9911796707
TMI Blog1974 (12) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ensing Authority for Iron, Steel and Cement, constitute sale of goods under the Sale of Goods Act. In other words, are the provisions of the Bengal Finance (Sales Tax) Act, 1941, attracted in respect of transactions referred to by respondent No. 1 in the original writ petition by making supplies to the permit-holders for cement, which they allege are not voluntary sales but deliveries under compulsion made by the petitioners under the terms of the permit issued to the permit-holders and the said Cement Control Order and orders and notifications issued thereunder. Therefore, the only question in the appeal whether the transaction mentioned in the petition amounts to sale of goods so as to attract the provisions of the Bengal Finance (Sales Tax) Act, 1941. In order to appreciate the question which has been argued exhaustively by both the parties by citing large number of decisions mostly of the Supreme Court, It is first necessary to set out the relevant portions of the said Cement Control Act and the orders and notifications made thereunder, the terms of licence of a stockist and dealer of cement and also the form of licence for cement issued to permit-holders. "WEST BENGAL ACT 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, every director, manager, secretary or other officer or agent thereof shall, unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention, be deemed to be guilty of such contravention. Order No. 1033 D.C.S. dated the 18th August, 1948.-In exercise of the powers conferred by sub-section (1) of section 3 of the West Bengal Cement Control Ordinance, 1948 (West Bengal Ordinance 9 of 1948), read with clauses (b), (c), (d), (e), (f), (g) and (h) of sub-section (2) of that section, the Governor is pleased to make the following order, namely: No person shall, after the commencement of this order, sell or store for sale any cement unless he holds a licence in this behalf under this order and except In accordance with the conditions specified in such licence obtained from the Director of Consumer Goods, West Bengal, of any officer authorised by him In writing In this behalf: Provided that persons engaged in the sale or storage for sale of cement at the commencement of this order shall, with a view to obtaining such licence, apply within fifteen days from such commencement and such persons shall be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay cancel or suspend a licence if It is of opinion that the licensee has contravened any of the conditions specified in the licence granted to him or any direction given to him under the provisions of sub-paragraph (8) or for any other reason sufficient in the opinion of the authority issuing the licence. Every licence or any person employed by him or acting on his behalf shall comply with any special or general directions Issued In writing by the Director of Consumer Goods, West Bengal, for securing proper distribution of cement or for carrying out the purpose of this order and shall also comply with such conditions as may be specified in the licence." The material portions of a pro form a application for grant of a licence are as follows: "FORM A [See paragraph 13(1)] [Application for the grant of a licence under the West Bengal Cement Control Ordinance (9 of 1948).] 1.. Name of applicant to whom the licence is to be issued with father's/husband's name....................................................... 2.......................................... 3.. Address of the place where business is to be conducted.................... 4.. Address of the place or places of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holds the licence, then without prejudice to any other action that may be taken against him his licence may be cancelled by the authority by which the licence was granted." And a specimen form of the licence for cement, a large number of which has been annexed to the writ petition of respondent No. 1 and including annexure 'A' is set out hereunder: Annexure 'A' referred to in the petition, paragraph 4(b), solemnly affirmed by Badrilal Todi before me this the...... day of April, 1972. Serial No. 176921. "COMMISSIONER GOVERNMENT OF WEST BENGAL Department of Food, Relief Supplies (Supplies) Directorate of Consumer Goods, 11A, Free School Street, Calcutta. Permit No. 71-M. Date of issue 9-1-63. LICENCE FOR CEMENT The quantities of cement detailed below are hereby allotted to M/s. Bijoy Industrial Works, 8, Mahatma Gandhi Road, P.S. Paschim Patiari, Calcutta-41, to be supplied by M/s. Vishnu Agencies Pvt. Ltd., 3, Chittaranjan Avenue, Calcutta-13, on conditions detailed below. The price of material involved must be deposited with the stockist within 15 days and the actual delivery must be taken within 15 days from the date of issue of the permit. The licence is issued onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were