of the Madras General Sales Tax Act, IX of 1939, as amended by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale." In Gannon Dunkerley & Company's case [1959] S.C.R. 379; 9 S.T.C. 353., the Court was concerned to adjudicate upon the validity of the provisions enacted in Acts of Provincial Legislatures imposing liability to pay sales tax on the value of goods used in the execution of building contracts, and the judgment of the Court proceeded on the ground that power conferred by Entry 48, List II, was restricted to enacting legislation imposing tax liability in respect of sale of goods as understood in the Sale Goods Act, 1930, and that the Provincial Legislature under the Government of India Act, 1935, had no power to tax a transaction which was not a sale of goods, as understood in the Sale of Goods Act. The ratio decidendi of that decision must govern this case. According to section 4 of the Sale of Goods Act to constitute a sale of goods, property in goods must be transferred from the seller to the buyer under a contract of sale. A contract of sale between the parties is therefore a prerequisite to a sale. The transactions of despatches of sugar by the assessees pursuant to the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to acceptance of an offer. A contract of sale postulates exercise of volition on the part of the contracting parties and there was in com- plying with the orders passed by the Controller no such exercise of volition by the assessees. By the Indian Contract Act, IX of 1872, a proposal or an offer is defined as signification by one person to another of his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence. When the person to whom the proposal is made or signified assents thereto, the proposal is said to be accepted. The person making the proposal is called the promisor and the person accepting the proposal is called the promisee, and every promise or every set of promises, forming the consideration for each other is an agreement. These provisions of the Contract Act are by section 2(15) of the Sale of Goods Act, incorporated therein. There was on the part of the Province of Madras no signifi- cation to the assessees of their willingness to do or to abstain from doing anything, with a view to obtaining the assent of the assessees to such act or abstinence, and the Controller did not invite any significa- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the expressions used therein should ordinarily be under- stood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature. If an expression is susceptible of a narrow or technical meaning, as well as a popular meaning, the Court would be justified in assuming that the Legislature used the expression in the sense which would carry out its object and reject that which renders the exercise of its powers invalid. If the narrow and technical concept of sale is discarded and it be assumed that the Legislature sought to use the expression "sale" in a wider sense as including transactions in which property was transferred for consideration from one person to another without any previous contract of sale, it would be attributing to the Legislature an intention to enact legislation beyond its competence. In interpreting a statute the Court cannot ignore its aim and object. It is manifest that the Bihar Legislature intended to erect machinery within the framework of the Act for levying sales tax on transactions of sale and the power of the Legislature being restricted to imposing tax on sales in the limited sense, it could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, and it was held that the provisions of section 4(1) read with section 2(g), proviso 2, of the Bihar Sales Tax Act was within the legislative competence of the Province of Bihar. It was pointed out that the second proviso to the definition of sale in section 2(g) of the Act did not extend the meaning of sale so as to include therein a contract of sale, what it actually did was to lay down certain circumstances in which a sale, although completed elsewhere, was to be deemed to have taken place in Bihar. Those circumstances did not constitute a sale, but only located the situs of such sale. The Court in that case was not called upon to consider whether a transaction to be a sale must be preceded by a contract of sale; the Court was merely considering the vires of the second proviso to section 2(g) of the Bihar Sales Tax Act. Das, C.J., in delivering the judgment of the majority of the Court observed "the basis of liability under section 4(1) remained as before, namely, to pay tax on 'sale'. The fact of the goods being in Bihar at the time of the contract of sale or the production or manufacture of goods in Bihar did not by itself constitute a 'sale' and did not by itself attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s railway wagons in the Transport Commission under section 29 of the Transport Act, 1947, with compensation fixed in the form of transport stock under the rele- vant sections of that Act did not constitute a sale for the purpose of section 17 of the Income Tax Act, 1945, so as to render the company liable to a balancing charge under that section. The cases turned upon the meaning of "sale" for the purposes of the Excess Profits Tax legisla- tion and the Income Tax Act, 1945, (8 and 9 Geo. 6, c. 32) and observations made therein have little relevance in determining the limits of the legislative power of the Provincial Legislature under the Government of India Act, 1935, and the interpretation of statutes enacted in exercise of that power. The second contention raised by counsel for the assessees requires no elaborate consideration. If it be