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TMI Blog1977 (1) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... g of this reference Mr. Joshi, the learned counsel for the respondents, stated that the respondents did not desire this court to answer the second question, and, accordingly, at the request of the respondents, we are not answering the said question. The facts which have given rise to this reference are that the respondents are established importers of copper. As such established importers, the respondents applied for and obtained an import licence dated 18th May, 1963, for the importation by them of copper scrap, whether ingoted or otherwise, falling under item 42 of Part I of section II of the Schedule to the import policy statement or what is popularly known as the "Red Book", for the period April, 1962-March, 1963, of the approximate c.i.f. value of Rs. 13,33,572. The shipment in respect thereof was to be effected within a period of twelve months. The said item 42 refers to copper scrap, whether ingoted or otherwise, and in the remarks column it is stated, "quota licences will be valid only for import of copper unwrought falling under S. No. 47/I". The description of goods set out in item 47 of Part I of the Import Trade Control Schedule is as follows: "Copper unwrought in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Non-ferrous Metals Control Order, 1958. The respondents were further prohibited from placing any orders on the foreign suppliers for the import of unwrought copper falling under the said item 47, except in accordance with the instructions issued by the said Controller, and had further to report to the said Controller the actual arrivals of unwrought copper. So far as the sale of imported unwrought copper was concerned, it could only be effected by the respondents against permits issued by the said Controller at prices not exceeding three and a half per cent margin over the landed cost. Further, the respondents were prohibited from consuming or disposing of any portion of the imported stock, except under and in pursuance of permits issued by the said Controller. These conditions were incorporated in the licence and in the import policy for the relevant period, as contained in what is popularly known as the "Red Book" by reason of the provisions of the Non-ferrous Metals Control Order, 1958, made by the Central Government under section 3 of the Essential Commodities Act, 1955. Under the said Order copper unwrought in the form of ingots, blooms, slabs, cakes, tiles, bricks, blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson under a permit granted under the said Order would ordinarily be less than the quantity required by him for a period of one month, but discretion was conferred upon the Controller to issue permits for larger quantities at any one time having regard to the availability for distribution and the requirement of the person concerned. In issuing such permit the Controller would have to take into account the requirements for a period of six months of industries which were scheduled industries within the meaning of the Industries (Development and Regulation) Act, 1951. Clause 4A of the said Order prohibited a person from selling or transferring any non-ferrous metal except to a permit-holder. It also prohibited a person acquiring any non-ferrous metal from fabricating it or converting it into any alloy, except under and in accordance with a permit issued by the said Controller. Clause 5 of the said Order casts an obligation upon every importer to notify immediately to the Controller about any quantity of nonferrous metal imported by him on or after 3rd April, 1958, as also any quantity of a non-ferrous metal cleared by him through the customs after it was notified to the Controller. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned against the said unit, depending on the quality of copper required by it. By the said letter the respondents were asked to intimate to the Controller that immediate action was being taken by them to contact the said unit. The respondents' attention was also drawn to the fact that they had to intimate to the Controller about the arrival or expected arrival of a particular shipment and to the fact that they were not to make any supply without a valid permit issued by the Controller. A copy of the said letter was endorsed to the said unit with the following remark: "They are requested to intimate their requirements of copper in detail including delivery programme to the established importer mentioned above (that is, the said unit) so that they may obtain regular supplies of the materials from them according to their production programme." The respondents thereafter imported under the said import licence 96.259 tonnes of fire-refined copper ingot bars by S.S. "Brooklyn Heights". The landed cost of the consignment as per the definition given in the said Non-ferrous Metals Control Order, 1958, came to Rs. 3,33,233.81. After the said goods were shipped, it appears that a permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine whether the said transaction was a sale and whether any tax was payable in respect of the said transaction. It may be mentioned that the said final bill mentions that the supply was "against sales tax form No. 15", that being the form to be given by a manufacturer who holds a recognition to the person form whom he purchases, inter alia, raw materials required for his manufacture. It is also significant to note from the statements made in the said application that the said unit refused to pay sales tax claimed by the respondents not on the ground that there was no agreement between the parties under which the respondents could recover the amount of sales tax payable by them in their assessment from the said unit but only on the ground that the said transaction was not a sale and that no tax could be charged. It is also significant to note that the said unit paid to the respondents the amount of Rs. 3,448.97 as a deposit so that it could be returned to the said unit if the said transaction was held not to be a sale and in case it was held to be a sale it could be utilised by the respondents for payment of sales tax. The Deputy Commissioner of Sales Tax by his order dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents a commission of three and a half per cent, being the maximum allowed under the said Nonferrous Metals Control Order, 1958. It is also clear that there was an agreement with respect to sales tax payable by the respondents to the Government. No documents whatsoever in connection with any of the above stages have been referred to by the respondents in their said application nor have copies of any such documents annexed to their application. Assuming all this