sales and could be lawfully taxed under the Bengal Finance (Sales Tax) Act, 1941. It is alleged by respondent No. 1 that such mistake was discovered by it in 1963 upon perusal of the decision of the Supreme Court in the case of New India Sugar Mills[1963] 14 S.T.C. 316 (S.C.); A.I.R. 1963 S.C. 1207. Thereafter the petitioner preferred several appeals from the said assessment orders before the Assistant Commissioner of Sales Tax and as the appeals were not disposed of, the petitioner moved a writ petition in this court and by an order dated 11th December, 1970, the rule issued in the said writ petition was made absolute directing the appellant to deal with and dispose of the said appeals after giving respondent No. 1 an opportunity of being heard. Thereafter the said matters were remanded and the Assistant Commissioner of Commercial Taxes, Dharmatala Circle, disposed of the said appeals holding that the sales made by respondent No. 1 under the Cement Control Order were taxable under the Sales Tax Act. The order made in the appeal by the said Assistant Commissioner of Commercial Taxes was dated 22nd December, 1971, a copy of which is also annexed to the writ petition of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1968 S.C. 599., State of Rajasthan v. Karam Chand Thappar and Brothers[1969] 23 S.T.C. 210 (S.C.); A.I.R. 1969 S.C. 343., Chittar Mal Narain Das v. Commissioner of Sales Tax[1970] 26 S.T.C. 344 (S.C.); A.I.R. 1970 S.C. 2000., Raghunandan Prasad Mohan Lal v. State of U.P.[1971] 27 S.T.C. 469 (S.C.); A.I.R. 1971 S.C. 2089., Cement Marketing Co. of India, Bangalore v. State of Mysore[1971] 27 S.T.C. 159 (S.C.)., Kotha Narasimham Amburi v. State of Andhra Pradesh[1971] 27 S.T.C 191., Excise and Taxation Officer, Hissar v. Jaswant Singh[1971] 27 S.T.C. 582., Salar Jung Sugar Mills Ltd. v. State of Mysore[1972] 29 S.T.C. 246 (S.C.); A.I.R. 1972 S.C. 87., Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax, West Bengal[1973] 81 S.T.C. 254 (S.C.); 87 I.T.R. 542 (S.C.); A.I.R. 1973 S.C. 376., State of Tamil Nadu v. Cement Distributors P. Ltd.[1973] 31 S.T.C. 309 (S.C.); A.I.R. 1973 S.C. 668., Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kozhikode v. V. Sreedhara Shenoy[1973] 32 S.T.C. 181., and Maheswar Mahapatro v. State of Orissa[1972] 29 S.T.C. 52. Relying on the principles laid down in those decisions, Mr. Sengupta analysed the facts of this case and submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the permit within the time specifiedsubject only to this that necessary endorsement or variation has to be notified and sanctioned by the appropriate authority under the said Cement Control Act. Mr. Sengupta analysing those aspects of the transactions Involved under the Cement Control Act between a stockist and a permitholder submitted that it is not completely denuded of all the elements of a contract but retained fair amount of volition to the parties entering into the said transaction so as to constitute a sale of goods within the meaning of the Indian Sale of Goods Act as laid down by the catena of Supreme Court decisions referred to by both the parties. Mr. Sengupta summarised his contentions as follows: (1) That under the transactions the maximum price has been fixed. The seller is entitled to sell even at a lower price than to the highest price fixed by the said permit issued under the Cement Control Act. (2) The purchaser might take delivery of the goods Immediately or within a period of 15 days as he chooses and to be agreed between the parties and, therefore, there is a volition as to the same. (3) The purchaser may either pay In cash or he can arrange for deferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject. The transactions in order to be a sale must be under entry 54 of List II in the Seventh Schedule to the Constitution corresponding to the Government of India Act, 1935, item 48. In order to be a sale of goods it must be a sale within the meaning of the Sale of Goods Act. Mr. Chowdhury submitted that whether, on the facts and in the circumstances of this case, the disposal of cement pursuant to directions contained In annexure A to the writ petition of the respondent is liable to be taxed under the Bengal Finance (Sales Tax) Act, 1941. Thereafter, Mr. Chowdhury submitted that In order to be a contract there must be four elements, viz., (1) willingness to contract, (2) mutuality, that is, volition of both the parties to a contract and meeting of minds to enter into an agreement and a contract, (3) price in cash not barter or exchange, mode of payment being not material, and (4) transfer of property. Mr. Chowdhury referred to section 5 of the Sale of Goods Act and submitted that in order to be a contract for sale there must be offer and acceptance. In short his submission is that it must be a sale within the meaning of the Sale of Goods Act. Mr. Chowdhury referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, as the case may be; they