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TMI Blog1973 (2) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the assessee had was that coriander and methi were oil-seeds coming within section 14(vi) of the Central Sales Tax Act. This again was accepted by the Tribunal, which held that the assessee need not pay tax on the sales of coriander and methi. There were other contentions too like that the sales of wheat attempted to be taxed were not first sales within the State and that the containers were not taxable. These questions, however, were not considered by the Tribunal, since the conclusions on the other questions made a decision on these issues unnecessary. What we have to consider is whether the decisions of the Tribunal on the three questions mentioned above are correct. The main question is the first question, namely, whether the sales of the rationed articles by the assessee to the retailers were sales coming within the General Sales Tax Act. There was an earlier Division Bench ruling of this Court, to which one of us was a party, in R.P. Govindan Co. v. Sales Tax Appellate Tribunal[1970] K.L.T. 136; p. 188 infra., where the question considered was whether such sales of rationed articles to the retailers by a wholesaler were sales. And the Division Bench answered the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Supreme Court relied on by the Division Bench. We do not think that this criticism of the counsel is justified. The Division Bench has pointed out, relying on State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.[1958] 9 S.T.C. 353 (S.C.). and New India Sugar Mills Ltd. v. Commissioner of Sales Tax Bihar[1963] 14 S.T.C. 316 (S.C.)., that a sale as contemplated by the Sale of Goods Act had four ingredients, viz., parties competent to contract, mutual assent, a thing the absolute or general property in which was transferred from the seller to the buyer, and a price in money paid or promised. Thereafter, considering the three other decisions of the Supreme Court, Indian Steel Wire Products Ltd. v. State of Madras[1968] 21 S.T.C. 138 (S.C.)., Andhra Sugars Ltd. v. State of Andhra Pradesh[1968] 21 S.T.C. 212 (S.C.). and State of Rajasthan v. Karain Chand Thappar and Brothers (Coal Sales) Ltd., Jaipur[1969] 23 S.T.C. 210 (S.C.), the Division Bench has made the observation, the correctness of which is disputed. It is clear that, out of the four ingredients mentioned above to constitute a sale, the first, the third and the fourth could not be absent in any transaction and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be free but compulsory and the parties would have no choice in the matter and therefore there would be no sale. The most common-place illustration of supply and acceptance of goods resulting in sale under the present conditions is furnished by the present system of sale of rationed goods. There are ration shops in particular areas. Ration cards are distributed to residents in that area. The owners of these cards are required to go to the particular shop mentioned in the card for supply of rationed articles. Price is also regulated by the Rationing Order. Therefore the parties, the price, the shop, the supply and the acceptance of goods in accordance with the provisions of the Rationing Order are all regulated. When one presents a ration card to the shop and the shop owner delivers the rationed articles and the holder of the ration card accepts them and pays the price, there is indisputably a sale." This clearly indicates (there cannot be any doubt about it either) that a sale by a retailer to a card-holder of rationed articles is a sale coming within the Sales Tax Act. Then, we are not able to understand how a sale by a wholesaler to a retailer of rationed articles is not a sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so like the Orissa Division Bench ruling including a decision of our court by a single judge in 0. M. Hamsa Haji v. Sales Tax Officer, Tirur[1967] 20 S.T.C. 470; 1967 K.L.T. 731. Still, the Division Bench has held that the language of clause (vi) of section 14 will not justify the conclusion that the said clause embodies a definition of the term "oil-seeds". The Division Bench has referred to relevant decisions of the Supreme Court like Ramavatar Budhaiprasad v. The Assistant Sales Tax Officer, Akola[1961] 12 S.T.C. 286 (S.C.). , and Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh(5), and also to the Full Bench decision of this Court in Krishna Iyer v. State of Kerala[1962] 13 S.T.C. 838; 1962 K.L.T. 608. There is yet another Division Bench ruling of this Court taking the same view in Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Mammootty[1970] 26 S.T.C. 122; 1970 K.L.T. 142. The principle to be followed in such cases is to accept the meaning of the terms as they are understood in common parlance. The decision of the Federal Court in Bhola Prasad v. EmperorA.I.R. 1942 F.C. 17. and the decision of the Privy Council in Mogh Raj v. Allah Rakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the State or not. The Tribunal will also decide whether the containers are liable to tax. And on the basis of these decisions, the Tribunal will modify its decision to the extent indicated. The revision cases are allowed in the manner indicated, however, without any order regarding costs. Petitions allowed. Appendix [The judgment of the Division Bench of the Kerala High Court consisting of T.C. RAGHAVAN and P. UNNIKRISHNA KURUP, JJ., in R.P. Govindan Co. v. Sales Tax Appellate Tribunal (T.R.C. No. 38 of 1968) delivered on 8th December, 1969, is printed below: ] R.P. GOVINDAN CO. V. SALES TAX APPELLATE TRIBUNAL The judgment of the court was delivered by RAGHAVAN, J.