TMI Blog1967 (9) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... jee and P.K. Bose with them), for the intervener (in C.A. No 1968 of 1966). K.N. Mudaliyar, Advocate-General for the State of Madras (A.V. Rangam with him), for the respondent (in all the appeals). -------------------------------------------------- The judgment of the Court was delivered by HEGDE, J.- These appeals by special leave arise from the common order made by the Madras High Court in T.C. Nos. 117 to 119 (Revisions Nos. 71 to 73) on its file. The Indian Steel and Wire Products Ltd., a joint stock public limited company is the appellant in all these appeals. At the instance of the Steel Controller, the appellant supplied certain steel products to various persons in the Madras State during the financial years 1953-54, 1954-55 and part of 1955-56 (from April 1, 1955 to September 6, 1955). The State of Madras assessed the turnovers of the appellant relating to those transactions to sales tax under the Madras General Sales Tax Act, 1939 (Madras Act 9 of 1939) (to be hereinafter referred to as the Act), the law in force at that time. The appellant has been assessed to tax on the basis of best judgment. The authorities under the Act have determined the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate before exercising its taxing power should have had in its possession material to show that the goods delivered by the appellant were delivered in that State for consumption which circumstance alone can make those transactions sales within that State; as no material was placed on record to show that the goods in question were delivered in that State for consumption it could not have brought the turnovers in respect of those transactions to tax under the Act. These contentions of the appellant have been rejected by the authorities under the Act as well as by the High Court. Other contentions advanced on behalf of the appellant deserve to be summarily rejected for the reasons to be mentioned hereinafter. The principal question that falls for decision in these appeals is whether the transactions with which we are concerned herein are sales. Section 2(h) of the Act defines "sale" thus: " 'Sale' with all its grammatical variations and cognate expressions means every transfer of the 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, and includes also transfer of property in goods involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut not a sale. And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale." As laid down by this decision, to constitute a valid sale, there must be 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. Therefore we have to see whether all these elements are found in the transactions before us. Before doing so it is necessary to refer to the "Order" and the manner in which those transactions were effected. During the World War 11 iron and steel goods became scarce. Therefore it became necessary for the Government to control the production and distribution of those goods. In order to do so, the Government issued the "Order" on July 26, 1941, and the same came into force on August 1, 1941. The provisions in that Order which are material for our present purpose are set out hereinbelow: "2. Definitions. -In this Order, unless there is anything repugnant in the subject or context: (a) 'Controller' means the person ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld or unsold, from his stockyard or from any other part of his premises to any place outside the precincts of such stockyard or premises, except with the written permission of the Controller. 11AA(3). Noproducer, stockholder, or other person holding stocks of iron and steel shall without sufficient cause, refuse to sell any iron or steel which he is authorised to sell under this Order. Explanation.-The possibility or expectation of obtaining a higher price at a later date shall not be deemed to be a sufficient cause for the purpose of this clause. 11B. Power to fix prices.-(1) The Controller may from time to time by notification in the Gazette of India fix the maximum prices at which any iron or steel may be sold (a) by a producer, (b) by a stockholder including a controlled stockholder, and (c) by any other person or class of persons. Such price or prices may differ for iron and steel obtainable from different sources and may include allowances for contribution to and payment from any equalisation fund established by the Controller for equalising freight, the concession rates payable to each producer or class of producers under agreements entered into by the Controller wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -K. Thiruvengadam Chetty and Company. Address.-Iron Merchants and Tata Scob Dealers, 93, Rasappa Chetty Street, Madras-3. Date: 20th December, 1952. To The Iron and Steel Controller, 33, Netaji Subas Road, Calcutta. Through the Director of Controlled Commodities, Mount Road, Madras. Dear Sir, Please place on our behalf and at our risk and account our order on registered producers for material as per specification given below for delivery in such period as you can arrange. We confirm that this indent is placed subject to the provisions of the Steel Price Schedule regarding prices, etc., and the terms and conditions of business (including payment) of the registered producers on whom the order is placed by you and that delivery or part delivery from any such registered producer will be accepted by us. Please direct the registered producers concerned to send us a copy of the works order in confirmation of having booked our indent. Ship to-Madras Saltcotaurs. Send R.R. to-Messrs K. Thiruvengadam Chetty and Company, Iron Merchants, 93, Rasappa Chetty Street, Madras-3, through your Madras Office. Send original and duplicate invoice to Messrs K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non-arrival of any consignment advice should be given us as soon as a reasonable time for the journey has elapsed.' 'All orders booked are subject to our terms of business and general understanding in force at the time of booking the orders and despatch of goods.' 