are the essentials of a contract. When there is no requirement of the law to make an offer or to accept an offer and the passing of property In the goods and there is only statutory rights and statutory obligations and there being no offer and acceptance a compulsory sale is effected, it is not a sale at all within the meaning of the Sale of Goods Act as no freedom of contract to enter into an agreement between the parties is left in the types of transactions which are involved in this appeal. Mr. Chowdhury further submitted that if the amount of freedom which is left to the parties does not relate to offer and acceptance, it is not freedom at all and cannot amount to a sale within the meaning of the Sale of Goods Act. He strongly relied on the passages in Salar Jung Sugar Mills Ltd. v. State of Mysore[1972] 29 S.T.C. 246 at 264 (S.C.); A.I.R. 1972 S.C. 87, paras. 43 and 44. He submitted that in order to constitute an agreement the parties must sign the same and offer and acceptance must be according to the free will of the parties. Mr. Chowdhury submitted that the transactions which are the subject-matter of this appeal are not sales but those are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to sections 4 and 5 of the Sale of Goods Act, 1930, and contended that offer and acceptance must be there and the property in goods must pass. But where there is any transfer of property in goods for money pursuant to statutory right to demand such goods and such statutory obligations to deliver, such transaction is not a "sale" within the meaning of entry 48 of List II of the Government of India Act, 1935, and entry 54 of List II of the Seventh Schedule to the Constitution of India read with section 4 of the Sale of Goods Act, 1930. Mr. Deb relied on Gannon Dunkerley Co. (Madras) Ltd.'s series of cases[1958] 9 S.T.C. 353 (S.C.); A.I.R. 1958 S.C. 560. He submitted that the transactions in question are compulsory sales and are not sales within the meaning of the Sale of Goods Act. There is no amount of freedom left in these transactions as the said Control Act does not provide that the transactions should not be entered into with offer and acceptance; as such there is no sale. He submitted that in the present case the allotment order gives no choice to the respondent and as such it cannot amount to sale. There is an obligation under the Cement Control Act on the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stockist and dealer who Is the seller agreeing to offer for sale of cement and the permit-holder also agrees to purchase from the licensed stockist and dealer of cement on the terms and conditions prescribed. Mr. Sengupta thereafter submitted that the Controller merely controls the flow of cement for equitable and fair distribution at a maximum price fixed for supply of cement which Is in short supply. Therefore Mr. Sengupta submitted that there is an Implied contract between the seller and the buyer. (5) There is a transfer of property In the goods by the agreement which is Involved in these transactions. (6) The parties are free to come through the Controller in respect of the said transactions for cement either to buy cement or to sell cement according to their volitions, that is, the seller obtaining a licence for selling cement within the limits and terms prescribed by the Control Act and the orders made thereunder and the permit-holder also agrees to buy cement from the stock1st and dealer of cement on the terms prescribed under the said Act and the orders. Mr. Sengupta again referred to the decision In Indian Steel and Wire Products Ltd. v. State of Madras[1968] 21 S.T.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of the transaction in cement in West Bengal, and from the preamble it appears that the object of the Act is to confer powers on the State Government to control the production, supply and distribution of, trade and commerce In, cement in West Bengal. Section 1 gives the short title, extent and the date of commencement of the said Act in West Bengal. Section 2 defines "cement". Sub-section (1) of section 3 gives power to the State Government to promulgate orders by publication in the official Gazette regarding regulation or prohibition of the production, supply and distribution of, trade and commerce in, cement within the State of West Bengal with a view to maintain or increase the supply of cement or in securing suitable distribution and fair price. Sub-section (2) of section 3 provides in addition to the general powers of the State to promulgate orders for the purposes mentioned therein which, inter alia, included regulating licences, permits or otherwise the production or manufacture of cement, fixing price at which the cement may be purchased or sold and prescribing conditions for the sale thereof, also regulation about storage, transport, movement, etc., and other relevant m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative purpose. The