assumed that the intimation of the requirement by the State of Madras to the Controller amounted to an offer, delivery of sugar by the assessees pursuant to such an order would constitute a sale within the meaning of section 2(g) of the Bihar Sales Tax Act, by the second proviso, which has been held intra vires by this Court in Tata Iron and Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions were stereotyped being under the Sugar and Sugar Products Order, 1946, which was passed by the Government of India on February 18, 1946, in the exercise of powers conferred by sub-rule (2) of rule 81 of the Defence of India Rules. The mode, which has been accepted by the parties, as correctly summarized was as follows: "The admitted course of dealing between the parties was that the Government of various consuming States used to intimate to the Sugar Controller of India from time to time their requirement of sugar, and similarly the factory owners used to send to the Sugar Controller of India statements of stock of sugar held by them. On a consideration of the requisitions received from the various State Governments and also the statements of stock received from the various factories, the Sugar Controller used to make allotments. The allotment order was addressed by the Sugar Controller to the factory owner, directing him to supply sugar to the State Government in question in accordance with the despatch instructions received from the competent officer of the State Government. A copy of the allottment order was simultaneously sent to the State Government concerned, on receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOP SEND RAIL RECEIPTS FOR EACH WAGON LOAD OR 100 BAGS LOAD WAGONS FULL CAPACITY FULLSTOP BOOK AT RAILWAY RISK IF NO SPECIAL RATES IN FORCE. PRICES T. R. L. Narasimhan. Assistant Secretary. Post copy in confirmation to Motilal Padampat Sugar Mills Ltd., Majhowlia Champaran District. Forwarded/By order, (Sd.) Illegible, Supdt. Board of Revenue, (Civil Supplies) Chepauk, Madras." Kitta 10-5-47. These documents between them disclose that free trading in sugar was not possible. All Provinces intimated their requirements to the Controller who was kept informed by the Mills about the supplies available. The price was controlled and the Controller directed the supply of a certain quantity from a particular Mill to an indenting Province. After giving his permit and sending a copy of this permit to each party, the Controller passed out of the picture and the Mill supplying and the Province receiving the supply (I am avoiding the words seller and buyer since that is the point to decide) arranged the rest of the affair including the issue of despatch instructions regarding the quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such a limitation could of course arise from a competing entry in List No. 1. Otherwise the entry conferred powers as large and plenary as those of any sovereign legislature. The ambit of the entry, prior to the inauguration of the Constitution, was the subject of three leading decisions by the Federal Court, in one of which there was also an appeal to the Privy Council. The first case was In re The Central Provinces and Berar Act No. XIV of 1938 [1939] F.C.R. 18; 1 S.T.C. 1. , a reference under section 213 of the Constitution of 1935. In that case the imposition of sales tax on retail sales of motor spirit and lubricants was questioned on the ground that though described as tax on the sale of motor spirit etc., the tax was, in effect, a duty of excise under Entry 45 of List I and there being an overlap between the two entries that in List I must prevail. Legislative practice in respect of excise duty was invoked but as sales tax legislation did not exist in India before 1938 there was no legislative practice to consider the meaning of the expression "tax on sale of goods ". The Government of India claimed that Entry 48, List II, must be limited to a direct tax like a turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45] F.C.R 179 P.C.; 1 S.T.C. 135.. The judicial Committee examined in detail the provisions of the Madras General Sales Tax Act, 1939, to emphasize its essential character and observed that- "Its real nature, its 'pith and substance', is that it imposes a tax on the sale of goods. No other succinct description could be given of it except that it is a 'tax on the sale of goods'. It is, in fact, a tax which according to the ordinary canons of interpretation appears to fall precisely within Entry No. 48 of the Provincial Legislative List." In repelling the contention that first sales were not included in the entry their Lordships observed that it did violence to the plain language and implied the addition of the words "other than first sale of goods manufactured or produced in India". The judicial Committee expressed itself in complete agreement with the two decisions of the Federal Court. The abmit of the entry was thus settled to be that it included all "sales of goods" though not "services" from the first sale by the producer or manufacturer to the last sale to the consumer and that the tax could be collected on wholesales or retail sales as well as on the turnover. It was howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. They could not have influenced the selection of the tax or its form. The modern tax was the result of the First World War. Germany imposed in 1916 a turnover tax called "die Umsatzsteuer" and that is the form in which the tax is collected there. France followed a year later but with a transaction tax which was known as "L'impot sur le chiffred' affaires". Soon other countries follow- ed as it was almost as productive as Customs and income-tax. By