Holding

For purchases after 23 April 1984 the appellant must either furnish the required Declaration Forms or reimburse the dealers for the full tax, interest and penalties; for purchases before that date the appellant bears no liability.

Summary

The Supreme Court considered appeals by Hindustan Vegetable Oils Corporation Ltd. (the appellant) against an Allahabad High Court order that compelled it to issue Declaration Forms (Form III‑Kha) to several dealers (the respondents) for tins purchased for vanaspati production. The dispute centered on whether the appellant, after acquiring Ganesh Flour Mills in April 1984, could refuse to issue the forms for tins used for purposes not covered by Section 4‑B(2) of the Uttar Pradesh Sales Tax Act, and whether it was liable to reimburse the dealers for tax, interest and penalties levied on them. The Court held that for purchases made after 23 April 1984 the appellant could not refuse to issue the forms and, if unable to do so, must reimburse the dealers for the full tax, interest and penalties. For purchases made before that date, the appellant was not liable because the contracts were not ratified under Section 22 of the Ganesh Flour Mills Acquisition Act. Consequently, the High Court order was modified and the appeal was allowed in part.

Issues considered

Whether the appellant is statutorily obligated to issue Declaration Forms under Section 4‑B(2) and Rule 25‑B of the Uttar Pradesh Sales Tax Act for tins used for purposes other than those specified.
Whether a mandamus can be issued compelling issuance of forms that may expose the appellant to penalty under the Sales Tax Act.
Whether the appellant must reimburse the dealers for tax, interest and penalties for the period after the vesting of Ganesh Flour Mills.
Whether the appellant is liable for obligations arising from contracts entered into before the vesting date under the Ganesh Flour Mills (Acquisition and Transfer of Undertakings) Act, 1984.

Legislation cited

Ganesh Flour Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1984s. 22, s. 3, s. 5, s. 6
Industries (Development and Regulation) Act, 1951s. 18AA
Uttar Pradesh Sales Tax Acts. 4-B, s. 6
Uttar Pradesh Sales Tax Ruless. 25-B

Subjects

Sales taxDeclaration FormRecognition certificateAcquisition of undertakingLiabilityMandamusUttar Pradesh Sales Tax ActGanesh Flour MillsVesting dateTax reimbursement

Judgment

A HINDUSTAN VEGETABLE OILS CORPORATION LTD.
v.

B
PROGRESSIVE INDUSTRIES AND OTHERS ETC.

SEPTEMBER 7, 1995

[B.P. JEEVAN REDDY AND M.K. MUKHERJEE, JJ.]
-
U.P. Sales TaxAct/U.P. Sales Tax Rules-Section 4B/Rule 25B-Decla-
ration Fonns agreed to be provided for purchase of raw mate1ial for manufac-
turing notified goods intended to be sold within the State or in the course of
C inter-State Trade or commerce or in the course of exp01t out of India-Not to be
extended to cases other than sale and for raw materials used for st01ing pur-
poses.

Sections 6 & Section 22-Ganesh Flour Mills Company Ltd. (Acquisi-
tion and Transfer of Undenakings Act),. 1984-Contract between Ganesh
D Flour Mills and the Respondent selling dealers-Not liable to be honoured by
the appellant buying dealers (in whom the Ganesh Flour Mills have vested)
prior to the date of vesting unless the contract is ratified within 30 days from
the appointed day.

As per Section 4-B of the U.P. Sales Tax Act, and Rule 25-B of the U.P.
E Sales Tax Rules, Ganesh Flour Mills which was a manufacturer of notified
. goods obtained recognition certificate and applied for declaration Form
111-B for concession in the rate of Sales Tax. Ganesh Flour Mills was sub-
sequently taken over by the Central Government and came to be vested in the
Appellant corporation.
F The appellant Corporation had also obtained recognition certificate.
Both Ganesh Flour Mills and the Appellant had purchased raw materials
viz. tins for packing Vanaspati from the Respondents against Declaration
Form llI-B. They were not only engaged in manufacturing Vanaspati by
themselves but were also undertakingjob works and part of the Vanaspati in
G tins was also sent to other States on consignment basis, i.e., without effecting
sale within the State of U.P.

