9911796707
TMI Blog1979 (1) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... modities specified in column (2) of the Second Schedule to the Act at the rates specified against the corresponding entry in column (3) of the said schedule. The Central Government in exercise of its power under section 18G of the Industries (Development and Regulation) Act, 1951, promulgated an Order dated 30th June, 1958, called the Cement Control Order, 1958. According to that Order, every manufacturer of cement was required to sell the entire quantity of cement manufactured by him to the State Trading Corporation (hereinafter referred to as the STC) and at the price fixed in the schedule to the said Order except such quantity as may be mutually agreed upon between the concerned manufacturer and the Central Government. The said Order was replaced by a subsequent Order dated 31st October, 1961. The price fixed under the 1958 Cement Control Order for the sale of cement by the manufacturer to the STC was at Rs. 62.50 per metric tonne and for the sale of cement by the STC was at Rs. 117.50 per metric tonne and the corresponding prices under the 1961 Cement Control Order was Rs. 69.50 and Rs. 97.00, respectively. There is no dispute that the clauses which are relevant for these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty and the amount of excise duty paid by a manufacturer has to be deducted from the sale price under rule 6(4)(j) of the Karnataka Sales Tax Rules, 1957 (hereinafter referred to as the Rules), in order to determine the sales turnover exigible to tax under section 5(3)(a) of the Act. The assessing officer refused to deduct the excise duty paid by the assessee on the ground that the sale of cement which was liable to tax was the sale by the petitioner-assessee as agent of the STC to other parties and not a sale by a manufacturer of cement to the STC and, therefore, the excise duty paid in the capacity of a manufacturer was not deductible from such sales turnover. Aggrieved by the five assessment orders, the petitioner preferred appeals before the Deputy Commissioner of Commercial Taxes (Appeals), Dharwar, under section 22(1) of the Act. The appeals were dismissed by him by a common order dated 31st March, 1973. Against the said order, the petitioner preferred five appeals to the Karnataka Sales Tax Appellate Tribunal. The Appellate Tribunal also by its order dated 5th December, 1974, dismissed the appeals. The contention before the appellate authorities was that the sale by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as agent of the STC to others at the rate of Rs. 117.50 per metric tonne constitutes the first sale which attracts levy of tax under section 5(3)(a) of the Act. The word "sale" is defined in section 2(t) of the Act thus: " 'Sale' with all its grammatical variations and cognate expressions means every transfer of 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, but does not include a mortgage, hypothecation, charge or pledge." Sri S.G. Sundaraswamy, the learned counsel appearing for the petitioner, and Sri Rajendra Babu, the learned High Court Government Pleader, appearing for the department, addressed arguments in support of their respective cases. The rival contentions urged for the petitioner-assessee and the department are as follows: (1) Learned counsel for the assessee contended that the sale of cement which was exigible to sales tax under section 5(3)(a) of the Act was the first sale by the manufacturer-assessee to the STC as required under the Cement Control Orders and not the subsequent sales effected by the assessee in favour of others, only as an agent of the STC and, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... List in the Seventh Schedule to the Constitution should be interpreted broadly and should be given the legal sense in that, the transfer of property in goods takes place from one person to another for a price; and (ii) that the words "sale of goods" should be given the meaning assigned to it under the Sale of Goods Act and should not be allowed to vary in accordance with the definition of "sale" in the laws relating to sale of goods as may be in force from time to time and, therefore, the essential attribute of sale is that it must be in pursuance to an agreement between the buyer and the seller and the transaction, resulting in transfer of title in goods from one to another in which they have no volition or option to bargain, is no sale. (2) New India Sugar Mills v. Commissioner of Sales Tax[1963] 14 S.T.C. 316 (S.C.); A.I.R. 1963 S.C. 1207.: In this case, the Supreme Court relying on Gannon Dunkerley's case[1958] 9 S.T.C. 353 (S.C.); A.I.R. 1958 S.C. 560; [1959] S.C.R. 379. held by a majority that a transaction resulting in the transfer of title in goods from one to another in accordance with certain obligatory terms of a statute was not a sale. Hidayatullah, J, who dissente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of these factors rendered the transaction a "sale" as defined in section 2(t) of the Act. This view was followed in the case of Oil and Natural Gas Commission v. State of Bihar[1976] 38 S.T.C. 435 (S.C.); A.I.R. 1976 S.C. 2478; [1977] 1 S.C.R. 354. (6) Chittar Mal Narain Das v. Commissioner of Sales Tax, U.P.