the time the Government of India Act, 1935, was passed, no less than thirty countries had imposed this tax in different forms. India, however, was not one of them. The period in India following the First World War opened with the Government of India Act with its Devolution Rules and the allocation of taxes by the Scheduled Tax Rules to the Provinces framed in 1920. The latter Rules contained only octroi and taxes on markets and trades, professions and callings which resembled very distantly, the modern sales tax. Indeed, sales tax was first visualized in the Report of the Taxation Enquiry Committee (1924-25) but only as a modification of the octroi through the intermediate steps of taxing markets and slaughter-houses. It was hoped that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metimes upon exporting. The popular name for American excises is sales taxes. Not all excises are imposed upon sales or the privilege of selling, however, for they may be placed upon the purchase or use of commodities, including services." The varieties this elastic tax took in that country are illustrated from the following passage from the same author- "Here, again, there is no standard usage, for selected sales taxes are often called sales taxes, limited sales taxes, selective sales taxes, and special sales taxes, while general sales taxes may be called sales taxes, turnover taxes, manufacturers' sales taxes, retail sales taxes and gross receipts or gross income-taxes." It was in the background of these laws of foreign countries and the recommendations of the Taxation Enquiry Committee that the entry in the Government of India Act, 1935, was framed. Taxes on the sale of goods being a kind of commodity taxes had to be demarcated from other commodity taxes like excise, octroi, terminal tax, market dues etc. The difficulty was solved by viewing the goods as the subject of taxation in different stages. These stages were production, movement, sale and consumption. Taxes on producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he said will bear repetition: "A powerful appeal was made to us by the Advocates-General of the Provinces that, consistently with its terminology, we should so interpret Entry No. 48 (List II) as to give it a content sufficiently extensive for the growing needs of the Provinces It was argued that provincial autonomy granted by the new scheme of government would be unmeaning and empty, unless it was fortified by adequate sources of revenue. Whatever value such an appeal may have in a judicial decision, I personally appreciate it, and I feel no doubt that the interpretation that I am placing on Entry No. 48 (List II) is sufficiently practical to leave an adequate source of revenue in the hands of the Provinces without making inroads on Central preserves. I may add here that the several authors I have been able to consult on this point agree in their opinion that, since the War, a tax on the sale of goods has proved to be both productive and practicable in many countries under circumstances not very different from those prevailing in the Provinces of India. The yield naturally varies with the scope and rates of the tax, business conditions and administrative efficiency, but it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions. Firstly, the definition by a fiction took in transactions of sale in which the goods were produced in the Pro- vince or were in the Province at the time the contract of sale took place, no matter where the contract could, in law, be said to have taken place. In other words, by a fiction incorporated in the definition of sale, the situs of sale could be established in the Province. Secondly, forward transactions in which the passing of property was postponed to a future date, if at all it took place, were included in the definition of "sale". Thirdly, materials in a works contract, where the bargain was for a finished thing, were treated as the subject-matter of sale. Laws in which transactions of sale were sought to be taxed on the ground that goods were in the Province or some part of the component elements of a contract of sale took place in the Province were generally upheld by the High Courts. In these cases the doctrine of nexus was extended to sales tax legislation following the analogy of the decision of the Privy Council in Wallace Brothers & Co. v. Commissioner of Income-tax, Bombay [1948] F.C.R 1 P.C.; 16 I.T.R. 240. These cases recognized the sovereignty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions which are accustomed to be debated in connection with sale of goods, it is natural that a lawyer should, as a matter of first impression approach the question of sale under the Sales Tax Act with the same concept of a sale. But if the matter is further considered it will be seen that considerations which arise under the Sales Tax Act are altogether different from those which arise under the Sale of Goods Act. The object of the Sales Tax Act is to impose a tax on all sales and it is a tax imposed on the occasion of sale ..... So far as the Government is concerned, it would be immaterial at what point of time property in the goods actually passed from the seller to the buyer. Of course, there must be a completed sale before tax can be levied and there would be a completed sale only when property passes. That is the scope of the definition of 'sale' in section 2(h). But when once there is a completed sale the question when property passed in the goods would be a matter of no concern or consequence for purposes of the Sales Tax Act. The Government is interested only in collecting tax due in respect of the sale and the only fact about which it has to satisfy