The appellant could not issue Declaration Form 111-B in respect of
those tins which were not sold within U.P. or those tins which were used for
storing other Vanaspati. The Assessing Authorities accordingly levied tax
.H at the full rate on the selling dealers and also levied interest on those sales
386
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. 387

for which no declaration forms were produced. Penalty proceedings were A
also initiated against the selling dealers.

In a writ petition filed by the selling dealers (Respondents) for
directing the appellants to issue Declaration Form 111-B for both the
periods viz. before vesting and after vesting of Ganesh Flour Mills Com-
pany, the High Court directed the appellant to furnish declaration forms B
for both the periods.

On Appeal the appellant contended that - (a) no mandamus ought
to have been issued by the High Court compelling the appellant to issue
declaration Forms, in respect of tins utilised for purposes other than those C
permitted by law since it would expose them to penalties under the U.P.
Sales Tax Act;

(b) That in such a case, the appellant could have been directed to
reimburse the tax levied upon the respondents for the period after
23.4.1984. However they can not be made liable to reimburse the interest D
and penalty; and

(c) The appellant cannot be held responsible for any of the acts,
defaults or liabilities for the period prior to acquisition i.e. 23.4.1984.

Allowing the appeal in part, this Court E
HELD: 1. That with respect to the period subsequent to 23.4.1984 it
was not open to the Appellant to refuse to issue Declaration Forms on the
plea that they have used the tins for purposes other than those mentioned
in Section 4(B) (2) of U.P. Sales Tax Act. However, the direction given by
the High Court could be modified to the extent that, if the appellan~ could F
not produce Declaration Form 111-B, they ought to reimburse the respon-
dents (selling dealers) the entire amount of tax which the respondents were
made to pay as also for the interest and penalties paid by them. [400-E]

2. With respect to period prior to 23.4.1984 the Appellant Company G
is not liable since the contract between Ganesh Flour Mills and the
respondent had not been ratified by the Central Government within 30
days from the appointed day as required under section 22 of the Act of
1984. [402-F-G]

3. Since the writ petitions did not challenge the omission of Central H
388 SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.

A Government to ratify the contract there is no need for any discussion in
regard to proviso to Section 22 of the Act of 1984, viz. the validity of
non-ratification in these writ petitions. [402-H]
·~

CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 8198-
8203 of 1995.
B
From the Judgment and Order dated 12.11.90 of the Allahabad High
Court in W.P. Nos. 32, 33, 140, 924/90, 323 & 503of1987.

WITH
c Civil Appeal No. 8205 of 1995.

From the Judgment and Order dated 22.4.91 of the Allahabad High
Court in W.P. No. 1877 (T) of 1988.

D RF. Nariman, D.N. Mishra, Adv. for JBD & Co., M.C. Dhingra,
R.A. Mishra and K.S. Rana for the Respondent Nos. 2, 3, 4. ·

Prashant Kumar Sunil Ambwani and Ashok K. Srivastava for the
Respondent No. 5.

E The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted.

These appeals are preferred against the judgment of the Allahabad
High Court allowing the writ petitions filed by the certain dealers under a
F common order.

The management of the Ganesh Four Mills was taken over by the
Central Government under Section 18AA of the Industries Development
and Regulation Act, 1951 under an Order dated November 3, 1972. In the
year 1984, the Parliament enacted The Ganesh Flour Mills. Company
G Limited (Acquisition and Transfer of Undertakings) Act, 1984, providing
for the acquisition and transfer of the right, title and interest of certain
undertakings of the Ganesh Flour Mills Company Limited. The Act came
into force on January 28, 1984. By a notification dated April 23, 1984 issued
under Section 5 of the Act, the said undertakings were vested in the
H Hindustan Vegetable Oils Corporation Limited, the appellant herein.
HJNDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. (B.P. JEEVAN REDDY, J.) 389

