TMI Blog1962 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... . I would, therefore, dismiss these appeals with costs. - Civil Appeal No. 237 of 1961, - - - Dated:- 26-11-1962 - KAPUR J.L. AND HIDAYATULLAH M. AND SHAH J.C. JJ. S.T. Desai, Senior Advocate (B.P. Maheshwari, Advocate, with him), for the appellant. S.P. Varma, Advocate, for the respondent. -------------------------------------------------- The judgment of KAPUR and SHAH, JJ., was delivered by SHAH, J.- HIDAYATULLAH, J., delivered a separate judgment. SHAH, J .-M/s. New India Sugar Mills Ltd., hereinafter called "the assessees", own a factory at Hasanpur in the State of Bihar. During the assessment period April 1, 1947 to March 31, 1948, the assessees who were registered as dealers under the relevant Sales Tax Acts despatched sugar valued at Rs. 6,89,482 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 Products Control Order, 1946. The Sales Tax Officer, Darbhanga, rejected the plea of the assessees that despatches of sugar to the Province of Madras in compliance with the instructions of the Controller were not liable to be included in the taxable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or distribution of sugar as may from time to time be issued by the Controller. By clause 6 the Controller was authorised to fix the price at which sugar may be sold or delivered, and upon fixation of the price all persons were prohibited from selling or purchasing or agreeing to sell or purchase sugar at a price higher than the fixed price. By sub- clause (1) of clause 7 the Controller was authorised, inter alia, to allot quotas of sugar for any specified Province, or area or market and to issue directions to any producer or dealer to supply sugar to such Provinces, areas or markets or such persons or organisations, in such quantities, or such types or grades, at such times, at such prices and in such manner as may be specified by the Controller, and sub-clause (2) provided that every producer shall, notwithstanding any existing agreement with any other person, give priority to, and comply with directions issued to him under sub-clause (1). Clause 11 provided that against a person contravening the provisions of the Order, without prejudice to any other punishment to which he may be liable, an order of forfeiture of any stocks of sugar in respect of which the Court trying the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly 1, 1947 to March 31, 1948 liability to pay tax had to be determined under Bihar Act 19 of 1947. It is common ground that the scheme of the two Acts for levy of tax was similar and the defini- tion of "sale" on which primarily the dispute centred under the two Acts was identical. We will therefore refer in dealing with this appeal as if the liability arose under Act 19 of 1947. The expression "sale" as defined under section 2(g) of the Bihar Sales Tax Act, at the material time stood as follows: "'Sale' means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge: Provided that a transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale; Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930) the sale of any goods wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not liable to be taxed under the Bihar Sales Tax Act. In popular parlance "sale" means transfer of property from one person to another in consideration of price paid or promised or other valuable consideration. But that is not the meaning of "sale" in the Sale of Goods Act, 1930. Section 4 of the Sale of Goods Act provides by its first sub-section that a contract of sale of goods is a contract where the seller agrees to transfer the property in goods to the buyer for a price. "Price" by clause (10) of section 2 means the money consideration for sale of goods, and "where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell" [sub-section (3) of section 4]. It is manifest that under the Sale of Goods Act a transaction is called sale only where for money consideration property in goods is transferred under a contract of sale. Section 4 of the Sale of Goods Act was borrowed almost verbatim from section 1 of the English Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 48, List II, Seventh Schedule, did not include power to legislate for levying tax on the value of goods used "in the course of a building contract which was one, entire and indivisible". The Court held that the expression "sale of goods" in Entry 48, List II, was used not in the popular sense but in the strictly limited sense in which it was defined in the Sale of Goods Act and that the Madras Provincial Legislature had no power to legislate under the power derived under Entry 48 in List II for taxing transactions other than those of sales strictly so called under the Sale of Goods Act. It was observed "the expression 'sale of goods' in Entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building con- tract which is, as in the present case, one, entire and indivisible-and that is its norm; there is no sale of goods; and it is not within the com- petence of the Provincial Legislature under Entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale." In Gannon Dunkerley Company's case [1959] S.C.R. 379; 9 S.T.C. 353., the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriates the sugar in accordance with the allotment order and in accordance with the despatch instructions of the competent officer appointed by the Madras Government, there is in the eye of law an acceptance of the offer by the assessee and a contract is immediately brought into existence between the