9911796707
TMI Blog1966 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... siness including sales of the articles were done at its office situated in Bihar. (2) The petitioner had a registered office at No. 7, Wellesley Place, Calcutta, and this was merely a statutory office. (3) The production and sale of the articles manufactured by the petitioner were controlled by the Iron and Steel (Control of Production and Distribution) Order, 1941, promulgated under rule 81(2) of the Defence of India Rules. (4) Notifications under the said Order were from time to time issued by the Iron and Steel Controller declaring the conditions under and prices at which the articles produced by the petitioner were to be sold to its customers. (5) In proceedings started under the Bengal Finance (Sales Tax) Act, 1941, against the petitioner, an order dated 23rd September, 1946, was passed by the Assistant Commissioner of Commercial Taxes, Calcutta, holding that the petitioner was not a dealer within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941. (6) In spite of the above the Assistant Commissioner of Commercial Taxes issued a notice dated 9th August, 1955, to the effect that he was satisfied on information received that the petitioner had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed an affidavit-in-opposition on 20th December, 1955 The facts alleged and the contentions raised in this affidavit were as follows: (a) The petitioner had its registered office at No. 7, Wellesley Place, Calcutta, and controlled and managed its business from the said office. The petitioner was a dealer within the meaning of the Act as amended in 1950. (b) On receipt of certain communication from the Central Section of the Directorate of Commercial Taxes it appeared that the petitioner had for some years past been selling goods of considerable value for which it was liable to pay sales tax. Thereupon the notice was issued under section 14(1) of the Act for production of the books of account of the petitioner to verify the sales. The petitioner produced certain registers of sale from which it appeared that it had been selling goods extensively in the State of West Bengal. (c) On 5th August, 1955, the authorised representative of the petitioner one L. Mukherjee, submitted a statement of sales made in West Bengal for the period 6th November, 1950 to 31st March, 1951, and for the period 1st April, 1951 to 31st March, 1952. In consideration of all the facts the notice dated 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fecting sales of such products under the Iron and Steel (Control of Production and Distribution) Order, 1941. These were as follows: (i) All intending purchasers were required to submit applications to the Iron and Steel Controller for placing on their behalf and at their risk, their orders on a registered producer for materials as per specifications in the applications subject to the provision of the price schedule etc., and the terms and conditions of sale of the registered producers on whom the order was placed. (ii) The Iron and Steel Controller, after scrutiny of the production programme and capacity of the registered producers, in his turn forwarded the indent of the purchaser to the dealer (registered producer) for supply of such materials allotted to the purchaser. (iii) On receipt of indent from the Iron and Steel Controller the registered producer accepted the purchaser's order as per indent subject to the acceptance of the terms of business of the registered producer by the purchaser. The terms of business of the registered producers contained amongst others, clauses governing mode of payment, mode of despatch, payment of sales tax etc. A specimen form of such term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and any damage or loss during transit shall be borne by the buyer. 7.. Prices F.O.R. Tatanagar or SCOB siding or Burnpur or F.O.R. destination are in all cases for full wagon loads. 8.. The company cannot agree on any account to despatch materials except in full wagon loads unless specified in the party's indent and confirmed by the company in the works order. 9.. The company will be at liberty to despatch goods 15 days before or after the time of delivery shown in the works order and the customer may cancel the order on which the company may fail to despatch from its works within the aforesaid time-limits; but whatever the delay in delivery may be the customer must accept the goods unless his written instructions countermanding the order are received by the company at least two days before the loading of the goods in the wagons. 10.. Claims for shortages should be made against the railway and the company will not be responsible for such claims in any way. 11.. The date of delivery as stated in all orders or contracts shall not be the essence of the contract but shall be approximate only, provided nevertheless that where a customer has entered into or proposes to ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spatches will be the Government statutory prices ruling at the time of despatch as laid down by the Iron and Steel Controller irrespective of the rates shown in the works order. Clause 5.-Your indent will be booked on the clear understanding that sales tax that may be levied by the Central Government or any State Government will be borne by you. Clause 8.