[1970] 26 S.T.C. 344 (S.C.); A.I.R. 1970 S.C. 2000; [1971] 1 S.C.R. 671.: In that case, having regard to the provisions of the U.P. Wheat Procurement (Levy) Order, 1959, the Supreme Court held as follows: (i) that the foodgrains supplied to the Food Controller was in the nature of compulsory acquisition and cannot be regarded as sale and, consequently, could not be exigible to sales tax under the U.P. Sales Tax Act; and (ii) that even if there was scope for consensual arrangement in the matter of place of delivery or place of payment of price, the transaction would not amount to a sale. (7) State of Tamil Nadu v. Cement Distributors[1973] 31 S.T.C. 309 (S.C.); [1973] 2 S.C.R. 1019; A.I.R. 1973 S.C. 668.: In this case, the transaction which came up for consideration was the sale of cement by a manufacturer to the STC under the 1958 Cement Control Order. In that case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cement, decides as a matter of his volition to obtain it on the terms of the permit or the order of allotment issued in his favour. That brings the two parties together, one of whom is willing to supply the essential commodity and the other to receive it. When the allottee presents his permit to the dealer, he signifies his willingness to obtain the commodity from the dealer on the terms stated in the permit. His conduct reflects his consent. And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity. His conduct too reflects his consent. Thus, though both parties are bound to comply with the legal requirements governing the transaction, they agree as between themselves to enter into the transaction on statutory terms, one agreeing to supply the commodity to the other on those terms and the other agreeing to accept it from him on the very terms. It is, therefore, not correct to say that the transactions between the appellant and the allottees are not consensual. They, with their free consent, agreed to enter into the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot completely excluded and is available even in respect of some of the matters concerning the transaction, transfer of title of goods from one person to another for a price, though most of the matters are under statutory compulsion, still amounts to a sale. In the result, the law laid down in Salar Jung Sugar Mills[1972] 29 S.T.C. 246 (S.C.); A.I.R. 1972 S.C. 87. and Oil and Natural Gas Commission[1976] 38 S.T.C. 435 (S.C.); A.I.R. 1976 S.C. 2478; [1977] 1 S.C.R. 354. is approved. (4) As regards Cement Distributors' case[1973] 31 S.T.C. 309 (S.C.); [1973] 2 S.C.R. 1019; A.I.R. 1973 S.C. 668. , the Supreme Court in Vishnu Agencies' case(6) held that the above judgment to the extent it was inconsistent with the minority judgment of Hidayutullah, J, in New India Sugar Mills' case(1) and the view in Indian Steel and Wire Products' case(2) and Salar Jung Sugar Mills' case(3) was not good law. 6.. The two cases which arose in Vishnu Agencies(6) were decided by applying the above principles. The first case, namely, Vishnu Agencies v. Commercial Tax Officer(6) arose out of assessment proceedings in respect of sales of cement made by M/s. Vishnu Agencies in accordance with the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously contended that in view of clause 3 of the Control Order, though the manufacturer was required to sell all the quantity of cement except to the extent exempted by the Central Government to the STC, in truth and substance, it was no sale, and the transfer of title in cement manufactured by the assessee in favour of the STC was in the nature of compulsory acquisition. The learned counsel for the assessee submitted that the transaction had to be regarded as sale as there were some areas in which consent of parties could operate, such as place of delivery, mode of payment of price, discount or commission, which the manufacturer might allow to the STC. 9.. In order to appreciate the contention, it is necessary to set out the relevant provisions of the Cement Control Orders. As the 1958 and 1961 Cement Control Orders are in pari materia, it is sufficient to set out the clauses in the latter and the same read as follows: "3. Producers to sell cement to Corporation.-(1) Every producer shall sell- (a) the entire quantity of cement which may be produced by him from the date of commencement of this Order up to 31st March, 1966 (inclusive), except such quantity as may be mutually ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manufacturer, has to be sold, at the price fixed in the Cement Control Orders only to the STC. Even so, in our opinion, the process cannot be termed as compulsory acquisition in favour of the State. It may be seen that the manufacturer is required to sell the cement to the STC which is a company incorporated under the Companies Act and the cement is not acquired in favour of the State. Further, as far as the fixation of price is concerned, there is nothing special about it. The fixation of price statutorily in respect of all essential commodities is now a well-established feature of social control to ensure supply of such commodities at reasonable prices to the community. When prices are fixed, the owner of the goods is no doubt compelled statutorily to sell such goods at a rate not higher than the price so fixed. He can sell at lower price. Therefore, the fixation of price at which cement should be sold, which is a reasonable restriction imposed in public interest, does not affect the nature of the transaction as sale. As far as compulsion to sell to the STC is concerned, it is needless to state that a manufacturer manufactures cement only for the purpose of selling it. Hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC as pointed out for the assessee. They are: (i) The rebate or commission which the manufacturer may allow to the STC. (ii) The place and time at which cement could be delivered. (iii) The mode of payment of price by the STC to a manufacturer, i.e., whether in cash or on credit facility or whether in a lump sum or in instalments. (iv) Cost of packing and the price of bags in which cement is supplied [see clause 6(1), explanation (ii)]. Therefore, applying the ratio of Vishnu Agencies' case[1978] 42 S.T.C. 31 (S.C.); A.I.R. 1978 S.C. 449., we hold that "sale" of cement by the manufacturer-assessee in these cases to the STC is "sale" within the meaning of that word as defined in section 2(t) of the Act and, as it constitutes the first sale, it is exigible to tax under section 5(3)(a) of the Act read with entry 36 of the Second Schedule to the Act. As the manufacturer-assessee, who has paid the excise duty on the cement, is also the seller, who is liable to pay sales tax on the sales turnover calculated on the basis of the cement sold to the STC, it follows that the assessee is also entitled to the deduction authorised by rule 6(4)(j) of the Rules. Therefore, the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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