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TMI Blog2008 (4) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... arshvardhan Jha, Yashraj Singh Deora, Gulsham Sharma (for M/s. K.L. Mehta Co.), Advocates for the respondent. -------------------------------------------------- The judgment of the court was delivered by Dr. ARIJIT PASAYAT J. Noticing that there was slight controversy on principle in the decisions of this court in State of Tamil Nadu v. Kothari Sugars Chemicals Ltd. [1996] 7 SCC 751 See [1996] 101 STC 197 (SC)., E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes [2000] 2 SCC 321 See [2000] 117 STC 457 (SC)., on one hand and Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer [2005] 13 SCC 102 See [2005] 142 STC 543 (SC)., the matter was referred to a Larger Bench and that is how the matter was placed before us. The controversy lies within a very narrow compass and is essentially as follows: The respondent-company is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 (in short, "the Act") and the Central Sales Tax Act, 1956 (in short, "the Central Act") and is engaged in the manufacture of sugar and is liable to pay tax on purchase of sugarcane. The price payable for purchase of sugarcane by a sugar factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser is to pay the grower only the aggregate of the amounts fixed under clauses 3 and 5A. In other words, under the statute there is no liability of the purchaser to pay the grower any amount in excess of this aggregate amount. Where, without any contractual or statutory basis the sale price of sugarcane is fixed at an amount higher than the minimum cane price fixed under clause 3 and the additional cane price fixed under clause 5A, any sum paid by the purchaser to the grower as advance prior to fixation of the additional cane price under clause 5A, to the extent that it is in excess of the additional cane price fixed later, cannot form part of the price of cane sugar. It must be proved as a fact that the higher price including the excess amount was paid as the price of the sugarcane under an agreement between the grower and purchaser irrespective of the lower amount being fixed as the aggregate of the price fixation under clauses 3 and 5A of the Control Order. Unless a clear finding to that effect is recorded, the amount paid by the purchaser in excess of the aggregate of the minimum price fixed under clause 3 and the additional price fixed under clause 5A, as a part of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96] 101 STC 197 (SC); [1996] 7 SCC 751, the High Court held that the matter was concluded by para 9 See at page 202 of [1996] 101 STC. in Kothari's case [1996] 101 STC 197 (SC); [1996] 7 SCC 751. The High Court further held that in the absence of agreement between sugarcane purchasers and sugarcane growers, the payment of excess amount fixed by the State/ Central Government was not to be reckoned. The writ petition was accordingly dismissed. In support of the appeal, learned counsel for the appellants submitted that approach of the High Court is clearly erroneous. It was submitted that essentially there are two prices fixed in respect of sugarcane; one is fixed by the Central Government which is the minimum price under the Control Order issued under the Essential Commodities Act, 1955 (in short, "the EC Act"). There is another price which is the State advised price fixed by the Executive Order. State advised price is normally higher than the price fixed under the Control Order. In U.P. Co-operative Cane Unions Federations v. West U.P. Sugar Mills Association [2004] 5 SCC 430 the controversy was competence of the State Government to fix the advised price. This court observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rowers' co-operative society to the sugar factory. It is well-settled that even a compulsory sale does not lose the character of a sale. This question has been examined in considerable detail by a Constitution Bench in Indian Steel Wire Products Ltd. v. State of Madras AIR 1968 SC 478 See [1968] 21 STC 138 (SC); [1968] 1 SCR 479. The appellant in this case supplied certain steel products to various persons at the instance of the steel controller, who exercised powers under the Iron and Steel (Control of Production and Distribution) Order, 1941, which was issued under the Defence of India Act, 1939. The appellant challenged the assessment of sales tax made on its turnover under the Madras General Sales Tax Act. The contention of the appellant was that it was the controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were to be transported and the mode in which payment of price was to be made. In short, it was said that every facet of the transaction was prescribed by the controller and, therefore, it could not be considered as sales. Sub-clause (1) of clause 11B of the Control Order provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Sale of Goods Act, 1930, 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 price. By section 3 of this Act, the provisions of the Indian Contract Act, 1872 apply to contracts of sale of goods save insofar as they are inconsistent with the express provisions of the later Act. Section 2 of the Indian Contract Act provides that when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Every promise and every set of promises forming the consideration for each other is an agreement. There is mutual assent to the proposal when the proposal is accepted and in the result an agreement is formed. Under section 10, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not by the Act expressly declared to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulate the purchase of sugarcane by the factory- wners from the cane growers. The cane growers scattered in the villages had no real bargaining power. The factory-owners or their combines enjoyed a near monopoly of buying and could dictate their own terms. In this unequal contest between the cane-growers and the factory-owners, the law stepped in and compelled the factory to enter into contracts of purchase of cane offered by the cane growers on prescribed terms and conditions.' 31.. A similar question was examined by a Bench of seven judges in Salar Jung Sugar Mills Ltd. v. State of Mysore [1972] 1 SCC 23 See [1972] 29 STC 246 (SC).. The contention was that there was no mutual assent by and between the sugar mills and the growers of the sugarcane and, therefore, there was no purchase or sale of sugarcane and consequently no tax under the Mysore Sales Tax Act could be levied. It was held that statutory orders regulating the supply and distribution of goods by and between the parties under the Control Orders in a State do not absolutely impinge on the freedom to enter into contract. Legislative measures or statutory provisions fixing the price, delivery, supply, restricting areas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the producers of sugar and khandsari sugar. The State action for the protection of the weaker sections is not only justified but absolutely necessary unless the restriction imposed is excessive.' 