TMI Blog1988 (5) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of 1986. Dr. Y.S. Chitale, Senior Advocate (M. Veerappa, Ashok Kumar Sharma and Atul Chitale, Advocates, with him), for the respondents. G. Ramaswamy, Additional Solicitor-General (R.J. Babu, R.F. Nariman, Ranjan Karanjawala, Mrs. M. Karanjawala and Ejaz Maqbool, Advocates, with him), for the appellants in C.A. Nos. 4522 to 4529 of 1985. Shanti Bhushan, Kapil Sibal, Soli J. Sorabjee, G.B. Pai and V.A. Bobde, Senior Advocates (K.P. Kumar, R. Vasudevan, K.T. Anantharaman, Harish N. Salve, H.K. Dutt, Miss Mridula Ray, O.C. Mathur, Miss Meera Mathur and Miss Lekha Mathur, Advocates, with them), for the petitioners in Writ Petitions Nos. 36, 37, 39 and 358 of 1986. -------------------------------------------------- The judgment of the Court was delivered by SABYASACHI MUKHARJI, J.- Civil Appeals Nos. 4522 to 4529 of 1985; These appeals by certificates are from the judgment and order of the High Court of Karnataka dated 16th of August, 1985. By the impugned judgment and order the writ petitions filed by the Coffee Board and others were dismissed. In order to appreciate the questions involved in the decision, it may be noted that the appellant he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to hold that the later export sales were "local sales" to avoid liability under section 6 of the Karnataka Sales Tax Act. The direct export sales made by the appellant for the period in challenge were not "in the course of export" and they did not qualify for exemption from purchase tax under section 6 of the Karnataka Sales Tax Act. The levy of sales tax on coffee, it was held by the High Court, fell under entry No. 43 of the Second Schedule of the Act and it was governed by section 5(3)(a) of the Act and not by section 5(1) of the Act. It was further held that under section 5 of the Central Sales Tax Act, 1956, purchases and exports made by the Coffee Board are "for export" and not "in the course of export" and thus did not qualify for exemption under article 286 of the Constitution of India. It was observed by the High Court that the Board did not purchase or take delivery of any specific coffee or goods of any grower and export the same under prior contracts of sale. The Board did not purchase any specific coffee of any specific grower for purposes of direct exports at all. The purchases made and exports made would be "for export" only and not "in the course of export " to ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Australian statutes. On or about 2nd March, 1942, the Coffee Market Expansion Act, 1942 (the title of the Act was later changed to "Coffee Act" in 1955) (hereinafter referred to as "the Act") was enacted and the Ordinance repealed. The Act was to remain in operation for the duration of the second world war and a period of one year thereafter. The Act, inter alia, added a new sub-section (6) to section 25 of the Act, specifically providing for extinguishment of all the rights of the owners of the registered coffee estates in the coffee delivered by them to the surplus pool of the Coffee Board (hereinafter referred to as "the Board") set up under the Act, except the right to receive payments referred to in section 34 of the Act. Under section 34 of the Act the Coffee Board was required to pay to the registered owners who had delivered coffee for inclusion in the surplus pool such payments out of the pool fund (comprising of the monies realised from the sale of coffee pooled with the Board) as the Board may think proper, the amount so paid being dependent upon the quantity and the kind of the coffee delivered to the Board. On or about 26th March, 1943, the Act was amended, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government under the proviso to section 25(1) of the Coffee Act are exempt from this provision. (c) Seizure by the Board of coffee wrongly withheld from the pool. Prosecution for failure to deliver and confiscation of quantity not delivered. (d) Delivery to be effected at such times and at such places as designated by the Board [section 25(2)]; the extinguishment on delivery of all rights of the growers in respect of the coffee delivered to the Board excepting the right to receive payment under section 34 of the Act [section 25(6)]. (e) Sale of coffee in the pool by the Board in the domestic market and for export through auctions and other channels in regulated quantities and at convenient intervals [section 26(1)]. (f) Payment to growers in such amounts and at such times as decided by the Board (section 34). The payment to be made on the basis of the value as determined by the price differential scale [section 24(4)], and in proportion to the value of such coffee to the total realisations in the pool [section 34(2)]. (g) Sale or contracts to sell coffee by growers in the years in which internal sale quota was not allotted were prohibited by section 17 of the Act. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the country is grown in the State of Karnataka. There are 1,12,153 coffee estates in the country of which 1,04,958 estates are less than 10 acres in size and 3,62,689 persons were employed on the estates in 1982-83. Over 59,000 tonnes of coffee of the value of about Rs. 209 crores was exported in the year 1984-85. The Madras High Court in the case of Indian Coffee Board v. State of Madras [1954] 5 STC 292 held that the Coffee Board was a "dealer" under the Madras General Sales Tax Act, 1939 and, inter alia, held that there was no contract, express or implied, between the coffee grower and the Board and that the object and scheme of the Act were analogous to the statutes in Australia, providing for compulsory acquisition of pool marketing of agricultural produce. So far as the Madras High Court held that the Indian Coffee Board was a dealer we accept the same. The observation that there was no contract was made in the context of agency contract between the Coffee Board and the grower. In or about 1957, the Karnataka Sales Tax Act, 1957, was enacted and the Mysore Sales Tax Act, 1948, repealed. "Sale" is defined in section 2(t) and "dealer" in section 2(k) of the said Act. Grower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." The Central Act defines "sale" as under in section 2(g): "'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortage or hypothecation of a charge or pledge on goods;" Coffee Board is a "dealer" duly registered as such under the Sales Tax Acts of all the States in which it holds auctions/maintains depots/runs coffee houses. The Board is also registered as a "dealer" under the Central Sales Tax Act. The Board collects and remits sales tax on all the coffee sold by it for domestic consumption to the State in which the sale takes place. Coffee is sold through auctions held in the States of Karnataka, Tamil Nadu and Andhra Pradesh, and also through the Board's own depots located in nine States. Sale is also effected by way of allotments to co- operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court, as it was done in this case unless the question was specifically raised and determined. We cannot also by-pass this decision by the argument of the learned Additional Solicitor-General that section 10 of the Act had not been considered or how it was understood by some. This decision in our opinion concludes all the issues in the instant appeal. In 1970, purchase tax was introduced. The Karnataka Sales Tax Act was amended by Karnataka Act 9 of 1970 and section 6 was substituted. The new section 6 provided for the levy of purchase tax on every dealer who in the course of his business purchased any taxable goods in circumstances in which no tax under section 5 was leviable and, inter alia, despatched these to a place outside the State, at the same rate at which tax would have been leviable on the sale price of such goods under section 5 of the Karnataka Act. The delivery of coffee by the coffee growers to the Coffee Board not being treated a purchase by the Board, the State did not demand any tax from the Board in respect of such deliveries. Demands were raised for the first time in 1983. Assessments for the years up to 1975 were completed without any demand for purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Act was amended by Act 10 of 1983, Act 23 of 1983 and Act 8 of 1984. The definition of "sale" in section 2(t), however, was not amended. That definition was amended with effect from 1st of August, 1985, by Karnataka Act 27 of 1985. After hearing the State Government, the High Court made absolute the stay of further proceedings pursuant to the show cause notice of the Commissioner proposing to reopen the assessment for the year 1974-75. The court modified the stay order regarding the pre-assessment notice and permitted the completion of assessment reserving liberty to the Coffee Board to move the High Court after the assessment was completed. On 31st of May, 1983, assessment order was made for the year 1975-76. On or about 17th of June, 1983, demand for Rs. 3.5 crores as arrears of tax for the assessment year 1975-76 was issued to the Coffee Board. On 2nd July, 1983, the High Court stayed the assessment demand for purchase tax for the assessment year 1975-76. On or about 18th of June, 1983, the assessment order was issued for the year 1976-77. The Board was assessed on a taxable turnover of Rs. 92.99 crores and Rs. 10.18 crores was assessed as tax. Of this sum, Rs. 8.06 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions by a common judgment and various sums of money for the various years became payable as purchase tax. The said judgment is reported in Indian Law Reports, Karnataka, Vol. 36, at page 1365 See [1985] 60 STC 142. These appeals challenge the said decision. In view of the decision of the High Court several questions were canvassed in these appeals. The questions were (i) Was there transfer of coffee to the Board from the coffee growers or acquisition. (ii) Was there any element of sale involved. (iii) Was the Coffee Board trustee or agent for the coffee growers for sale to the export market, and (iv) If it is sale, is it in the course of export of the goods to the territory outside India. The first and the basic question that requires to be considered in these appeals is whether the acquisition of coffee by the Board is compulsory acquisition or is it purchase or sale? As mentioned all the questions were answered by this Court in Bhavani Tea Produce Co.'s case [1966] 2 SCR 92 against the appellant. We were, however, invited to compare the transaction in question with transactions in Peanut Board v. Rockhampton Harbour Board 48 CLR 266. Was there any mutuality? In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the conditions specified in the licence issued by a designated officer. It also provided that no person should sell cement at a higher price than the notified price and no person to whom a written order had been issued shall refuse to sell cement "at a price not exceeding the notified price". Any contravention of the order became punishable with imprisonment or fine or both. Under the A.P. Procurement (Levy and Restriction on Sale) Order, 1967 (Civil Appeals Nos. 2488 to 2497 of 1972), every miller carrying on rice-milling operation was required to sell to the agent or an officer duly authorised by the Government, minimum quantities of rice fixed by the Government at the notified price, and no miller or other person who gets his paddy milled in any rice-mill can move or otherwise dispose of the