parties." We are with respect unable to hold that this view is correct. The Provincial Government of Madras gave intimation of its requirements of sugar to the Controller and applied for allotment of sugar; thereby the Government was not making any offer to purchase sugar. Evidently the offer could not be made to the Controller because the Controller was not a manufacturer of sugar or his agent. The communication of the allot- ment order to the assessees was again not of any offer made by the State which it was open to the assessees to accept or decline. Mere compliance with the despatch instructions issued by the Controller, which in law the assessees could not decline to carry out, did not amount to acceptance of an offer. A contract of sale postulates exercise of volition on the part of the contracting parties and there was in com- plying with the orders passed by the Controll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Legislature had by the definition included in the expression "sale of goods" all transfers of property in goods for consideration and the transactions which are sought to be taxed by the State of Bihar fell within that definition. Counsel submitted that a literal meaning should be given to the words of the Act without any pre-disposition as to what the expression "Sale" means under the Sale of Goods Act. But if the Bihar Legislature had under the Government of India Act, 1935, no power to legislate in respect of taxation of transactions other than those of sale of goods as understood in the Sale of Goods Act, a transaction to be liable to pay sales tax, had to conform to the requirements of the Sale of Goods Act, 1930. Attributing a literal meaning to the words used would amount to imputing to the Legislature an intention deliberately to transgress the restrictions imposed by the Constitution Act upon the Provincial Legislative authority. It is a recognised rule of interpretation of statutes that the expressions used therein should ordinarily be under- stood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as actually decided in that case. The Tata Iron Steel Company Ltd., which carried on the business of manufacturing iron and steel in its factory at Jamshedpur in Bihar was assessed to sales tax under the Bihar Sales Tax Act, 1947. The company sent its goods from its factory to different Provinces and Indian States by rail, the railway receipts being obtained by the company in its own name as consignor and consignee. The branch offices of the company or its bankers at the destination handed over the railway receipts to the purchasers against payment of the price. The Sales Tax Officer of the State of Bihar included in the gross turnover of the company the value of goods manufactured in Bihar but delivered and consumed outside the State of Bihar in the manner already stated. The contention of the company that the goods delivered were not liable to be included in the taxable turnover was negatived by the taxing authorities and the High Court of Patna. The matter was then carried in appeal to this Court, and it was held that the provisions of section 4(1) read with section 2(g), proviso 2, of the Bihar Sales Tax Act was within the legislative competence of the Province of Bihar. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pector of Taxes) v. John Hudson and Company Ltd. [1955] A.C. 696. It may be sufficient to observe that in the first of these cases, goods belonging to the assessee were taken over by order of the Admiralty, acting under the relevant regulations, and in compliance with the order of a Compensation Court, the assessee was paid an amount exceeding 5,000 being the difference between the amount originally paid and the amount settled as due under the order of the Compensation Court. The House of Lords held that the transaction under which the Admiralty took over the goods was a sale in the business, and although no doubt it affected the circulating capital of the assessee it was none the less proper to be brought into the profit and loss account arising from the assessee's trade for the purpose of computation of liability to pay excess profits duty. In Kirkness (Inspector of Taxes) v. John Hudson and Co. Ltd. [1955] A.C. 696., it was held by the House of Lords that the vesting of a company's railway wagons in the Transport Commission under section 29 of the Transport Act, 1947, with compensation fixed in the form of transport stock under the rele- vant sections of that Act did not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be levied was sugar. The disputed tax relates to supp- lies of sugar made by the assessee-companies under the orders of the Sugar Controller of India to certain Provincial Governments in the relevant periods. There is only one contention of the assessee-com- panies in these appeals and it is that in the circumstances of the case there was no "sale" of sugar, regard being had to the decision of this Court in Gannon Dunkerley's case [1958] 9 S.T.C. 353; [1959] S.C.R. 379., and the amounts received from the Provincial Governments should not be included in the taxable turnover. I have already mentioned that the assessment period in this case is one whole year-April 1, 1947 to March 31, 1948-and that it is divided into two parts of three months and nine months respectively governed by the two Acts. There was however no difference in the mode of dealing in this case in the two periods. In the other cases the assessment periods were different but there was no other difference. The transactions were stereotyped being under the Sugar and Sugar Products Order, 1946, which was passed by the Government of India on February 18, 1946, in the exercise of powers conferred by sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts Control Order, 1943, I, Shashi Kiran, Assistant Sugar Controller for India, having been duly authorised in this regard under clause 2 of the said Order by the Sugar Controller for India hereby direct you to supply 1200 tons/maunds of sugar by 31-1-1947, to Bengal in accordance with the des- patching instructions of the Director of Civil Supplies, Bengal, Calcutta. 