itself is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in Sales Tax Officer, Pilibhit v. Messrs Budh Prakash Jai Prakash [1955] 1 S.C.R. 243; 5 S.T.C. 193,. The definition of the word "sale" in the U.P. Sales Tax Act (XV of 1948) included "forward contracts", and this part of the definition was declared ultra vires Entry 48 in List I of the Government of India Act, 1935, and Explanation III to section 2(h) of that Act which provided that forward contract "shall be deemed to have been completed on the date originally agreed upon for delivery" and also section 3-B taxing turnover of dealers in respect of transactions of forward contracts were also declared ultra vires. Venkatarama Ayyar, J., speaking for this Court held that under the statute law of England and also of India there was a well-recognized distinction between "sales" and "agreements to sell" though they were grouped under the generic name of "Contracts of sale". The distinc- tion, it was pointed out, lay in the transfer of property which, if simultaneous with agreement, made for a sale, but if in the future, operated only for an agreement to sell. In the latter case property could only pass as required by section 23 of the Sale of Goods Act. Relying on the observation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 S.T.C. 396; A.I.R. 1953 Mad. 91., of the Madras High Court was not accepted. Then came the third batch of cases. This batch was concerned with the taxing of materials which were supplied and used as part of building or repair operations, like bricks, timber and fittings in buildings, girders, beams, rails etc. in bridges, spare parts in repair of motor vehicles etc. Two distinct views were held by the High Courts. The Madras High Court in sub nom. Gannon Dunkerley & Co. v. State of Madras [1954] 5 S.T.C. 216., held that such transactions did not involve a sale of goods and there could be no tax. A contrary view was expressed in Pandit Banarsi Das v. State of Madhya Pradesh [1955] 6 S.T.C. 93., where it was held that such contracts involved both labour as well as materials and inasmuch as materials were goods and property in them passed, it was within the competence of the Provincial Legislatures to separate the sale of goods from the composite and entire transactions and to tax them. It was pointed out that legislative practice in relation to the Sale of Goods Act was not conclusive, and though it could not be doubted that a limited Legislature could not create a power for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1945 (8 & 9 Geo. 6 c. 32) in an assessment under clause I of Schedule D to the Income Tax Act, 1918. The Company appealed against the balancing charge and succeeded. Section 17(1) of the Income Tax Act, 1945 (which in its purport resembled section 10(2)(vii) of the Indian Income-tax Act, 1922) ordained that a balancing charge or allowance should be made if certain events occur- red, one such event being "(a) the machinery or plant is sold, whether still in use or not". The question was whether there was such a "sale" justifying a balancing charge. It was contended for the Revenue that the word "sale" had a wider meaning than a contract and a conveyance of property and that in its legal meaning it did not involve a contract at all but just the transfer of the property in or ownership of some- thing from A to B for a money price, whether voluntary or effected by operation of law or compulsory. Passages were cited from Benjamin on Sale (2nd Edn., p. 1), Halsbury's Laws of England (2nd Edn. Vol. XXI, p. 5), Blackstone's Commentaries (19th Edn. (1836) Vol. II, p. 446), and Chalmer's Sale of goods (11 th Edn., p. 161) to show that a bargain only shows a mutual assent but it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the sale as, for example, when it is said by a modern writer that 'the first step in the sale of land is the contract for sale' (see Cheshire, Modern Real Property, 7th Edn., p. 631). But it is immaterial whether the contract is regarded as the sale itself, or as a part of it, or a step in, the sale or as a prelude to the sale; there is for the present purpose no substance in any such distinction. The core of it is that the con- sensual relation is connoted by the simple word 'sale' ". Lord Reid also emphasized the consensual relation in "sale" as its vital element and observed: "'Sale' is, in my opinion, a nomen juris; it is the name of a particular consensual contract. The law with regard to sale of chattels or corporeal movables is now embodied in the Sale of Goods Act, 1893. By section 1(1) 'A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price', and by section 1(3): 'Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase but only because the line of reasoning of this case has been closely followed in Gannon Dunkerley's case [1969] S.C.R. 379; 9 S.T.C; 353. The decision of the Court of Appeal, later approved by the House of Lords, had also influenced in a large measure the decision of the Madras High Court earlier in the same case. In Gannon Dunkerley's case [1969] S.C.R. 379; 9 S.T.C; 353., Venkatarama Ayyar, J., posed the question thus: "The sole question for determination in this appeal is whether the provisions of the Madras General Sales Tax Act are ultra vires, in so far as they seek to impose a tax on the supply of materials in execution of works contract treating it as a sale of goods by the contractor, and the answer to it must depend on the meaning to be given to the words 'sale of goods' in Entry 48 in List II of Schedule VII to the Government of India Act, 1935." His Lordship accepted that building materials were "goods" in view of the definition and narrowed the inquiry