rice recovered by milling at such rice-mill except in accordance with the directions of the Collector. Breach of these provisions became punishable. It was held dismissing the appeals that sale of cement in the former case by the allottees to the permit-holders and the transactions between the growers and procuring agents as well as those between the rice-millers on the one hand and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding core or character of the transaction. Analysing the Act, It was observed that according to the definition of "sale" in the two Acts the transactions between the appellants in that case and the allottees or nominees, as the case may be, were patently sales because in one case the property in the cement and in the other property in the paddy and rice was transferred for cash consideration by the appellants. When the essential goods are in short supply, various types of Orders are issued under the Essential Commodities Act, 1955, with a view to making the goods available to the consumer at a fair price. Such Orders sometimes provide that a person in need of an essential commodity like cement, cotton, coal or iron and steel must apply to the prescribed authority for a permit for obtaining the commodity. Those wanting to engage in the business of supplying the commodity are also required to possess a dealer's licence. The permit-holder can obtain the supply of goods, to the extent of the quantity specified in the permit and from the named dealer only and at a controlled price. The dealer who is asked to supply the stated quantity to the particular permit-holder has no opti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the learned Additional Solicitor-General. All the four essential elements of sale- (1) parties competent to contract, (2) mutual consent, though minimal, by growing coffee under the conditions imposed by the Act, (3) transfer of property in the goods and (4) payment of price though deferred, are present in the transaction in question. As regards the provisions under section 26(2) empowering the Coffee Board to purchase additional coffee not delivered for inclusion in the surplus pool, it is only a supplementary provision enabling the Coffee Board to have a second avenue of purchase, the first avenue being the right to purchase coffee under the compulsory delivery system formulated under section 25(1) of the Act. The scheme of the Act is to provide for a single channel for sale of coffee grown in the registered estates. Hence, the Act directs the entire coffee produced except the quantity allotted for internal sale quota, if any, to be sold to the Coffee Board through the modality of compulsory delivery and imposes a corresponding obligation on the Coffee Board to compulsorily purchase the coffee delivered to the pool, except: (1) where the coffee delivered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng just compensation. Nichols on Eminent Domain (1950 Edition), a classic authority on the subject, defines "eminent domain" as "the power of the sovereign to take property for public use without the owner's consent": see para 1.11, page 2 of Vol. 1 which elaborates the same in these words: "...This definition expresses the meaning of the power in its irreducible terms: (a) power to take, (b) without the owner's consent, (c) for the public use. All else that may be found in the numerous definitions which have received judicial recognition is merely by way of limitation or qualification of the power. As a matter of pure logic it might be argued that inclusion of the term 'for the public use' is also by way of limitation. In this connection, however, it should be pointed out that from the very beginning of the exercise of the power the concept of the 'public use' has been so inextricably related to a proper exercise of the power that such element must be considered as essential in any statement of its meaning. The 'public use' element is set forth in some definitions as the 'general welfare', the 'welfare of the public', the 'public good', the 'public benefit' or 'pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r XV, expressed the same view at page 524 of the book in these words: "...More accurately, it is the rightful authority which must rest in every sovereignty to control and regulate those rights of a public nature which pertain to its citizens in common and to appropriate and control individual property for the public benefit, as the public safety, convenience or necessity may demand. " In Charanjit Lal Chowdhury v. Union of India [1950] 1 SCR 869, Mukherjea, J., as the learned Chief justice then was, while examining the scope and ambit of article 31 of the Constitution observed as follows: "It is a right inherent in every sovereign to take and appropriate private property belonging to individual citizens for public use. This right, which is described as eminent domain in American law, is like the power of taxation, and offspring of political necessity, and it is supposed to be based upon an implied reservation by Government that private pro- perty acquired by its citizens under its protection may be taken or its use controlled for public benefit irrespective of the wishes of the owner." This Court in the State of Karnataka v. Ranganatha Reddy [1978] 1 SCR 641 held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of all kinds in consequence of such delivery and sale or otherwise under these Acts' [see 15(1), (2), as modified by the Order in Council]. Sub-section (3) of section 15 penalizes the sale or delivery of any of the 'commodity' to, or the purchase or the receipt of any of the 'commodity' from, any person except the board. These provisions operate even although the Governor in Council does not resort to compulsory