2.. A permit No. 1988 to enable you to despatch sugar in compliance with this order is attached. (Sd.) Shashi Kiran, Asst. Sugar Controller for India. To The Motilal Padampat Sugar Mills Co. Ltd., Majhowlia, District Champaran. And now the despatch order: EXPRESS STATE MOTIPAT MAJHOWLIA UNDERSTAND SUGAR CONTROLLER ISSUED PERMIT FOR 600 TONS SUGAR THIS PROVINCE FULLSTOP DESPATCH IMMEDIATELY 300 TONS MANGALORE DRAFTS ON ME THROUGH GENERAL BANK CALICUT 300 TONS COIMBATORE DRAFTS ON ME THROUGH CENTRAL BANK MADRAS FULLSTOP SEND RAIL RECEIPTS FOR EACH WAGON LOAD OR 100 BAGS LOAD WAGONS FULL CAPACITY FULLSTOP BOOK AT RAILWAY RISK IF NO SPECIAL RATES IN FORCE. PRICES T. R. L. Narasimhan. Assistant Secretary. Post copy in confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax could not be demanded as there was no sale of sugar at all. The entry in question is- "48. Taxes on the sale of goods and on advertisements." "'Goods' was defined in section 311 as follows:" "'Goods' include all materials, commodities and articles." The White Paper had the entry "taxes on the sale of commodities and on the turnover". It was altered to "taxes on the sale of goods" and as pointed out by Gwyer, C.J., in In re The Central Provinces Berar Act No. XIV of 1938 [1939] F.C.R. 18; 1 S.T.C. 1., it is idle to speculate what the reason was. The expression "sale of commodities" would not have taken the mind to the Sale of Goods Act as the redrafted entry does. There is no provision in the whole of the Government of India Act, 1935, which expressly seeks to limit the meaning of the plain words "taxes on the sale of goods" which include all materials, commodities and articles. Such a limitation could of course arise from a competing entry in List No. 1. Otherwise the entry conferred powers as large and plenary as those of any sovereign legislature. The ambit of the entry, prior to the inauguration of the Constitution, was the subject of three leading decisions by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Boddu Paidanna and Sons [1942] F.C.R. 90; 1 S.T.C. 104., Government of India reversed its stand and contended that the power of the Provincial Legislatures did not extend to levying sales tax on first sales but only after the goods were released by the producer or manufacturer. The argument of the Government of India was not accepted and it was declared that the power of a Provincial Legislature to levy a tax on the sale of goods extended to sales of every kind and at all stages between a producer or manufacturer and a consumer. The Central Government had filed a suit and the third case before the Federal Court was an appeal from that decision. The Federal Court followed its own decision in Boddu Paidanna's case [1942] F.C.R. 90; 1 S.T.C. 104. The Central Government appealed to the judicial Committee and the judgment is to be found in Governor-General in Council v. Province of Madras [1945] F.C.R 179 P.C.; 1 S.T.C. 135.. The judicial Committee examined in detail the provisions of the Madras General Sales Tax Act, 1939, to emphasize its essential character and observed that- "Its real nature, its 'pith and substance', is that it imposes a tax on the sale of goods. No other succin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the original entry. There was no occasion to expound the meaning of "goods" in the two Federal Court decisions but the decisions laid down that "turnover" was included even though not expressly mentioned. I have already said above that prior to 1938 a tax on the sale of goods was not imposed in India. It is claimed that in ancient times sales tax was levied in India but we do not have to delve into these matters. The tax, as it is known today, is of comparatively modern growth though economists have traced it to Ptolemies, Greeks and Romans. Findlay Shirras and other writers give us the history of the tax. It was imposed in a recognizable form in Spain in 1342 and was known as the sakabala. This notorious tax continued for five hundred years. In France it was also imposed in the fourteenth century but was soon given up. We are not concerned with these ancient pro- genitors of the modern tax. They could not have influenced the selection of the tax or its form. The modern tax was the result of the First World War. Germany imposed in 1916 a turnover tax called "die Umsatzsteuer" and that is the form in which the tax is collected there. France followed a year later but with a tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of excise. In France the excise and sales tax were inter- changeable, the former being a replacement tax on the turnover of the manufacturer. In Germany the tax included both goods and services; in France services were excluded unless there was a commercial element. In England, it took the form of a purchase tax. France also devised a simpler method by imposing a forfait a lump sum which represented, so to speak, a quit tax. In Belgium it was collected by stamps from both the seller and the buyer according to their respective