Section 4-B(2) of the Uttar Pradesh Sales Tax Act provides that A
(a) where a dealer requires any goods, referred to in sub-section (1), for
_. use in the manufacture by him, in the State of any notified goods, or in the
packing of such notified goods manufactured or processed by him and
(b) such notified goods are intended to be sold by him in the State or in
the course of inter-State trade or commerce or in the course of export out
B
of India, (c) he may apply to the assessing authority, in such form and
manner and within such period as may be prescribed for the grant of a
recognition ce1tificate in respect thereof. The sub-section provides that if
the applicant satisfies such requirements and conditions as may be
prescribed, the assessing authority shall grant him in respect of such goods
a recognition certificate in such form and subject to such conditions as. may c
be prescribed. The Explanation to sub-section clarifies that "goods re-
quired for use in manufacture" shall mean raw materials, processing
materials, machinery, plant, equipment, consumable stores, spare parts,
accessories, components, sub- assemblies, fuels or lubricants. Clause (b) of
the Explanation defines the expression "notified goods" to mean such goods D
as may from time to time be notified by the State Government in that
behalf.

Rule 25-B of the Uttar Pradesh Sales Tax Rules provides that "where
a dealer holding a recognition certificate purchases any goods referred to
in clause (b) of sub-section (1) of Section 4-B for use as raw material for E
the purpose of manufacture of any notified goods, he shall, if he wishes to
avail of the concession referred to therein, furnish to the selling dealer a

- certificate in Form III-B (hereinafter called a 'Declaration Form')". The
rule provides that any dealer holding a recognition certificate and wishing
to avail of the concession referred to in Section 4-B (l)(b) shall apply to F
the appropriate Sales Tax Officer for Declaration Forms and the said
officer shall issue the same on being satisfied about the relevant particulars.

Ganesh Flour Mills, while under the management of the Central
Government, was granted a recognition certificate under Section 4-B(2).
The appellant-corporation has·also been granted a recognition certificate G
under the said provision. The Ganesh Flour Mills, prior to its vesting in
the appellant-Corporation (the date of vesting of the undertakings of the
Ganesh Flour Mille; in the appellant-corporation, as stated above, is April
23, 1984) and the appellant-corporation after such vesting has been placing
orders on certain dealers including Respondent Nos. 1 to 5 for supply of H
390 SUPREME COURT REPORTS [1995) SUPP. 3 S.C.R.
I

A tins of specified size and quality representing that it is a recognised dealer
and that the said supplies shall be made to it against the Declaration Forms
(Form III-Kha) to be issued by it. The High Court has extracted one such
order/Jetter dated April 10, 1982/April 26, 1982, which may be extracted
hereinbelow :

B "(Subject to Kanpur Courts Jurisdiction)

THE GANESH FLOUR MILLS CO. LIMITED
(Govt. of India Management)
PURCHASE ORDER
c Sales Tax Regd. No. KR 4938 Grams: 0 GANESHMILL"
C.S.T. No. KR-3, dt. 22.5.57 Tele : 21071, 21021, 21191,
21178.

No. 163 558 Telex KP 354
D To

Mis Tracto Auto Industries P.B. No. 32.4 Kalpi Rd.,
12 P & T, Factory Area, Kanpur - 208012.
Kanpur - 208 012.
E Dated : April 10, 1982
26 APR 1982

Dear Sirs,

Sub : Supply of New Empty Tins of 18 litre capacity
F
We are pleased to place an order on you for 12,500 (twelve
and half thousand only) of 18 litre capacity with newman bung hole
and newman ticklies as per standard size @ Rs. 13.50 per tin
against 3 Kha fonn delivered at our works. The rates are F.O.R.
G Kanpur.

2. It has been mutually agreed that payment will be made to you
within seven days of testing of each lot and submission of bills.

3. This order is effective from April 10, 1982....... Supplies should
p
H be completed within 4 weeks.
HINDUSfAN VEG. OILSCORPN. LTD. v. PROGRESSIVEINDS.!B.P.JEEVAN REDDY,J.J 391

4 ................................ . A

5 ............................... ..

11. You will submit separate bill for each challan. Please mention
order No. on challan as well as bill.
B
12.............................. .