said Act appears to be a comprehensive one and covering a wide range regarding control over production and transactions in cement in West Bengal. The State Government, if it appears to it necessary and expedient, can pass any order for the purposes and object of the said Act which, inter alia, includes sale of cement by a licensed stockist to a consumer to whom licence has been issued under the said Act. As It has already been laid down by the Supreme Court through the said series of decisions mentioned hereinbefore in order to enable the State Government to impose sales tax the transaction must be a "sale" of goods within the meaning of the Sale of Goods Act as interpreted by the said decisions. In the instant case, it is an admitted position that the respondent is a licensed stockist who has applied for licence under the said Control Act to sell cement on the terms and conditions of the licence issued to it. The application form, the relevant terms of which has been set out before, makes it abundantly clear that any person who is agreeable on the conditions set out in the said licence issued to him, can sell cement to customers. Relevant portion of clause 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compulsion under the law to apply under the said Act for a licence both on the part of the licensed stockist of cement and the consumers of cement. What is prescribed is only a control of such contract which must comply with the provisions of the said Act and order made thereunder. It cannot be said in the circumstances that it is wholly controlled eliminating consent or volition of the parties altogether. A party who has voluntarily and freely according to his sweet will and requirement applied under the Act for issue of a licence as stockist or a consumer of cement agreeing to have dealings and transactions in purchase and sale of cement under the terms and conditions of licences issued under the said Act. Therefore, it must be held that there is no question of total elimination of volition or mutual consent of the parties in the transaction of delivery of cement, as in this instant case, by the respondent to the customer in whose favour the said licence for cement has been issued under the said Act. There is no question about satisfying the third element to constitute a sale within the meaning of the Sale of Goods Act, that is, transfer of property from the seller to the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot "sales" within the meaning of the Sale of Goods Act. It is needless for us to discuss and consider all the decisions cited at the Bar, as from the facts of this case and on the analysis of the scope and object of the West Bengal Cement Control Act, 1948, enumerated hereinbefore, It is abundantly clear that the transaction Involved in the supply of cement by the respondent as a licensed stockist under the said Cement Control Act and a registered dealer under the Bengal Finance (Sales Tax) Act by supplying cement to the holder of licence for cement, being the consumers and customers, is certainly a sale within the meaning of the Sale of Goods Act. It is immaterial that there are provisions for penalty and prosecution for non-compliance of the provisions of the said Cement Control Orders and the terms of the licence by the parties having dealings and transactions under the said Act. What is material is whether the transaction amounts to "sale" within the meaning of the Sale of Goods Act or not, The principle to be applied in the present case having regard to the facts and the scope and object of the Cement Control Act seems to have been well-established by the four decisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t coercion as defined in section 15 of the Act. In spite of the compulsion, the agreement is neither void nor voidable. In the eye of the law, the agreement is freely made. The parties are competent to contract. The agreement is made for a lawful consideration and with a lawful object and is not void under any provisions of law. The agreements are enforceable by law and are contracts of sale of sugarcane as defined in section 4 of the Indian Sale of Goods Act. The purchases of sugarcane under the agreement can be taxed by the State Legislature under entry 54, List ll." In that decision, it was observed that in Kirkness v. John Hudson and Co. Ltd.