invoices. In America the position was unique. It can be stated from a passage from Beuhler's Public Finance (3rd Edition) page 410- "A sales tax is an excise in so far as it is imposed upon domestic transactions of commodities, and it may also have some of the aspects of customs duties because national sales taxes commonly fall upon importing and sometimes upon exporting. The popular name for American excises is sales taxes. Not all excises are imposed upon sales or the privilege of selling, however, for they may be placed upon the purchase or use of commodities, including services." The varieties this elastic tax took in that country are illustrated from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax to the Provinces as the main source of revenue and abolish altogether to category of deficit Provinces and the subventions. It was expected that land revenue would have to be reduced and income-tax could not be increased beyond a point. The only tax that was new and fell imperceptibly upon consumers was the sales tax and it was allotted to the Provinces. It was expected to be a very productive tax, an expectation which has been amply fulfilled. In 1954-55, this tax alone yielded about 60 crores and it his been even more productive since. The inroads upon the tax were many but they were resisted in the pre-Constitution period by the Provinces both in Courts and in administration. Indeed, appeals were made in cases before the Federal Court, not to cut down unduly the ambit of the natural words and Jayakar, J., mentioned them in his judgment with sympathy. I feel that what he said will bear repetition: "A powerful appeal was made to us by the Advocates-General of the Provinces that, consistently with its terminology, we should so interpret Entry No. 48 (List II) as to give it a content sufficiently extensive for the growing needs of the Provinces It was argued that provinci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have taken place in the territory of the State, if at the time when the contract of sale or purchase was made, the goods were actually in those States. In certain States, the transfer of property in goods supplied in the execution of a contract is also included in the definition of sale. " The definitions led to a variety of decisions on the meaning of the word "sale" which were likely to bewilder the common man. The Taxation Enquiry Commission summed up the situation in the following words: "The layman who asks: 'What is a sale?' would not have to go without an answer; he would find plenty of replies in the reported judgments of courts of law; and he would not be a layman if, piecing them together, he was able to say when, where and how a sale becomes a sale which a sales tax may tax." From the earliest times the extension of the word "sale" was in three recognizable directions. Firstly, the definition by a fiction took in transactions of sale in which the goods were produced in the Pro- vince or were in the Province at the time the contract of sale took place, no matter where the contract could, in law, be said to have taken place. In other words, by a fiction incorpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sales Tax Act. That is the conception which is familiarized in the provisions of the Sale of Goods Act. If one leaves out of account sales tax legislation which is of comparatively recent origin, questions relating to sale of goods usually come up before the Courts only in connection with disputes between the sellers and purchasers. If the goods perish, on whom is the loss to fall. If the purchaser becomes insolvent before payment of price can the goods be claimed by the trustee in bankruptcy. For deciding these and similar questions it is necessary to deter- mine at what point of time the property in goods passed to the purchaser. Sometimes when the point for determination is as to jurisdic- tion of Courts to entertain suits based on contract, it may be material to consider where property in the goods passed, that being part of the cause of action. These being the questions which are accustomed to be debated in connection with sale of goods, it is natural that a lawyer should, as a matter of first impression approach the question of sale under the Sales Tax Act with the same concept of a sale. But if the matter is further considered it will be seen that considerations which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of property in a sale and no other". The Bench held that the presence of goods within the Province at the time of the contract would have made the sale, if subsequently com- pleted, a sale within the Province by reason of the Explanation added by Act XXV of 1947 but as the Explanation was not in operation during the relevant period the assessment of sales tax was held to be illegal and unwarranted by the law as it then stood. It would appear from this that this Court took the view that the word "sale" in the entry "taxes on the sale of goods" was used in a sense wider than that commonly accepted in the law relating to sale of goods, and the judgment of Venkatarama Ayyar, J., in the Madras High Court on this part was not questioned. Then came a decision of the Allahabad High Court from which an appeal was brought to this Court. The judgment of this Court is reported in Sales Tax Officer, Pilibhit v. Messrs Budh Prakash Jai Prakash [1955] 1 S.C.R. 243; 5 S.T.C. 193,. The definition of the word "sale" in the U.P. Sales Tax Act (XV of 1948) included "forward contracts", and this part of the definition was declared ultra vires Entry 48 in List