Please confirm your acceptance of order including the terms
and conditions written above by signing the duplicate copy of the
letter. Please return signed copy of order four our record.
c
Thanking you,

Yours faithfully,

sd/- MANAGER."
D
It is agreed that even after the .undertakings of the Ganesh Flour
Mills vested in the appellant-corporation, purchase orders were issued in
identical terms.

In view of the fact that Ganesh Flour Mills as well as appellant-car- 'E
poration were recognised dealers and had purchased the raw material
required by them (for storing the vanaspati in those tins) against Declara-
tion Forms in Form III-Kha, the selling dealers charged the tax on such
sales at the concessional rate of one percent as against the normal rate of
four percent, as contemplated by clause (b) of Section 4-B(l). It is stated
before us that according to the then obtaining practice, the Declaration F
Forms (Forms III-Kha) were supplied either at the time of supply of the
raw material or at a later point of time. (According to the rules, the selling
dealer could produce these declaration Forms before the assessing
authority "upto the date on which he is required to furnish his accounts for
final assessment in respect of the year to which the claim pertains" vide G
sub-1Ule (5) of Rule 25-B.)

Ganesh Flour Mills prior to its vesting in the appellant-corporation
and the appellant-corporation after the said date of vesting were engaged
not only in manufacturing van<:lspati by themselves but were also undertak-
ing job works on behalf of other parties. Even the vanaspati manufactured H
392 SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.

A by them was not sold entirely within the State or in the course of intei-
Sta.te trade or commerce or in the course of export out of India, as
contemplated by sub-section (2) of section 4-B. Part of it was sent to other ·
States on consignment basis without effecting sale thereof within the State
of Uttar Pradesh. According to the provisions of Section 4-B., it may be
reiterated,the facility of recognition certificate is confined only to cases
B where a manufacturer purchases raw material for manufacturing notified
goods (or for packing such notified goods manufactured or processed by
him) and which are intended to be sold within the State or in the course
of inter-state trade or commerce or in the course of export out of India.
In other words, the said facility was not available for storing (packing) the
c vanaspati manufactured on account of third parties (this is the common
case of the parties before us) or for storing the vanaspati which was sent
to other States on consignment basis otherwise than by effecting the sale
within the State or in the course of inter-State trade or commerce or in the
course of export out of India. It follows from the above that the recognised
dealer (appellant herein) was not entitled to rely upon his recognition
D certificate or to issue Declaration Foi:ms (Form III-Kha) to such selling
dealers in respect of tins purchased it but intended for the above purposes
(purposes other than those mentioned in sub-section (2) of Section 4-B).
But what happened in this case is this : the Ganesh Flour Mills while under
Central Government management and the appellant-corporation, after the
E date of vesting aforesaid, have been purchasing tins from the respondents
undertaking to supply Declaration Forms (Form III-Kh11.) in that behalf and
on the basis of such representation, the selling dealers charged sales tax at
the concessional rate of one percent instead of the normal four percent.
Having so purchased the tins and having used part thereof in connection
with job works and/or for storing vanaspati (which was not sold or exported
F as contemplated by sub-section (2) of Section 4-B but was sent to other
States on consignment basis) Ganesh Flour Mills and the appellant found
it not possible to issue Declaration Forms (Form III-Kha) in respect of
such purchases. To be precise while they did issue declaration Forms in
respect of the tins required for storing (packing) the vanaspati manufac-
G tured by them which was sold within the State/sold in the course of
inter-State trade or commerce/sold in the course of export out of India,
they could not and did not issue such Declaration Forms in respect of tins
which were used for storing (packing) the remaining quantity of vanaspati.
The result was that the respondents-selling dealers could not produce
Declaration Forms (Form III-Kha) before the assessing authority in the
H course of their assessments. On that account, the assessing authority levied
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.] 393