[1955] A.C. 696. and New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar[1963] 14 S.T.C. 316 (S.C.); A.I.R. 1963 S.C. 1207., on the special facts of those cases the transactions were not "sales" as no contract resulted and those decisions are not treated as an authority for the proposition that "there can be no contract of sale under compulsion of a statute. It depends upon the facts of each case and the terms of the particular statute regulating the dealings whether the parties have entered into a contract of sale of goods". I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied. Therefore, It was held that the transactions were not completely regulated and controlled by the Controller leaving no room for mutual assent, It was also held that the said Control Order reduced the area within which there can be bargaining between a prospective buyer and an intending seller of steel products. Both of them have to conform to the requirements of the order and to comply with the terms and conditions contained in the order of the Controller. Therefore, they could negotiate only in respect of matters not controlled by the order or prescribed by the Controller. That does not mean that there is no freedom to contract. The concept of freedom of contract has undergone a great deal of change even in those countries where it was considered as one of the basic economic requirements of a democratic life. Full freedom to contract was never there at any time. Law invariably imposed some restrictions on freedom to contract. But due to change in political outlook and as a result of economic compulsions, the freedom to contract is now being confined gradually to narrower and narrower limits: see Indian Steel and Wire Products Ltd. v. State of Madras[1968] 21 S.T.C. 138 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iery (sic) to a purchaser at the price fixed by the Central Government. In the present case, there was between the State of Rajasthan and the assessee acting as an agent of the Equitable Coal Company an agreement to sell coal. The price chargeable was fixed under the Colliery Control Order. The effect of the Control Order was only to superimpose upon the agreement between the parties the rate fixed under the Order. But on that account it cannot be said that the relation between the supplier and the person to whom the coal was supplied was not contractual. The contract between the parties was only modified by the statutory provisions." In dealing with New India Sugar Mills Ltd.'s case[1963] 14 S.T.C. 316 (S.C.); A.I.R. 1963 S.C. 1207., the Supreme Court observed that when goods, supply of which was controlled by statutory orders, are delivered pursuant to contract of sale, the principles of the decision in New India Sugar Mills Ltd.'s case[1963] 14 S.T.C. 316 (S.C.); A.I.R. 1963 S.C. 1207. had no application. The latest Supreme Court decision is Salar Jung Sugar Mills Ltd. v. State of Mysore[1972] 29 S.T.C. 246 at 261 (S.C.); A.I.R. 1972 S.C. 87 at 98, para. 38. , where in a writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is delivered to the customers holding a permit to whom the property passes on the terms and conditions as to payment to the respondent. As such the third condition Is also satisfied. There Is no dispute that the money for the price of the said quantities of cement have been paid by the customers to respondent No. 1 and, as such, the fourth condition is also satisfied. In fact the respondent charged sales tax and realised the same from the customers. It is true that there is no separate writing evidencing an agreement for sale or a contract for sale, at least nothing has been disclosed by the parties, but a contract can be expressed or implied and, in the facts and circumstances of this case, presenting the licence for cement by the customer to the licensed stockist being the respondent and his acceptance of the same by supplying cement and receiving payment of the price mentioned therein, clearly constitute a contract for sale within the meaning of the Sale of Goods Act read with the Contract Act. The Supreme Court in a recent decision in Instalment Supply Ltd. v. Sales Tax Officer, Ahmedabad[1974] 34 S.T.C. 65 at 69 (S.C.); A.I.R. 1974 S.C. 1105 at 1108, para 6., while dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed from one person to another for a price and there is a contract plus conveyance. The said Cement Control Act only imposes certain conditions on such sales for attaining the scope and object of the said Act in respect of equitable distribution of cement at a fair price, to prevent black market and ensure fair and equitable distribution of cement at a fair price in the State of West Bengal. The sole and only contention exhaustively argued on behalf of the respondent is that there was no volition on the part of the respondent but to accept the permit for cement of the customer and supply the goods on the terms and conditions of the respective licences issued under the said Cement Control Act. In short, there was no consensus between the parties which has been voluntarily arrived at. As has been laid down in the Supreme Court decisions discussed above, unless the transaction amounts to compulsory acquisition of property, which completely eliminates all the four elements of sale, there may be sale even under compulsion or when the terms of such sales are controlled by legislation for the purpose and object laid down therein. The identical question came up before the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