I of the Government of India Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n irrespective of delivery was considered not material for the purpose of the discussion. In these cases by the application of the legislative practice relating to sale of goods the meaning of the expression "taxes on sale of goods" was determined and future contracts in which delivery and payment of price were deferred were held to be outside the purview of the Entry. There can hardly be any doubt that the entry is concerned with a completed sale because it is only a "sale" which can be taxed and not anything which is short of a sale and if a transaction which is sought to be taxed is merely in the region of an agreement de futuro there is no taxable event. The opinion that if there be a completed sale then the law dealing with taxation would be indifferent whether price was paid or not, expressed by Venkatarama Ayyar, J., in Poppatlal Shah's case [1952] 3 S.T.C. 396; A.I.R. 1953 Mad. 91., of the Madras High Court was not accepted. Then came the third batch of cases. This batch was concerned with the taxing of materials which were supplied and used as part of building or repair operations, like bricks, timber and fittings in buildings, girders, beams, rails etc. in bridges, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted. It is contended for the appellants that this view of the Supreme Court controls the present case and it is, therefore, necessary to follow the reasoning in some detail. Before I do so I shall refer to a case of the House of Lords which influenced in no small measure the decision of this Court. That case is Kirkness v. John Hudson and Co. Ltd. [1955] A.C. 696. Under, section 29 of the Transport Act, 1947 (10 11 Geo. 6 c. 49) the company's railway wagons were vested on January 1, 1948, in the British Transport Commission. These wagons were already under requisition to the Ministry of Transport under the powers contained in Regulation 53 of the Defence (General) Regulations, 1939. Later the company received compensation. This amount was higher than the written down value. A balancing charge of 29,021 was made under section 17 of the Income Tax Act, 1945 (8 9 Geo. 6 c. 32) in an assessment under clause I of Schedule D to the Income Tax Act, 1918. The Company appealed against the balancing charge and succeeded. Section 17(1) of the Income Tax Act, 1945 (which in its purport resembled section 10(2)(vii) of the Indian Income-tax Act, 1922) ordained that a balancing charge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot sell" Viscount Simonds went on to say: "When Benjamin said in the passage quoted by Singleton and Birkett, L. JJ., from his well-known book on Sale, 2nd Edn., p. 1, that "by the common law a sale of personal property was usually termed a 'bargain and sale of goods" he was by the use of the word 'bargain' perhaps unconsciously emphasizing that the consensual relation which the word 'bargain' imports is a necessary element in the concept. In this there is nothing new, the same principle is exhibited in the Roman law, for the opening words of Title 23 of the third book of the Institutes of Justinian 'Do emptione et venditione' are 'emptio et venditio contrahitur, simulatque de pretio convenerit ..... sometimes the contract for sale itself the sale, as so often in the sale of goods; sometimes, and particularly in the sale of land, it is regarded as a part of the sale as, for example, when it is said by a modern writer that 'the first step in the sale of land is the contract for sale' (see Cheshire, Modern Real Property, 7th Edn., p. 631). But it is immaterial whether the contract is regarded as the sale itself, or as a part of it, or a step in, the sale or as a prelude to the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a meaning different from or wider than that which it ordinarily bears, and this may apply to the word 'sale' where it appears in a context relating to the process of compulsory acquisition of land....." I do not find it necessary to quote from the minority view of Lord Morton of Henryton but he did point out that the word "sale" for 100 years was being used in connection with transactions by which the property of A had been transferred to B, on payment of compensation to the owner but without the consent of the owner and said of the question posed by Singleton, L.J., that if it were put to ten persons unconnected with the company, five of them might say "No, the wagons were taken over under the Transport Act" and the other five might say, "Yes", adding, possibly, "but it was a compulsory sale" or "because they had to do it." I have paused long over this case but only because the line of reasoning of this case has been closely followed in Gannon Dunkerley's case [1969] S.C.R. 379; 9 S.T.C; 353. The decision of the Court of Appeal, later approved by the House of Lords, had also influenced in a large measure the decision of the Madras High Court earlier in the same case. In Ganno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in its legal sense. What its connotation in that sense is must now be ascertained. For a correct determination thereof, it is necessary to digress somewhat into the evolution of the law relating to sale of goods." The learned Judge next referred to Roman Law of emptio venditio and pointed out that the consideration of sale could not be anything but only money or something valuable and that it was so recorded in the Institutes of Justinian Title XXIII and that emptio venditio was a consensual contract. The learned Judge next referred to