TMI Blog1970 (4) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. The petitioner was asked whether it had any objection to the same. The petitioner submitted objections on 30th November, 1966, stating that the sales at the canteen could not be included in the turnover of the petitioner as they were not made in the course of its "business", but were made in order to comply with the requirements of statute. The Commercial Tax Officer, however, did not agree with the objections of the petitioner and included the sales at the canteen in the turnover. The petitioner preferred an appeal to the Assistant Commissioner of Commercial Taxes, but his appeal was rejected on 18th February, 1967. The petitioner preferred an appeal to the Sales Tax Appellate Tribunal raising the question of vires of sections 2(bbb), 2(n) and 5-A of the Andhra Pradesh General Sales Tax Act. On the ground that it may not be competent for the petitioner to question the vires of the provisions of the statute before the Tribunal, the petitioner has filed the present application for the issue of a writ of certiorari to have the order of the Assistant Commissioner of Commercial Taxes dated 18th February, 1967, confirming the order of the Commercial Tax Officer, quashed. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rayana Rao and Rajagopalan, JJ., observed that the word "business" must be understood in a commercial sense as involving an activity to earn profit and held that the supply of food-grains to the workers by the company was not carried out with a view to earn profit and in fact no profit accrued and, therefore, the company was not liable to pay sales tax. In the course of their discussion they observed: "........it cannot be disputed that the word 'business' is used in the sense of carrying on continuous trading operations with a view to earn profit. He may not actually obtain profit and the business may end in loss. The test is not whether he actually gets profit or loss but the object with which the trading activity is carried on. If we omit the expression 'who carries on the business of' in the definition of dealer, it would only mean that a dealer is a person who merely buys or sells goods. The object of the Act is not to impose tax upon such a person. The words 'buying and selling' are qualified by the expression 'carries on the business of'. The context, therefore, requires that the word must be understood in a restricted and commercial sense that the activity was with a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not on any theory that the sales were compulsory sales made in order to comply with statute. In The Trustees of the Port of Madras v. The State of Madras[1960] 11 S.T.C. 224., the facts were that under the Port Trust Act, the Port Trust was under an obligation to supply water to ships calling at the Madras harbour. The Port Trust, which was supplied water by the Corporation of Madras at certain rates, in its turn supplied water to ships calling at the port on payment of charges. The question arose whether the Port Trust Act could be subjected to sales tax on the supply of water to ships. On an examination of the Port Trust Act, the learned judges came to the conclusion that the Madras Port Trust was not "conceived as a commercial body for making profits by sale of goods" and that "no profit-motive could be implied in the levy of charges for the water supplied to the ships". The learned Judges referred to the earlier decisions of the Madras High Court in Gannon Dunkerley and Co. v. State of Madras[1954] 5 S.T.C. 216., and Sree Meenakshi Mills Ltd. v. State of Madras[1954] 5 S.T.C. 291., and held that in order to become liable to sales tax a dealer should be one who buys and sells ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of its employees. Notwithstanding the amended definition of "business", Veeraswami and Ramaprasada Rao, JJ., held that the assessee could not be assessed as the assessee was not "carrying on the business of selling commodities in the fair price shop in a trade or commercial sense". The amended definition of "business" was considered in the following manner: "The primary requisite of 'business' as defined even under Madras Act 15 of 1964 is that it should be a trade or commerce or adventure or concern in the nature of trade or commerce. Presence or absence of profit will not matter. But the activity must be of commercial character and in the course of trade or commerce. The second clause in the definition of 'business', as it appears to us, is still one invested with commercial character, for the reference is to any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. Unless the transaction is connected with trade, that is to say, it has something to do with trade or has the incidence or elements of trade or commerce, it will not be within the definition. The words 'in connection with or incidental or ancill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld indeed be a most pernicious principle to say that a person does not intend to do a thing merely because he does that thing in obedience to the law and to advance the law. It may be that the law puts him in peril if he does not do the thing, but that does not mean that when he does it, lie does not intend to do it. The compulsion, or it may be more appropriate to say, the inducement resulting from the fear of penal consequences