TMI Blog1986 (11) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... or depots outside the State of Haryana. That, in pursuance of the instructions of the Central Government, the Government of Haryana promulgated the Haryana Rice Procurement Price Control Order, 1968, as also the Haryana Rice Procurement (Levy) Order, 1979 (hereinafter referred to as "Levy Orders"). The procurement price of the rice is fixed under these Orders and the different officers of the State of Haryana procure rice on behalf of petitioner No. 1 with the funds made available by it to the Director of Food and Supplies Department, Haryana, respondent No. 3. The procured rice is delivered to the Central pool under the supervision and control of the Corporation. Petitioner No. I procured rice from the State Government in the years 1970-71 and 1971-72, in the similar circumstances as are in vogue now and the sales tax authorities then created a demand of tax to the tune of Rs. 1,63,87,225.46 against the petitioner on account of sales tax and the petitioner filed Writ Petition No. 4065 of 1973 in this Court and the same was allowed by a Division Bench on May 17, 1975, and the case is reported as Food Corporation of India v. State of Punjab [1976] 38 STC 144. It was held therein: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased by Food In the hands of Food Corporation Corporation of India of India at the stage of purchase from within the State, by it in the State. directly or through any other dealer liable to pay tax under this Act. (ii) In all other cases First sale in the State by a dealer except (i) above. liable to pay tax under this Act." After the issuance of this notification, the Assessing Authority, respondent No. 2, directed the petitioner-Corporation to furnish the figures of the rice procured by it during December, 1982 and January, 1983. Petitioner No. 1 submitted a statement of levy rice procured during the two months. On receipt of this statement, respondent No. 2 issued a letter (annexure P-2) asking the petitionerCorporation to pay tax on the purchase of rice made from within the State of Haryana for the period November 30, 1982 to January 31, 1983, and required it to show cause as to why penalty under section 47 of the Act should not be made for failure to pay tax and also directed the petitioner-Corporation to deposit an amount of Rs. 50,01,857.10. Respondent No. 2 is treating the procurement of rice under the Haryana Rice Procurement (Levy) Order, 1979, as purchases by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llers to the Food Corporation of India is a sale and is exigible to the sales tax under the provisions of the Haryana General Sales Tax Act, 1973. The Food Corporation of India is a registered dealer and is doing business in real sense in which the term is used. It has been earning profits out of its business like other trading companies. Even the supply of rice to the District Food and Supplies Controllers made under the Levy Order is a sale. This has been held to be so in a case decided by the Supreme Court in Dhanyalakshmi Rice Mills v. Commercial Tax Officer, Eluru along with Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer, reported in [1978] 42 STC 31, in the context of the Andhra Pradesh Levy Order. It was held that such a transaction amounted to sale. The Food Corporation of India is a dealer. The transactions in which the rice procured by the officers of the State of Haryana under the provisions of the Haryana Rice Procurement (Levy) Order is delivered to the Food Corporation of India is sale, exigible to tax. The authority under the Levy Order to sell compulsorily procured rice is vested in the State Government. The petitioner-Corporation has no such authority to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed judges were, with respect, not right in holding in Chittar Mal [1970] 26 STC 344 at 348 (SC); [1971] 1 SCR 671 at 677, that even if in respect of the place of delivery and the place of payment of price, there could be a consensual arrangement, the transaction will not amount to a sale." It has been forcefully argued on behalf of the State that there are large areas of consensual arrangement between the petitioner-Corporation and the officers of the State when they sell the rice procured under the Levy Control Order to the Corporation. In view of the decision in Dhanyalakshmi Rice Mills' case [1978] 42 STC 31 (SC) the decision in Food Corporation of India's case [1976] 38 STC 144 (P H) requires reconsideration. The challenge raised to the validity of notification dated November 30, 1982, also raises question of paramount importance, which requires authoritative determination by a larger Bench. I, therefore, direct that the papers of this case be placed before my Lord the Acting Chief justice for decision by a larger Bench. [In pursuance of the abovesaid order of reference the petition came on for hearing before the Division Bench.] Ashok Bhan, Senior Advocate (R.P. Sahney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement (Levy) Order, 1979 (hereinafter referred to as the Levy Order). The procurement price of the rice is fixed under these Orders and the different officers of the State of Haryana procure rice on behalf of the petitioner-Corporation with the funds made available by it to the Director of Food and Supplies Department, Haryana. The procured rice is delivered to the Central pool under the supervision and control of the Corporation. It procured rice from the State Government in the years 1970-71 and 1971-72 in the similar circumstances as are in vogue now and the sales tax authorities then created a demand of tax to the tune of Rs. 1,63,87,225.46 against it on account of sales tax and it filed Civil Writ Petition No. 4065 of 1973 in this Court which was allowed by the Division Bench on May 17, 1975, and the decision therein is reported as Food Corporation of India v. State of Punjab [1976] 38 STC 144. It was held therein: (a) that there was no relationship of principal and agent between the Corporation and the State and its officers; (b) that the petitioner is the recipient of the foodgrains from the State Government and that to that extent the Corporation was not a dealer; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued the letter, annexure P-2, asking it to pay tax on the purchase of rice made from within the State of Haryana for the period November 30, 1982 to January 31, 1983, and required it to show cause as to why penalty under section 47 of the Haryana General Sales Tax Act should not be imposed for failure to pay tax and also directed the petitioner-Corporation to deposit an amount of Rs. 50,01,857.10. The Assessing Authority is treating the procurement of rice under the Haryana Rice Procurement (Levy) Order, 1979, as purchases by the petitioner-Corporation and thereby making it liable to pay tax. According to the petitioner, this stand of the Assessing Authority is against law as it goes contrary to the decision of this Court in Food Corporation of India's case [1976] 38 STC 144. The notification dated November 30, 1982, has also been attacked by the petitioner on various grounds but those need not be noticed as the same has been withdrawn by notification dated October 31, 1984. In the written statement filed on behalf of the Assessing Authority, it has been averred that the rice is procured under the provisions of the Levy Order by the District Food and Supplies Controllers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 144 stands overruled by a subsequent judgment of the Supreme Court in Vishnu Agencies' case [1978] 42 STC 31. It was further submitted that after the decision of Vishnu Agencies' case [1978] 42 STC 31 (SC), the Division Bench judgment of this Court in Food Corporation of India's case [1976] 38 STC 144 does not lay down the correct law and requires reconsideration. As observed in the earlier part of this judgment, before this Bench, it is a common case of the parties that in case it is held by this Court that the decision rendered by the Division Bench of this Court in Food Corporation of India's case [1976] 38 STC 144 was correct and the Supreme Court's decision in Vishnu Agencies case [1978] 42 STC 31 does not overrule the same so far as the requisite ratio of that case is relevant, impliedly or otherwise, then the transactions will not amount to sales and the writ petitions will be liable to succeed. The correctness of the Division Bench judgment of this Court in Food Corporation of India's case [1976] 38 STC 144 was doubted earlier also in C.W.P. No. 1863 of 1979 by the Division Bench of this Court. As a result, the said case was referred to the Full Bench but the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reference, clause 3 of the said Order, which is material, is reproduced hereunder: Clause 3 provides: 11(1) Every licensed dealer shall sell to the State Government at the controlled prices: (a) Fifty (50) per cent of wheat held in stock by him at the commencement of this Order; and (b) Fifty (50) per cent of wheat procured or purchased by him every day beginning with the date of commencement of this Order and until such time as the State Government otherwise directs. (2) The wheat required to be sold to the State Government under subclause (1) shall be delivered by the licensed dealer to the Controller or to such other person as may be authorised by the Controller to take delivery on his behalf." It was held that "the Order ignored the volition of the dealer, and the source of the obligation to deliver the specified quantities of wheat and to pay for them was not in any contract but in the statutory Order" and after holding so the Supreme Court further said that assuming that the Controller might designate the place of delivery and place of payment of price at the controlled rate, and the licensed dealer acquiesced in them, the transaction of supply of wheat pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction would amount to a sale and to that extent only the ratio of Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 has been held to be not good law though the ultimate decision has been justified as being one of compulsory acquisition by the State in the strict sense of the term. In other words, Vishnu Agencies' case [1978] 42 STC 31 (SC) has split up compulsory acquisition of commodities into two categories for the purpose of determining whether the transaction involved therein amounts to "sale" or not. In one category falls the case of the nature of Chittar Mal Narain Das's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 and in the other, the case of the nature of Vishnu Agencies' case [1978] 42 STC 31 (SC), Dewan's Modern Breweries Ltd.'s case [1979] 43 STC 454 (SC) and Union Territory of Chandigarh v. Amrit Roller Flour Mills case [1985] 60 STC 66 (SC), etc. Now we revert to the decision of this Court in Food Corporation of India's case [1976] 38 STC 144. Therein the question arose whether the transaction under the Punjab Rice Procurement (Levy) Order, 1958, amounted to sale or not and for the purpose of comparison with the Levy Order involved in Chittar Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the Levy Order are concerned, the Corporation does not act independently. If a dealer has no say of any kind in the matter, I fail to understand how such a transaction can have any profit-motive. It will be a travesty of facts to call it a business so far as the distribution of foodgrains to deficit States by the Corporation is concerned. Further, I find that the act of procuring rice under the Levy Order does not constitute 'sale' or, in other words, the transaction of sale of rice under the Levy Order by the millers and the dealers to the State of Punjab is not a taxable event", and further held that "from a bare perusal of these clauses [i.e., of the U.P. Wheat Procurement (Levy) Order], it would be clear that the same are in pari materia with the clauses of the Levy Order with which we are concerned." It would, thus, be clear that the decision in Food Corporation of India's case [1976] 38 STC 144 (P H) is based on the ratio of Chittar Mal Narain Das's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 to the extent that the Levy Order envisages compulsory acquisition of rice by the State Government from the licensed dealers and not on the later part of the ratio which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk that the case before us is distinguishable from Food Corporation of India [1976] 38 STC 144 (P H). It is a case which falls more appropriately within the rule laid down by this court in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer [1978] 42 STC 31 (SC); [1978] 2 SCR 433, where the majority judgment discussed the en-tire case law on the subject, including the earlier decisions in Salar Jung Sugar Mills Ltd. [1972] 29 STC 246 (SC) as well as Chittar Mal Narain Das [1970] 26 STC 344 (SC)." After giving our thoughtful consideration to the entire matter we find that the Control Orders which are the subject-matter of the decision in Vishnu Agencies' case [1978] 42 STC 31 (SC) were different from the Levy Order under which the State Government sets up the machinery for compulsory acquisition of the essential commodities. The Supreme Court's decision in Chittar Mal Narain Das's case [1970] 26 STC 344; AIR 1970 SC 2000 which was relied upon for decision by the Division Bench of this Court in Food Corporation of India's case [1976] 38 STC 144 holds the field and does not stand impliedly overruled in toto. From the aforesaid observations, it is clear that the Control Orders un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee goods and was, therefore, not exigible to tax. Moreover, as to whether there was an agreement to sell bardana or not was a question of fact and it was for the Revenue to prove the existence of such an agreement. It was further contended that bardana was a cheap mode of conveying the commodities; its value was insignificant as compared to the commodity packed therein and that an implied contract to sell bardana independently could not be inferred. In support of the contention, reliance was placed on Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. [1967] 19 STC 84 (SC) and M.A. Razack Company v. State of Madras [1967] 19 STC 135 (SC). On the other hand, the learned counsel for the State relied upon A. Srinivasa Pai v. State of Kerala [1975] 36 STC 482 (Ker) and Deputy Commissioner of Sales Tax, Ernakulam, v. Raja Oil Mills [1979] 43 STC 78 (Ker) [FB] to contend that the bardana was taxable. According to the Supreme Court in Razack Co.'s case [1967] 19 STC 135, as the value of the packing material as compared to the value of the contents of the packet was insignificant, an agreement to sell packing material independently of chewing tobacco could not, under the genera ..... 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