acquisition. It was said by Mr. Mitchell that the provisions authorizing the borrowing of money constituted the chief purpose of the compulsory acquisition. If this means that the control of the marketing of peanuts is a subordinate or consequential purpose of the instruments, I cannot agree. The ability to borrow upon the whole crop may afford an advantage, if not an incentive, in the concentration of the 'commodity' in the hands of one marketing authority. But, the weight attached to supposed advantages arising from the policy adopted in these enactments is not material. What is material is whether the scope and object of the enactments as gathered from their contents are to deal with trade and commerce including inter-State trade and commerce. In examining this que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a collectivist one for the distribution of milk within the area containing the most densely populated part of the State; and all that can be presumed is that the substitution was deemed by the legislature to be an expedient one for reasons only of health, hygiene, efficiency and the economic benefit of farmers in the milk-producing districts. I agree, therefore, that the operation of section 26 is not inconsistent with section 92 of the Constitution." The aforesaid observations are most apposite. In the light aforesaid along with the provisions of section 17 and section 25 of the Act, it cannot be said in the Act, there is any compulsory acquisition. We accept the submission of the learned Additional Solicitor-General that it is not necessary that every member of the public should benefit from property that is compulsorily acquired. But in essence the scheme envisaged is sale and not compulsory acquisition. It has also to be borne in mind that the terms "sale" and "purchase" have been used in some of the provisions and that is indicative that no compulsory acquisition was intended. Section 34 of the Act reads as follows: "34. (1) The Board shall at such times as it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with section 17 nor the provisions for payment of compensation indicate that coffee becomes the property of the Coffee Board not by consent but by the operation of law. The levy of duties of excise and customs under sections 11 and 12 of the Coffee Act are inconsistent with the concept of compulsory acquisition. Section 13(4) of the Coffee Act clearly fixes the liability for payment of duty of excise on the registered owner of the estate producing coffee. The Board is required to deduct the amount of duty payable by such owner from the payment to the grower under section 34 of the Act. The duty payable by the grower is a first charge on such pool payment becoming due to the grower from the Board. Section 11 of the Act provides for levy of duty of customs on coffee exported out of India. This duty is payable to the customs authorities at the time of actual export. The levy and collection of this duty is not unrelated to the delivery of the coffee by the growers to the Board or the pool payments made by the Board to the growers. The duty of excise as also the duty of customs are duties levied by Parliament in exercise of its powers of taxation. It is not a levy imposed by the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce from the Coffee Market Expansion Act is a dealer within the meaning of section 2(b) of the Madras General Sales Tax Act, 1939, and is therefore, liable to sales tax on its turnover. The High Court held that the Board was not a constituted representative of the producer and it did not hold the goods on behalf of the producer. After the goods enter the pool after delivery, they become the absolute property of the Board and the producer, a registered owner, has no right or claim to the goods except to a share in the sale proceeds after the goods are sold in accordance with the provisions of the Act. It was said by the learned Additional Solicitor-General that the cultivation of coffee in India was over a century old and numerous plantations existed long prior to the enactment of the Coffee Act. There was no act of volition on the part of the growers in taking to coffee cultivation and subjecting themselves to the provisions of the Act by taking up such cultivation. The cultivation of coffee can be carried on only in certain types of soil and in high elevations. The land suited for coffee cultivation cannot be used for growing other crops on a similar scale. Coffee is a perennial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attracted. The alternative submission of the appellant was that the Coffee Board was a trustee or agent of the growers. We are unable to accept this submission either. There is no trust created in the scheme of the Act in the Coffee Board; it is a statutory obligation imposed on the Coffee Board and does not make it a trustee in any event. It is also not possible to accept the submission that the Central Sales Tax Act will not be applicable to any sale by the Coffee Board because it was an export sale by the Coffee Board. In Consolidated Coffee Ltd. v. Coffee Board, Bangalore [1980] 46 STC 164 (SC); [1980] 3 SCR 625 it has been held that there must be a prior agreement at the time when the transaction of sale takes place. No such prior agreement existed in this case. In New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 STC 316 (SC); [1963] Supp 2 SCR 459, Hidayatullah, J., as the Chief Justice then was, observed that so long as the parties trade under controls at fixed price and accept these as any other law of the realm because they must be deemed to have contracted at a fixed price both sides having or deemed to have agreed to such price. Consent un ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