is not a compulsion which would vitiate a contract. Under section 14 of the Contract Act, a consent is said to be free when it is not caused by (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake subject to the provisions of sections 20, 21 and 22. Section 15 defines coercion as "committing or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement." A contract is said to be induced by undue influence where the relations subsis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se sugar by the Province, and no acceptance of any offer by the manufacturer. The manufacturer was under the Control Order left no volition; he could not decline to carry out the order; if he did so he was liable to be punished for breach of the order and his goods were liable to be forfeited. The Government of the Province and the manufacturer had no opportunity to negotiate, and sugar was despatched pursuant to the direction of the Controller and not in acceptance of any offer by the Government." ".........A contract of sale postulates exercise of volition on the part of the contracting parties and there was in complying with the orders passed by the Controller no such exercise of volition by the assessees................." "To infer a contract from the compulsory delivery of sugar and acceptance thereof would be to ignore the true position of the parties, and the circumstances in which goods were delivered." This case is not of any real assistance to the petitioner because it was a case where the company and the Government never met face to face or through an agent. There was never any privity of contract between them. We do not think when their Lordships said that a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h intention could be inferred. In the present case all the circumstances indicated by their Lordships of the Supreme Court as throwing light on the intention to carry on business are present. We may now refer to three other decisions of their Lordships of the Supreme Court. The first of these cases, Indian Steel and Wire Products Limited v. State of Madras[1968] 21 S.T.C. 138 (S.C.); A.I.R. 1968 S.C. 478. was concerned with the question whether the supply of certain products by the assessee to various persons, under orders of the Controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order of 1941, could be included in the taxable turnover of the assessee. The contention of the assessee was that it was the province of the Controller to determine the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were to be transported and the mode in which the payment of the price was to be made and, therefore, there was no volition on the part of the assessee, and the supplies could not constitute sales within the meaning of the Sale of Goods Act. Their Lordships while holding that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat nothing was left to be decided by mutual assent." Referring to the case of New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar[1963] 14 S.T.C. 316 (S.C.)., it was observed: "On the basis of those facts, the court came to the conclusion that there was no room for mutual assent in those transactions. The facts of the present case are materially different from the facts of that case. Hence the ratio of that decision does not apply to the facts of the present case. Whether in a given case there was mutual assent or not is a matter to be decided on the facts of that case." In Andhra Sugars Ltd. v. State of Andhra Pradesh[1968] 21 S.T.C. 212 (S.C.); A.I.R. 1968 S.C. 599. , the facts were that under the Andhra Pradesh Sugar-cane (Regulation of Supply and Purchase) Act and the Rules made thereunder, a cane-grower in a factory zone was free to sell or not to sell sugar-cane to the factory. He might consume it or he might process it into jaggery and then sell the finished product. If he offered to sell his cane, the occupier of the factory was bound to enter into an agreement with him on the prescribed terms and conditions and to buy cane, pursuant to the agreement, in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Sale of Goods Act. The purchases of sugar-cane under the agreement can be taxed by the State Legislature under entry 54, List II." Referring to the case of New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar[1963] 14 S.T.C. 316 (S.C.)., Bachawat, J., observed: "On the special facts of that case, the majority decision was that there was no offer and acceptance and no contract resulted. That decision should not be treated as an authority for the proposition that there can be no contract of sale under compulsion of a 'statute. It depends upon the facts of each case and the terms of the particular statute regulating the dealings whether the parties have entered into a contract of sale of goods. Under Act No. 45 of 1961, a cane-grower makes an offer to the occupier of the factory directly and the latter accepts the offer. The parties then make and sign an agreement in writing. There is thus a direct privity of contract between the parties. The contract is a contract of sale and purchase of cane, though the buyer is obliged to give his assent under compulsion of a statute. The State Legislature is competent to tax purchases of canes made under such a contract." In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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