to whether there was "a sale of those materials within the meaning of that word in Entry 48". The learned judge then pointed out that in interpreting a Constitution a liberal spirit should inspire courts and the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a price in money paid or promised." (Vide 8th Edn., p. 2). "In 1893 the Sale of Goods Act, 56 & 57 Vict. c. 71 codified the law on the subject, and section 1 of the Act which embodied the rules of the common law runs as follows: 1.. (1) 'A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. There may be a contract of sale between one part owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.' " It was then pointed out that in section 77 of the Indian Contract Act, 1872, sale was defined as "the exchange of property for a price involving the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatur solo, solo credit, and it vests in the other party not as a result of the contract but as the owner of the land." I shall refer to two other cases which were decided with Gannon Dunkerley's case. [1959] S.C.R. 379; 9 S.T.C. 353. In Pandit Banarsi Das v. State of Madhya Pradesh [1959] S.C.R. 427; 9 S.T.C. 388., it was observed at page 437- "It should be made clear, however, in accordance with what we have already stated, that the prohibition against imposition of tax is only in respect of contracts which are single and indivisible and not of contracts which are a combination of distinct contracts for sale of materials and for work, and that nothing that we have said in this judgment shall bar the Sales Tax Authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category." In Mithanlal v. State of Delhi [1959] S.C.R. 445; 9 S.T.C. 417., from a composite transaction involving work and materials, the materials were held liable to sales tax under a law made by Parliament for a Part C State. This was held to fall within the residuary pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Legislature having power to levy a tax not expressly mentioned. It was, however, held that if the taxing Province had the goods at the time of the contract or there was other substantial connection with the contract by reason of some element having taken place there, the Legislature could validly make a law which treated the whole transaction as having taken place in the Province. The argument in this case is that the tax can only be placed upon a transaction of sale which is the result of mutual assent between the buyer and seller, and observations in Gannon Dunkerley's case [1959] S.C.R. 379; 9 S.T.C. 853. where stress is laid upon the consensual aspect of "sale" are relied upon. It is true that consent makes a contract of sale because sale is one of the four consensual contracts recognised from early times. "Consensu fiunt obligations in emptionibus venditionibus" and "Ideo autem istis modis consensu dicimus obligationes contrahi". But consent may be expressed or implied and it cannot be said that unless the offer and acceptance are there in an elementary form there can be no taxable sale. The observations in Gannon Dunkerley's case were made in connection with materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third person and not by the buyer and seller. This is the old controversy between Labeo and Proculus that if price is fixed by a third person a contract of sale results or not. Labeo with whom Cassius agreed, held that there was not, while Proculus was of the contrary opinion: "Pretium autem certum esse debet. Nam alioquin si ita inter nos convenerit, ut guanti Titius rem aestemauerit, tanti, sit empta, Labeo negavit ullam uim hoc negotium habere, cuius optnionen Cassius probat. Ofilius et eam emptionem et uenditionem, cuius opinionem Proculus secutus est." (Gaius III, 140). This was solved by Justinian holding that there was: "Sed nostra decisio ita hoc constituit." (Inst. III, 23, 1). I do not think the modern law is any different. So long as the parties trade under controls at fixed price and accept these as any other law of the realm because they must, the contract is at the fixed price both sides having or deemed to have agreed to such a price. Consent under the law of contract need not be express, it can be implied. There are cases in which a sale takes place by the operation of law rather than by mutual agreement express or implied. See Benjamin on Sale (8th Edn., p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sick man is given medicines under the orders of his doctor and pays for them to the chemist with tax on the price. He does not even know the names of the medicines. Did he make an offer to the chemist from his sick bed? The affairs of the world are very complicated and sales are not always in their elementary forms. Due to short supply or maldistribution of goods, controls have to be imposed. There are permits, price controls, rationing and shops which are licensed. Can it be said that there is no sale because mutuality is lost on one account or another. It was not said in the Tata Iron and Steel case, which was a case of control, that there was no sale. The entry should be interpreted in a liberal spirit and not cut down by narrow technical considerations. The entry in other words should not be shorn of all its content to leave a mere husk of legislative power. For the purposes of legislation such as on sales tax it is only necessary to see whether there is a sale express or implied. Such a sale was not found in "forward" contracts and in respect of materials used in building contracts. But the same cannot be said of all situations. I for one would not curtail the entry any furth ..... 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