-All quotations, tenders, offers, and acceptance by the company must be deemed to include and subject to the company's terms of business, general understanding and general stipulations in force at the time of conclusion of the contract. The next document is a letter addressed by Messrs Martin Burn Ltd. to the Iron and Steel Controller dated 25th July, 1949, requesting the addressee to place an order on registered producers for materials as per specification given. The writer confirmed that the indent was placed subject to the provisions of the Steel Price Schedule of the registered producers on whom the order was placed and that delivery or part delivery from any such registered producers would be accepted by the writer. The document further shows that the indent was forwarded to Indian Steel and Wire Products Ltd. (the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the said order deprived the petitioner of the capacity or competence to negotiate and conclude any agreements of sales as required by the law of sale of goods and as such the production and delivery of the products by the petitioner did not amount to sales in accordance with the law of sale of goods and that being so, those transactions were beyond the legislative competence of the respondent No. 2 to legislate for and/or de hors the competence of the executive authorities commissioned to execute the Bengal Finance (Sales Tax) Act of 1941. No documents were annexed to this affidavit to show the course of dealings adopted by the petitioner or enjoined upon the petitioner by the Iron and Steel Controller for the manufacture or distribution of its products. No attempt was made to show what classes of goods the petitioner had from time to time been required by the Controller to produce or the orders of the Controller directing the terms on which the said goods were allotted to or despatched to persons desirous of acquiring them. No reference was made to the terms of business of the petitioner in respect of any such distribution or despatch. Far from disclosing any document w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t "the expression 'sale of goods' in Entry 48, List II, Schedule VII, of the Government of India Act, 1935, was a nomen juris, its essential ingredients being an agreement to sell goods for a price and property passing therein pursuant to that agreement. Entry 48 introduced a new topic of legislation with respect to which there was no legislative practice. Under the Government of India Act, 1935, Provincial Legislatures were competent to enact laws in respect of the matters enumerated in Lists II and III and though the entries therein are to be construed liberally and in their widest amplitude the law must, nevertheless, be one with respect to those matters and Provincial Legislatures could not in the purported exercise of their power tax transactions which were not sales by merely enacting that they shall be sales. A contract of sale postulates the exercise of volition on the part of the contracting parties. A transaction by which title to goods passes by compulsion was not a sale of goods as contemplated by the Sale of Goods Act, 1930. Where the elements of sale required under the Sale of Goods Act, 1930, wanted, it was immaterial whether the word 'sale' was used or the word 'sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o all such State laws. The true meaning of the word "sale" as used in Entry 48 and Entry 54 was examined at length in Gannon Dunkerley's case[1958] 9 S.T.C. 353; A.I.R. 1958 S.C. 560. There it was observed after considering the earlier cases of the Supreme Court "that the expression 'sale of goods' in Entry 48 cannot be construed in its popular sense and that it must be interpreted in its legal sense." Tracing from the Roman Law of emptio venditio the Court considered "the common law of England relating to sales which had developed very much on the lines of the Roman Law in insisting on an agreement between parties and price as essential elements of a contract of sale of goods" and referring to the codification of the law in England by the Sale of Goods Act, 1893, and the Indian Sale of Goods Act, 1930, it was said, "According to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course pre-supposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sales tax was payable on the materials used for constructing a structure on the basis of a building contract. The Court held that "in such an agreement there was neither a contract to sell the materials used in the construction, nor was there any transfer of property in movables and it was impossible to maintain that there was implicit in a building contract a sale of materials as understood in law." In short the judgment of the Supreme Court was to the effect that the expression "sale of goods" in any Act providing for the imposition of taxes thereon must be construed in the sense which it has in the Sale of Goods Act. In New India Sugar Mills Limited v. Commissioner of Sales Tax, Bihar[1963] 14 S.T.C. 316; 9 A.I.R. 1963 S.C. 1207., the facts were as follows: The appellants owned a factory manufacturing sugar in the State of Bihar. During the assessment period 1st April, 1947 to 31st March, 1948, the appellants who were registered as dealers under the Bihar Sales Tax Act despatched sugar valued at approximately Rs. 7,00,000 to the authorised agents of the State of Madras in compliance with the directions issued by the Controller exercising powers under the Sugar and Sugar Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not invite any signification of the assent of the assessees to the intimation received by them. He did not negotiate a sale of sugar; he in exercise of his statutory authority ordered the assessees to supply sugar to the Government of Madras. We are unable to hold that from the intimation of the order of the Controller, and compliance therewith by the assessees any sale of goods resulted in favour of the State of Madras." Mr. Justice Hidayatullah took a