33. As discussed earlier, the reservation or assignment of area is made for the benefit of a sugar factory. The agreements executed by the cane growers or cane-growers' co-operative society in favour of occupier of a factory are also for the benefit of the sugar factory as by such agreements it gets an assurance of a continuous supply of freshly harvested sugarcane on the days indicated in the requisition slips issued by it so that there may not be any problem in getting optimum quantity of raw material throughout the crushing season. In absence of the agreements the sugar factory will also be a loser as it may face great problem in getting the supply of sugarcane according to its requirement. The occupiers of the factory are themselves keen on execution of the agreements but their only objection is to the mention of State advised price. The agreement is one composite transaction and it is not open to them to contend that the terms thereof which are to their advantage should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted by Parliament and the impugned Act. The only questions that arise are whether Parliament and the State Legislature sought to exercise their powers over the same subject-matter or whether the laws enacted by Parliament were intended to be a complete exhaustive code or, in other words, expressly or impliedly evinced an intention to cover the whole field.' 35.. In M. Karunanidhi v. Union of India [1979] 3 SCC 431 See [1979] SCC (Cri) 691; AIR 1979 SC 898. the principles to be applied for determining repugnancy between a law made by Parliament and law made by the State Legislature were considered by a Constitution Bench. In pursuance of an FIR lodged against Shri M. Karunanidhi, CBI after investigation had submitted charge-sheet against him under sections 161, 468 and 471 IPC and section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act. The Madras Legislature had passed an Act known as the Tamil Nadu Public Men (Criminal Misconduct) Act, 1973 which had received the assent of the President. It was contended that by virtue of article 254(2) of the Constitution, the provisions of the Indian Penal Code, Prevention of Corruption Act and Criminal Law Amendment Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give rise to any inconsistency or repugnancy as both the rules could operate harmoniously and effect could be given to both of them. Similarly, in Preeti Srivastava (Dr.) v. State of M.P. [1999] 7 SCC 120 it was held that laying down higher eligibility qualification by the State Government for admission to postgraduate medical courses did not lead to any kind of repugnancy. 37.. Under sub-clause (1) of clause 3 of the 1966 Order, the Central Government can only fix a minimum price of sugarcane. This clause should be read along with sub-clause (2) which creates an embargo or prohibition that no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under sub-clause (1). The inconsistency or repugnancy will arise if the State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, there will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them. A high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit the State or the financial institution, it cannot be held to be bad.' 38.1. The next is State of M.P. v. Jaora Sugar Mills Ltd. [1997] 9 SCC 207 which has been decided by a Bench of two judges. The dispute arose on account of fixation of price under the M.P. Sugar- cane (Regulation of Supply and Purchase) Act, 1958. The contention on behalf of the sugar factories was that clauses 3 and 5A of the 1966 Order determine the liability to pay the price and additional price and the Central Government having determined the price of the sugar- cane under the aforesaid Order, there is no power with the State Government de hors the order to fix any agreed price. The concept of agreed price came into force on September 19, 1976 by virtue of clause 3-A of the said order and until then there was no power to fix an agreed price. It was also urged that the State Government has, therefore, no power under the Act to fix any price as the field was occupied by the 1966 Order. The contention was, however, not accepted and after noticing the provisions of clauses 3(2) and 3(3), it was held as under in para 8 of the report (SCC page 211): '8. This would clearly indicate that despite the fixa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is to ensure that the cane-growers should not be compelled to sell their sugarcane at a price lower than the minimum price fixed by the Central Government under clause 3. In this case an agreement had been arrived at between Sugar Factories Owners Association and sugarcane growers, wherein a higher price was agreed to be paid but this was sought to be resiled by the appellant on the ground that it was a company, which was an independent entity in the eye of the law and was, therefore, not bound by any such agreement. After noticing the provisions of the Act and the earlier decision rendered in State of M.P. v. Jaora Sugar Mills Ltd. [1997] 9 SCC 207 it was held as under in para 6 of the report: (SCC page 367) '6. It is not in dispute that under section 31 of the Supply Act, the State Government has power to fix the reserved area. In other words, zone was carved out for the appellant for the supply of sugarcane to the factory. All the farmers who are cultivating sugarcane within that zone are bound by the State action to supply sugarcane to the factories within that reserved area. Consequently, the factory also is bound by the actions of the State Government. Obviously, pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods under section 5." It is the stand of the respondent that purchase price is not defined and, therefore, the agreed price would be taken to be the purchase price. This plea is clearly unsustainable. As noted above, the basic question is what is the consideration paid for effecting the purchase. The definition of "sale" [in section 2(t) of the Act] is relevant. It refers to transfer of the property in goods by one person to another in the course of trade or business "for cash or for deferred payment or other valuable consideration". "Purchase price" is well-known expression in commercial transactions. Every purchase involves a corresponding sale. The purchase money or purchase price for property is the price to be paid for it. Speaking technically, acquires by "words of purchase" and is a "purchaser" when he obtains title in any other mode than by descent or devolution of law. It was noted in Commissioner of Income-tax, Andhra Pradesh v. T.N. Aravinda Reddy [1979] 4 SCC 721 See [1979] 120 ITR 46 (SC). as follows: "The legal meaning of the word 'purchase' in section 54, clause (i) of the Income-tax Act, 1961 is not different from its plain meaning which connotes buying for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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