Benjamin on Sale and observed that according to that learned author to constitute a valid sale there must be a concurrence of the following elements, viz.,: "(1) Parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised." (Vide 8th Edn., p. 2). "In 1893 the Sale of Goods Act, 56 57 Vict. c. 71 codified the law on the subject, and section 1 of the Act which embodied the rules of the common law runs as follows: 1.. (1) 'A contract of sale of goods is a contract whereby the seller transfers or agrees to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re concerned two reasons why there could not be a sale of goods were mentioned. The first was that there was no agreement express or implied to sell "goods". It was observed: ".............. we are concerned here with a building contract, and in the case of such a contract, the theory that it can be broken up into its component parts and as regards one of them it can be said that there is a sale must fail on both the grounds that there is no agreement to sell materials as such, and that property in them does not pass as movables." The second reason was that the property in the building materials does not pass in the materials regarded as "goods" but as part of immovable property. It was observed: "When the work to be executed is, as in the present case, a house, the construction embedded on the land becomes an accretion to it on the principle quicquid Plantatur solo, solo credit, and it vests in the other party not as a result of the contract but as the owner of the land." I shall refer to two other cases which were decided with Gannon Dunkerley's case. [1959] S.C.R. 379; 9 S.T.C. 353. In Pandit Banarsi Das v. State of Madhya Pradesh [1959] S.C.R. 427; 9 S.T.C. 388., it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As a result of this fundamental consideration "forward contracts" were held to be outside the scope of the entry. The sale, it was held, had to be a completed sale with passing of property before the tax could become payable. A further limitation was pointed out in certain cases relating to building contracts in which it was held that though property in materials passed, it did so without an agreement, express or implied, in that behalf, and only when the material ceased to be goods and became immovable property. It was held that the supremacy of the Provincial Legislatures did not extend to levying a tax on sales in these circumstances by modifying the definition of sale. It was however held that if the parties agree to divide a works contract into labour plus materials, the tax might be leviable. It was also held that a tax on building materials, was leviable by the Legislature having power to levy a tax not expressly mentioned. It was, however, held that if the taxing Province had the goods at the time of the contract or there was other substantial connection with the contract by reason of some element having taken place there, the Legislature could validly make a law which tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery Province had to indent its requirements to the Con- troller and every sugar mill had to inform the Controller of the existing and future stocks. What the Controller did was to permit a particular mill to supply sugar of a stated quality and quantity to a named Province. The mill then had to send the sugar on pain of prosecution and forfeiture and receive price according to the fixed rates. Bargaining, it is said, was Dot possible but bargaining in the sense of offer and acceptance may be express or implied. That after the permit was obtained the two parties agreed to "sell" and "purchase" sugar admits of no doubt. I shall now analyse the whole transaction and see how the element of compulsion and control affects the existence of a sale. First there is the fixation of price by the Controller. Can it be said that there is no sale because the price is fixed by a third person and not by the buyer and seller. This is the old controversy between Labeo and Proculus that if price is fixed by a third person a contract of sale results or not. Labeo with whom Cassius agreed, held that there was not, while Proculus was of the contrary opinion: "Pretium autem certum esse debet. Nam alio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th selling and buying, perhaps more for the mills than for the Provinces. But a compelled sale is nevertheless a sale as was held by the House of Lords in Newcastle Breweries v. Inland Revenue Commissioners (1927) 96 L.J.K.B. 735. The case in Kirkness v. John Hudson Co., Ltd. [1955] A.C. 696., was different because the section there interpreted required a "sale" and there was no sale express or implied when the wagons were taken away and compensation was paid in the shape of transport stock. There a sale in its ordinary forms was obviously meant though it was recognised that "sale" in other context has other meanings. It was argued that there must be mutuality. That one party must be free to offer and must offer and the other side must be free to accept and must accept the offer before a sale can be said to arise. But sales often take place without volition of a party. A sick man is given medicines under the orders of his doctor and pays for them to the chemist with tax on the price. He does not even know the names of the medicines. Did he make an offer to the chemist from his sick bed? The affairs of the world are very complicated and sales are not always in their elementary f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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