'All prices mentioned in the works orders are subject to revision, i.e., prices ruling at the time of despatch will be charged.' " The works order in question specifically says that "all orders booked are subject to our terms of business and general understanding in force at the time of booking the orders and despatch of goods." In fact as seen from the letter of Thiruvengadam Chetty and Co., dated August 31, 1953, the buyers were willing to change by mutual agreement the specifications of the goods to be supplied. This is what that letter says: "If 1/4 size is not ready, please despatch 3/8' size 20 tons as requested in our previous letter. Please treat this as very urgent." From the material on record it is not possible to accept the contention of Mr. S. R. Banerjee, learned counsel for the appellant that the dealings in question were controlled at every stage, leaving no room for consensus. From the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products could not have been supplied to any person except in pursuance of an order made by the Controller under clause 10B. We think that supplies by producers can be made in pursuance of an order of the Controller under clause 5. We are not persuaded by Mr. Banerjee's contention that clauses 4 and 5 merely prohibit the prospective buyer and the intending seller from buying or selling without the sanction of the Controller and that those provisions do not confer power on the Controller to authorise a person to acquire and to permit a producer to sell. Those provisions, in our judgment, by implication confer power on the Controller to issue the necessary authority to the buyer and the seller. This conclusion of ours is strengthened from the circumstance that clause 10B was not a part of the Order till 1946. That provision was inserted in the Order by Notification No. 1(1)-1 (530)-A, dated May 26, 1946. It is nobody's case that the provisions of the Order were incapable of being implemented till that date. The contention of Mr. Banerjee that the Controller derives his power to authorise the buyer to buy and the seller to sell exclusively under clause 10B, suffers from another infirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere can be bargaining between a prospective buyer and an intending seller of steel products, is greatly reduced. 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. It is true, in these circumstances, the doctrine of laisser-faire can have only a limited application. That is naturally so. In certain quarters the validity of that doctrine is seriously challenged. Under the existing economic compulsions-all essential goods being in short supply- in a welfare State like ours, social control of many of our economic activities is inevitable. 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the appellant that nothing was left to be decided by mutual assent. On the other hand, we agree with the learned Advocate-General of Madras and Mr. Setalvad who appeared for the State of West Bengal, the intervener, that the Controller's directions were confined to narrow limits and there were several matters which the parties could decide by mutual assent. We shall now proceed to examine the principal decisions relied upon by the learned counsel for the appellant. In Kirkness v. John Hudson Co. Ltd. [1955] A.C. 696., the material facts were these: On January 1, 1948, railway wagons owned by John Hudson Co., the taxpayers, then under requisition by the Minister of Transport, were acquired by the British Transport Commission under section 29 of the Transport Act, 1947. Under section 30 of that Act, compensation became payable by the Commission to the taxpayers. The amount paid as compensation was substantially higher than the written down value of the wagons for income tax purposes and as the taxpayers had received allowances under rule 6 of the rules applicable to Cases I and 11 of Schedule D to the Income Tax Act, 1918, they were assessed under section 17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] Supp. 2 S.C.R. 459; 14 S.T.C. 316., this Court was called upon to consider whether certain transactions effected under the Sugar Control Order, 1946, were sales. By a majority this Court held that they were not sales. The facts as found by the High Court and accepted by this Court are found at pages 463 and 464 of the report. They are as follows: "The admitted course of dealing between the parties was that the Government of various consuming States used to intimate to the Sugar Controller of India from time to time their requirement of sugar, and similarly the factory owners used to send to the Sugar Controller of India statements of stock of sugar held by them. On a consideration of the requisitions received from the various State Governments and also the statements of stock received from the various factories, the Sugar Controller used to make allotments. The allotment order was addressed by the Sugar Controller to the factory owner, directing him to supply sugar to the State Government in question in accordance with the despatch instructions received from the competent officer of the State Government. A copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entered into voluntarily between two persons known as buyer and seller by which the buyer acquires the property of the seller for an agreed consideration known as "price". The rule laid down in that decision is the same as that laid down by the House of Lords in Kirkness v. John Hudson Co. Ltd. [1955] A.C. 696. In this case also the Court was dealing with a compulsory acquisition and not sale. In Mls. Cement Limited v. The State of Orissa [1961] 12 S.T.C. 205., the Court was dealing with transactions effected under the Cement Control Order, 1956. Therein the assessee-company, a manufacturer of cement, was required to sell cement to the State Trading Corporation on payment of stipulated price. Clause 3 of the Cement Control Order provided, "Every producer shall sell (1)(a) the entire quantity of cement held in stock by him on the date of the commencement of the Order, and (b) the entire quantity of cement which may be produced by him during a period of two years from the date of commencement of this Order to the Corporation and deliver the same to such person or persons as may be specified by the Corporation in this behalf from time to time, (2) notwithstanding any contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rightly proceeded on the basis that "the burden is certainly upon the State to establish facts upon which a subject can be taxed under a financial enactment". But it accepted the finding of the Sales Tax Appellate Tribunal that from the facts and circumstances established it is a reasonable inference to draw that the goods were delivered for consumption in the Madras State. This aspect was dealt with by the Tribunal in para. 11 of its order dated April 17, 1959. On that question this is what the Tribunal says: "It will be an onerous task to pursue the subsequent history of every inter-State sale transaction to find out whether after successive change of hands the goods left the State; but it will be permissible in such cases to consider the broad pattern of the transaction, the surrounding circum- stances and any other relevant data to draw a reasonable conclusion therefrom. In the cases before us, it is admitted that the sales were in pursuance of a scheme of internal distribution under the Control Order applicable to the whole of India. That there was necessity to draw up such a scheme indicates that the goods were essential goods, that the supply was inadequate to meet the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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