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TMI Blog2006 (5) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the impugned judgment. The contentions of the appellant that having regard to the transaction entered into by and between the parties and no sale having taken place, they are not liable to pay any tax, will not be correct. Non- filing of the appeal against the said order dated July 30, 1991, would not take away the effect of order of assessment passed as against the appellant by the assessing authority. - Civil Appeal No. 2635 of 2006 - - - Dated:- 12-5-2006 - SINHA S.B. AND BALASUBRAMANYAN P.K. JJ. Dushyant Dave, Senior Advocate (Prasenjit Keswani, Bharat Singh, Amol Chitale and Mrs. V.D. Khanna, Advocate, with him) for the appellant. Dinesh Dwivedi, Senior Advocate (Rajeev Dubey and Kamlendra Mishra, Advocate, with him) for the respondent. -------------------------------------------------- The judgment of the court was delivered by S. B. SINHA J. Leave granted. Whether the adjustment of price of molasses from the amount of licence fee would amount to sale within the meaning of the Uttar Pradesh Trade Tax Act, 1948 ("the Act", for short), is the question involved in this appeal which arises out of the judgment and order dated May 21, 2004, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of his earlier order dated January 9, 1992, to it, but in other respects, the said appeal was dismissed. Aggrieved by and dissatisfied with the said order dated January 9, 1992, an appeal was preferred thereagainst by the respondent herein before the Trade Tax Tribunal. The said appeal was found to be barred by limitation and on the said ground alone it was dismissed by an order dated August 26, 1992. However, the respondent preferred another appeal before the Trade Tax Tribunal against the order dated February 6, 1992. An appeal was also preferred by the appellant herein before the said Tribunal questioning the order dated February 6, 1992, passed by the Deputy Commissioner (Appeal), Trade Tax, in so far as it refused relief to the petitioner on various other grounds. Both the appeals were heard together. By an order dated June 26/28, 1993, the appeal preferred by the Revenue was dismissed on the premise that the issues stood concluded by the dismissal of the second appeal of the Department against the order dated January 9, 1992. However, the company was proceeded against by the Revenue for imposition of tax for the assessment year 1988-89 purported to be in terms of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale, the arrangements entered into by and between the parties hereto, cannot be held to be a sale within the meaning of the said Act or otherwise. Mr. Dinesh Dwivedi, learned Senior Counsel appearing on behalf of the respondent, on the other hand, submitted that the intention of the parties, as to whether the transaction in question would be a "sale" within the meaning of the Act must be gathered from the terms of the licence itself and, upon a perusal of the relevant terms of the said deed, it is clear that the transaction would constitute a sale. The U. P. Trade Tax Act, 1948, was enacted to provide for the levy of tax on the sale or purchase of the goods. "Sale" has been defined in section 2(h) of the U. P. Trade Tax Act, 1948. The said provision reads as under: "2(h) 'sale' with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration and includes (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment which, whether in the course of business or otherwise, buys, sells, supplies or distributes goods, directly or otherwise for cash or for deferred payment or for commission, remuneration or other valuable consideration; (v) every person who acts within the State as an agent of a dealer residing outside the State, and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as (A) a mercantile agent as defined in the Sale of Goods Act, 1930; or (B) an agent for handling of goods or documents of title relating to goods; or (C) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or such payment; (vi) a firm or a company or other body corporate, the principal office or headquarter whereof is outside the State, having a branch or office in the State, in respect of purchases or sales, supplies or distribution of goods through such branch or office: Provided that a person who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant, or otherwise, or who sells poultry of dairy produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered necessary. In terms of clause 18 of the purported deed of licence, the licensee was required to execute a performance guarantee in favour of the owner to ensure performance on its part and the company was required to assure the appellant that it would not in any manner put any hindrance to the running of the mill during the period of the licence and the company would also ensure that none of its creditors as on date including its bankers, take any steps to hinder the working of the mill. It is beyond any controversy that the mode and manner in which the licence fee was to be paid, is not the subject-matter of the said deed. In other words, the deed of licence does not contain any provision that the appellant was required to transfer to the company, the molasses produced by it, by exercising its exclusive right to use the sugar mill, in lieu of the licence fee or otherwise. The performance guarantee deed entered into by the appellant herein was a mechanism to pay the licence fee. By reason of the said performance guarantee, only a provision has been made in terms whereof the appellant was required to hand over the entire quantity of molasses to the company and the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down in the deed of licence. The performance guarantee is not a part of the deed of licence in the sense that by reason thereof the terms and conditions for grant of the licence including that of payment of the licence fee, are not controlled by it. The definition of "sale" has undergone a change after coming into force of the Forty-sixth Constitution Amendment Act. Clause (29A) of article 366 of the Constitution of India defines "sale" to mean: "366.(29A) 'tax on the sale or purchase of goods' includes (a) a tax on the transfer, otherwise than in pursuance of a con- tract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch excess molasses, the company was required to pay any amount to the appellant, in our opinion, it cannot be said that the parties have entered into a contract for supply of molasses produced in the sugar mill by the appellant herein in favour of the company by way of a barter or exchange. It is inconceivable in law that a licence fee can be a subject-matter of barter or exchange. A barter or exchange indisputably is distinct and different from a sale. A contract of sale denotes a transfer of property in goods by mutual consent. Such a transfer of ownership must be in relation to transfer from one person to another. The consideration would be a price in the form of money. Only when the consideration for transfer consists of other goods, it may be an exchange or barter. Such is not the position here. In State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1959] SCR 379, relied upon by Mr. Dave, this court was concerned with a question as to whether any transfer of property in goods was involved in the execution of a works contract. By reason of clause (29A) of article 366, the ratio in Gannon Dunkerley Co. [1959] SCR 379 See [1958] 9 STC 353 (SC). has been overcome, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a telephone service may not have intended to purchase or obtain any right to use electromagnetic waves. It was held that the transaction by which mobile phone connection is given, is a service and not a sale of goods. It is, however, interesting to note the following observations: "We cannot anticipate what may be achieved by scientific and technological advances in future. No one has argued that at present electromagnetic waves are abstractable or are capable of delivery. It would, therefore, appear that an electromagnetic wave (or radio frequency as contended by one of counsel for the respondents), does not fulfil the parameters applied by the Supreme Court in Tata Consultancy [2005] 1 SCC 308 See [2004] 137 STC 620; [2004] 271 ITR 401 (Sc). for determining whether they are goods, right to use of which would be a sale for the purpose of article 366(29A)(d)." The subject-matter involved in the said decision of Bharat Sanchar Nigam Ltd. [2006] 3 SCC 1 See [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 6 RC 276. primarily was held not to be within the purview of definition of "goods" as the contract between the telecom service provider and the subscriber was merely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the price thereof. The amount towards the price of the goods could be paid either by way of cash or deferred payment. Instead of cash, the price of molasses was to be adjusted from the amount payable by the appellant to the owner by way of consideration for use of the mill. Such a mutual arrangement is merely one for the purpose of adjusting the accounts. The transactions between the parties in effect and substance involve passing of monetary consideration. It would, thus, come within the purview of the expression "any other valuable consideration", which expression would take colour from deferred payment being a monetary payment, but does not lose its character of some other monetary payment by way of mutual arrangement. The parties are not bartering or exchanging any goods so that the element of monetary consideration is absent. Money is a legal tender. Cash is, however, narrower than money. The words "deferred payment" and "other valuable consideration" enlarge the ambit of consideration beyond cash only. Entry 54 of List II of the Seventh Schedule to the Constitution of India provides for "sale of goods". Once a sale of goods takes place, the State becomes entitled to impose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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