different view but in this Court we are bound by the majority view and we are to guide ourselves by the opinion of the majority Judges of the Supreme Court and the principles laid down in Gannon Dunkerley's case[1958] 9 S.T.C. 353; A.I.R. 1958 S.C. 560. to see whether the transactions entered into by the petitioners were sales within the meaning of Entry 48 of List II of the Seventh Schedule to the Government of India Act, 1935, or Entry 54 of List II in the Seventh Schedule to the Constitution of India. Unfortunately for us the petitioner did not come out with the facts in its petition but raised only some vague contentions including that the sales, if any, were inter-State sales. Not a scrap of paper was produced before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proceeding a step further let us consider the case where the State does not allow any and everybody to manufacture goods of certain classes and does not permit any and everybody to acquire goods of such specified classes except under permits issued by the State. In such cases considerable restraint is imposed on every person concerned both as regards the acquisition of such goods and the disposal thereof as also the consideration for acquisition or disposal. Even with these limitations the State may allow a citizen to acquire the goods from any supplier of its choice and the purchaser and the seller may be at liberty to offer to purchase and to accept the bargain and enter into binding transactions of sale and purchase. I see no reason to hold why such agreements cannot ripen into sales within the meaning of the Sale of Goods Act. In the present set up of society the State may consider it beneficial in the interest of all that everybody should not be allowed to manufacture iron and steel and everybody should not be allowed to acquire such goods but that the needs of persons wishing to acquire them have to be considered in view of the supplies available from the producers, and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption whatsoever and in particular prohibit, or withhold from sale either generally or to specified persons or classes of persons or in specified circumstances. The rule also provided for controlling the prices or rates at which articles or things of any description whatsoever might be sold and for relaxing any maximum or minimum limits otherwise imposed on such prices and rates. The Iron and Steel (Control of Production and Distribution) Order, 1941, was aimed at regulating the production and supply of iron and steel goods. Under clause 4 "no person shall acquire or agree to acquire any iron or steel from a producer or a stockholder except under the authority of and in accordance with the conditions contained or incorported in a general or special written order of the controller." Under clause 5 "no producer or stockholder shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends, any iron or steel except in accordance with the conditions contained or incorporated in a special or general written order of the Controller." Under clause 10B the Controller might by a written order require any person holding stock of iron and stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, "dealer" means any person who carries on the business of selling goods in West Bengal and includes the Government. Under section 2(d) "goods" means all kinds of movable property other than actionable claims, stocks, shares, or securities and includes all materials, articles and commodities whether or not to be used in the construction, fitting out, improvement or repair of immovable property. The first respondent has not brought any facts to the notice of the court to show that the successive stages of operation carried on by the dealers manufacturing iron and steel products are not as described in the affidavit of Himangshu Kumar Bhadra affirmed on 24th April, 1964. According to this affidavit as already noted any person intending to purchase iron and steel goods has to submit an application to the Iron and Steel Controller for placing on his behalf and at his risk an order on registered producers for materials as per specification in the application. The Iron and Steel Controller then takes upon himself to find a registered producer who is in a position to supply materials required by the intending purchaser. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s they please. This is followed by actual transfer of title to the goods and payment of the price agreed upon. There is nothing to show that the purchaser cannot reject the goods if they are not such as were contracted for. He can claim compensation for losses suffered in respect of his engagement with third parties if he makes the same known to the producer at the time of entering into the contract. The limitation as to the price or as to the quantity which a purchaser can acquire from a producer or even the want of choice as to the person from whom a purchaser is allowed to acquire the goods does not in my opinion take away from the essential requisites of an agreement for sale followed by transfer of property in pursuance thereof on payment of the price. The petitioner, the first respondent before us who is in business in a large way, could easily have produced documents to show that the statements in the affidavit-in-opposition of Himangshu Kumar Bhadra were not correct and that the course of operations detailed was not accurate. In my view there is a world of difference between the facts of this case and the facts in the New India Sugar Company's case [1963] 14 S.T.C. 316; A.I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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