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TMI Blog1970 (7) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... since there was no "sale" within the meaning of the U.P. Sales Tax Act, 1948. The order was confirmed by the Additional Judge (Revisions) Sales Tax. The Additional Judge (Revisions) Sales Tax referred the following questions to the High Court of Allahabad for opinion: "(1) Whether the sale made to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959, are sales within the meaning of 'sale' under section 2(h) of the U.P. Sales Tax Act. (2) Whether in the circumstances of the case, the assessees are liable to pay sales tax on the sales made to the Regional Food Controller under the provisions of the U.P. Wheat Procurement (Levy) Order, 1959." The questions raised were defective in form. The word "sales" when it first occurs in question No. (1) should be "supplies". The expression "sales made" in question No. (2) should be "on the price for wheat supplied". We modify the questions accordingly. The High Court of Allahabad, following their earlier judgment in Commissioner of Sales Tax, U.P. v. Ram Bilas Ram Gopal [1969] 24 S.T.C. 508; 1969 A.L.J. 424., answered the two questions in the affirmative. The appellants have appealed to this court with special l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed.' " It was also observed that the expression "sale of goods" in the Constitution must be understood in the same sense in which it is used in the Sale of goods Act, 1933. The U.P. Legislature could therefore legislate for levy of sales tax on a transaction which amounted to a sale within the meaning of the Sale of goods Act, 1930, and not on any other transaction which was deemed by fiction to be a sale. It is necessary then to determine whether the stocks of wheat supplied by the appellants in compliance with the provisions of the U.P. Wheat Procurement (Levy) Order, 1959, to the Regional Food Controller were sold to that officer within the meaning of the definition of the word "sale" in section 2(h) of the U.P. Sales Tax Act, 1948. The relevant provisions of the U.P. Wheat Procurement (Levy) Order, 1959, may first be read. The preamble to the Order states: "WHEREAS the State Government is of the opinion that it is necessary and expedient so to do for maintaining the supplies of wheat and for securing its equitable distribution and availability at fair prices: Now, THEREFORE, in exercise of the powers conferred by clauses (e), (f), (h), (i) and (j) of sub-section (2) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey have reason to believe that wheat is procured, purchased or stocked, and may make necessary enquiries, examine any books or documents and search any premises, vehicles, vessels and air-craft and seize wheat in respect of which they have reason to believe that a contravention of the Order has been, is being, or is about to be committed. Obligation to deliver wheat of the quantity specified arises out of the statute. The Order takes no account of the volition of the licensed dealers and, until the State Government directs otherwise, of the Controller or the authorised officer. The Order imposes an obligation upon the licensed dealer who is defined in clause 2(b) as meaning a person holding a valid licence under the U.P. Foodgrains Dealers Licensing order, 1959, to deliver the quantities of wheat specified in the Order. The State Government is directed by the Order to pay for the wheat supplied at the controlled rate. The source of the obligations to deliver the specified quantities of wheat and to pay for them is not in any contract, but in the statutory Order. In our judgment clause 3 sets up a machinery for compulsory acquisition by the State Government of stocks of wheat bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, as regards that wheat the Levy Order leaves it open to one of the parties, namely the State Government, to decide when it will stop purchasing wheat from the dealer. That in substance is clause 3 of the Levy Order and it embodies the total sum of obligations imposed on the dealer and the State Government. All other details of the transaction are left open to negotiation. It leaves it open to the parties to negotiate in respect of the time and mode of payment of the price, the time and the mode of delivery of wheat and other conditions of the contract." Clause 3 of the Order compels the licensed dealer to deliver to the Controller or his authorised agent every day 50 per cent. of the wheat procured or purchased by him. There is no scope for negotiations there. Assuming that the Controller may designate the place of delivery and the place of payment of price at the controlled rate, and the licensed dealer acquiesces therein, or even when in respect of those two matters there is some consensual arrangement, in our judgment, the transaction of supply of wheat pursuant to clause 3 of the Order and acceptance thereof do not result in a contract of sale. The High Court observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not the option to refuse to comply with, amount to acceptance of an offer or to making of an offer. A contract of sale of goods postulates a voluntary arrangement regarding goods between the contracting parties. It was held that in the case before the court there was no such voluntary arrangement. In two later decisions of this court the true character of transactions in which supplies of commodities were made pursuant to Control Orders was examined. In Indian Steel & Wire Products Ltd. v. State of Madras [1968] 21 S.T.C. 138 (S.C.); [1968] 1 S.C.R. 479., the taxpayer supplied certain steel products to various persons in the State of Madras pursuant to the directions given by the Steel Controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order, 1941. The authorities of the State of Madras assessed the turnover of the taxpayer resulting from those transactions to sales tax under the Madras General Sales Tax Act. The taxpayer contended that the transactions of supply did not result in sales and were on that account not exposed to sales tax, because steel products were supplied pursuant to the directions of the Iron and Steel Controller ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the order issued by the Controller could not have been issued under clause 10B." The court then observed: "........the area within which there 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." The court also observed: "It would be incorrect 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. On the facts of this case for the reasons already mentioned, it is not possible to accept the contention of the learned counsel for the appellant that nothing was left to be decided by mutual assent." The court in that case distinguished the case in New India Sugar Mills' case and expressly reserved their opinion on the question whether supplies of goods pursuant to the directions issued under clause 10B of the Order m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Control Order and by reason of such super-imposition of the rate fixed by the Control Order the mutual assent of the parties and the voluntary character of the transactions were not affected. The decision of this court in New India Sugar Mills' case [1963] 14 S.T.C. 316 (S.C.); [1963] Supp. 2 S.C.R. 459., was distinguished on the ground that there was in the case then in hand mutual assent between the parties to the transaction of supply of coal. The decision of the House of Lords in Kirkness (Inspector of Taxes) v. John Hudson & Co. Ltd. [1955] A.C. 696. is Instructive. In that case liability to pay income tax on the difference between the compensation received for requisition of certain wagons by the Minister of Transport was in issue. A majority of the House held that there was no sale of the wagons and no income tax was payable. Viscount Simonds observed: "...the [taxpayer's] wagons were not sold, and it would be a grave misuse of language to say that they were sold. To say of a man who has had his property taken from him against his will and been awarded compensation in the settlement of which he has had no voice, to say of such a man that he has sold his prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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