-The petitioner is a wholesale distributor of foodgrains appointed under clause 51 of the Kerala Foodgrains (Regulation of Distribution) Order, 1965. He was assessed to sales tax on the transfers of the foodgrains effected by him to the retail distributors treating those transactions as sales and considering their total as the turnover for the year 1965-66, overruling his objections that he was only an agent of the Government and not a dealer, and that the transactions by way of transfer of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court was considering in this case whether a State Legislature had power to tax the sale of the materials used in a works contract; and the Supreme Court held that, in the case of a building contract, the property in the materials used did not pass to the other party to the contract as movable property, unless that was the agreement between the parties. In other words, the Supreme Court held that in a building contract there was no sale of the materials as movables, unless the parties themselves treated the contract as two, one for the sale of the materials and the other to do work and render service. The next decision relied on by the counsel of the petitioner was by a Bench of three judges; and one of the learned judges (Hidayatullah, J., as he then was) disagreed with the other two. In that case, the earlier decision in Gannon Dunkerley's case[1958] 9 S.T.C. 353 (S.C.). was followed; and Shah, J., who spoke for the majority, held that the ratio decidendi in Gannon Dunkerley's case[1958] 9 S.T.C. 353 (S.C.). applied to the case, while Hidayatullah, J., observed that the said decision should not be extended to the facts of the case. But, there are three other more re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was yielding to monopoly, where strange things might well be done in the name of liberty. The twentieth century has seen its progressive erosion on the one hand by opposed theory and on the other by conflicting practice. The background of the law, social, political and economic, has changed. Laissez faire as an ideal has been supplanted by 'social security'; and social security suggests status rather than contract. The State may thus compel persons to make contracts........In many instances a statute prescribes the contents of the contract ..........." In the course of the discussion in this judgment, Hegde, J., has referred to the decision of the House of Lords in Kirkness v. John Hudson Co. Ltd.[1955] A.C. 696. In that case, Viscount Simonds "only echoed" what Singleton, L.J., said "in his admirably clear judgment" and followed the passage, that "by the common law a sale of personal property was usually termed a 'bargain and sale of goods' ", from Benjamin in his well-known book on "Sale" quoted by Singleton and Birkett, L. JJ., and Hegde, J., has pointed out that that was a case of compulsory acquisition and not sale. Freedom of contract can be and has always been only free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the contract entered into between the petitioner and the Collector on behalf of the State. The agreement contains only five clauses, and a schedule which contains several provisions. The second clause in the body of the document provides that the petitioner shall sell the specified articles to holders of foodgrains distribution documents, and he shall receive the articles from authorised mills/importers/wholesalers or a depot of the Food Corporation of India. Under clause 3, the petitioner has to deposit a security of Rs. 1,000 for the due fulfilment of the terms and conditions of the contract. Clause 4 provides that in case the petitioner commits any breach of any of the provisions of the contract, the Government, the Commissioner of Civil Supplies or any other authorised officer shall have power to cancel the agreement, to forfeit the security deposit, etc. The last clause gives power to the Government to recover amounts from the petitioner under the Revenue Recovery Act. In the schedule there are several provisions; and we shall refer only to a few of them which are relevant for the purpose of the case. It is provided in clause 1 of the schedule that the petitioner shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributes or transfers the articles to the retail dealers, he gets the price for them. The restriction is that the price he pays to his vendor is fixed and the price he takes from the retail dealer is also fixed. Similarly, he can purchase only from a particular miller/importer/wholesaler or depot of the Food Corporation of India and can sell only to particular retail distributors; he cannot purchase from any other source, nor can he sell to any other distributor or consumer as he likes. These restrictions on purchase and sale are intended to ensure equitable distribution of the foodgrains and to prevent cornering, racketeering and black-marketing. The purpose of controls is to prevent these; and these alone are achieved by the restrictions imposed on the purchase and sale by the petitioner. If, as we have already stated, these controls are valid and constitutional, the consequential restriction on the freedom of contract is also valid and constitutional. Because of these restrictions, the transactions do not cease to be sales. The area within which freedom of contract was being exercised in a laissez faire economy was certainly wider, though even that freedom was always regulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had to return the articles still remaining with him to the Government; and it was argued that this indicated that the assessee was only an agent. This argument was repelled by the Allahabad High Court. In the case before us, the provision is not that the petitioner should return the articles to the Government; the provision is that the articles would be disposed of in accordance with the direction of the officer ordering the cancellation or suspension which need not mean that the petitioner will not get the money he paid for the articles. Mr. M.I. Joseph relied also on clause 2 of the schedule to the contract, where it is stated that the articles purchased by the petitioner have to be treated as "an entrustment from Government". This only means that he has to keep the articles "for the purpose of sale to authorised retail distributors"; and this does not mean that he is the agent of the Government. For these reasons, this contention has also to be rejected. When this judgment is being pronounced, the recent Full Bench decision of the Allahabad High Court in Commissioner of Sales Tax, U.P., Lucknow v. Ram Bilas Ram Gopal[1969] 24 S.T.C. 508., is brought to our noti ..... 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