took place orally between the parties, nothing of what was agreed upon between the parties has been set out in the said application. In our opinion, in this unsatisfactory state of affairs the Deputy Commissioner of Sales Tax should not have proceeded to determine the question submitted to him and should have either asked the respondents to produce all these documents or present before him the necessary facts or should have rejected their said application. Under section 52(1) of the Bombay Sales Tax Act, 1959, the Commissioner of Sales Tax is not bound to determine every question submitted to him if the facts on which such question arises have not been fully presented to him or brought out before him. Since, however, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst them were dismissed. In appeal the decision of the Mysore High Court was affirmed. After analysing the provisions of the said two Orders and after considering in detail all the previous judgments of the Supreme Court, their Lordships of the Supreme Court held as follows: "The Control Orders are to be kept in the forefront for appreciating the true character of transactions. It is apparent that the area is restricted. The parties are determined by the order. The minimum price is fixed. The minimum quantity of supply is also regulated. These features do not complete the picture. The entire transaction indicates that the parties agree to buy and sell. The parties choose the terms of delivery. The parties have choice with regard to obtaining supply of a quantity higher than 95 per cent of the yield. The parties can stipulate for a price higher than the minimum. The parties can have terms for payment in advance as well as in cash. A grower may not cultivate and there may not be any yield. A factory may be closed or wound up and may not buy sugarcane. A factory can reject goods after inspection. The combination of all these features indicates that the parties entered into agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror's consent does not matter and the sale is to proceed without it. In truth, transfer is brought into being which ex facie in all its essential characteristics is a transfer of sale. Fifth, delimiting areas for transactions or denoting parties or denoting price for transactions are all within the area of individual freedom of contract with limited choice by reason of ensuring the greatest good for the greatest number of achieving proper supply at standard or fair price to eliminate the evils of hoarding and scarcity on the one hand and ensuring availablity on the other. Sixth, after all the transactions in substance represent the outgoing of the business and the price would come into the computation of profits." Applying the principles laid down in Salar Jung Sugar Mill's case[1972] 29 S.T.C. 246 (S.C.). and Oil and Natural Gas Commission's case[1976] 38 S.T.C. 435 (S.C.)., we find that in the transaction before us there was an area of consensual freedom left to the parties to the transaction. For a transaction of this type to amount to a contract it is not necessary that each and every feature which would amount to consensual freedom should be found in it. The court has to Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract between two parties in respect of a commodity declared to be an essential commodity under the Essential Commodities Act, 1955, subject to the regulatory provisions necessitated by the requirements of the supply and distribution of an essential commodity. In a modern State, where economic factors have to be taken into account in view of the complexities of present-day transactions, it is not required that there should be a complete freedom of contract or that freedom of contarct should be wholly unrestricted. Merely because there are regulatory controls on the import or sale or distribution of a particular commodity and contracts have to be entered into within the framework of such controls, it does not follow that all freedom to contract is abolished. We will now turn to the decisions relied upon by Mr. Joshi, the learned counsel for the respondents, in support of his submission that there was no volition left to the parties in this case. The case upon which Mr. Joshi placed the strongest reliance is the very decision of the Supreme Court on the basis of which the Tribunal held in favour of the respondents, namely, New India Sugar Mills Ltd. v. Commissioner of Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct to contend that because law imposes some restrictions on freedom to contract, there is no contract at all. So long as mutual assent is not completely excluded in any dealing, in law it is a contract." The case of New India Sugar Mills Ltd.[1963] 14 S.T.C. 316 (S.C.). again fell to be considered by a Bench of five Judges of the Supreme Court in Andhra Sugars Ltd. v. State of Andhra Pradesh[1968] 21 S.T.C. 212 at 223 (S.C.). and the Supreme Court observed: "That decision should not be 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." Mr. Joshi next relied upon the decision of the Supreme Court in Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P.[1970] 26 S.T.C. 344 (S.C.). This was a case under the U.P. Wheat Procurement (Levy) Order, 1959. Under that Order a dealer was directed to sell to the State Government at controlled prices 50 per cent of the stock of wheat held in stock-market at the commencement of the Order and 50 per cent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts. There the question was whether the price of bottles in which liquor was sold was liable to sales tax. The Court held that, though the price of bottles was liable to sales tax when bottled liquor was sold, as there was no voluntary contract as such for the sale of liquor, there was no sale of liquor within the meaning of that expression in the Sale of Goods Act, 1930, and there was, therefore, no sale of the bottles also. The court come to the conclusion that there was no sale of liquor, because on an examination of the relevant statutory provisions, the High Court found that the producer of liquor was bound to sell the liquor at fixed prices to permitholders and that the only volition left to the permit-holders was to ask for a permit for one particular distillery or another. The last two cases relied upon by Mr. Joshi have equally little relevance to the question to be decided by us. The first of them was a decision of the Punjab and Haryana High Court, namely, Food Corporation of India v. State of Punjab[1976] 38 S.T.C. 144., in which the question was whether the procurement of rice under the Punjab Rice Procurement (Levy) Order, 1958, was a purchase. The court held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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