tax at the full rate of four percent and also levied interest under the A
provisions of the Uttar Pradesh Sales Tax Act. The respondents complain
that even penalty proceedings were initiated against them for the said
failure. It is then that they approached the Allahabad High Court by way
of writ petitions from which these appeals arise. The principal relief sought
in the v,rrit petitions was for issuance of a writ of mandamus directing the
appellant-corporation to furnish to the writ petitioners Declaration Forms B
(Form III-kha) prescribed under the Uttar Pradesh Sales Tax Rules in
respect of that quantity of tin containers which were supplied by the writ
petitioners to the appellant-corporation on the strength of recognition
certificate and against the undertaking to furnish the Declaration Forms
(Form III-Kha). The claim of the writ petitioners pertained both to the
period anterior to April 23 1984 (the date of vesting of the undertakings
c
of Ganesh Flour Mills in the appellant-corporation) and also for the period
subsequent to the said date. The Union of India was also impleaded as a
respondent to the writ petitions.

The appellant-corporation denied any responsibility or liability to D
issue the Declaration Forms (Form III-Kha) for the period prior to April
23, 1984. They disclaimed any responsibility for the said period relying on
the provisions of the Ganesh Flour Mills Company Limited (Acquisition
and Transfer of Undertaking) Act, 1984 [hereinafter referred to as "Ac-
quisition Act"] So far as the period subsequent to April 23, 1984 is
El
concerned, the appellant-corporation submitted that in view of the fact that
the said tins were used for purposes other than those specified in Section
4-B(2), they could not have issued Declaration Forms (Form III-Kha) in
respect of those purchases inasmuch as issuance of such forms would have
exposed them to pe~alties under sub-section (6) of Section 4-B. They
expressed their readiness to pay the difference of sales tax which was levied F
upon and collected by the State from the selling dealers (writ petitioners).
They submitted that no writ can be issued to them compelling them to do
an act prohibited by law and which would expose them to penalties under
the provisions of the Uttar Pradesh Sales Tax Act.

The High Court has allowed the writ petitions on the following G
findings:

- (i) Where the purchasing dealer wishes to avail himself of the con-
cession referred to in Section 4-B(l)(b), as in the present cases, it is not
competent for the purchasing dealer to withhold the Declaration Form H
394 SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.

A (Form III-Kha) from the selling dealer. If the purchasing dealer wishes to
avail of the concession provided by section 4-B, he has no option bu( to
furnish to the selling dealer the Declaration Form (Form III-Kha).

(ii) where the purchasing dealer represents to the selling dealer that
he wishes to avail of the concession admissible to him under Section 4-B
B and on the basis of such representation avails himself of such concession
by accepting the sale and supply from the selling dealer at the concessional
rate of tax, it is not open to such purchasing dealer to tlirn round and refuse
to issue the Declaration Form (Form III-Kha) on the specious plea that he
now does not wish to avail of the concession and that he is willing to pay
to the selling dealer tax at full rate. The matter cannot be left to the whims
c and fancies of the purchasing dealer.

(iii) That by virtue of the provisions contained in Section 22 of the
Acquisition Act, the appellant corporation is liable, and bound, to issue
the Declaration Forms (Forni III-Kha) even with respect to the period
D prior to April 23, 1984. Section 6(1) of the Acquisition Act does not relieve
the appellant-corporation of the said obligation and liability.

(iv) The writ petitioners are not seeking to enforce any contractual
obligation by means of the said writ petitions l;>ut were only seeking to
enforce the statutory obligation placed upon the appellant-corporation.
E Even otherwise, the corporation being a 'State' within the meaning of
Article 12 is bound to act fairly and hence amenable to writ jurisdiction.

(v) It appears from the record placed before the Court that the
appellant-corporation has been picking and choosing dealers in the matter
of issuance of Declaration Forms (Form III-Kha). To some they have
F issued the forms and to others they have refused. The plea of the corpora-
tion that such forms were issued to some dealers under a mistake is not
acceptable.

(vi) The plea of the appellant-corporation that issuance of such
G Declaration Forms (Form III-Kha) would expose it to penalties under the
Uttar pradesh Sales Tax Act is also not acceptable. (The Court, however,
declined to express any opinion on the question whether in fact the
corporation would become liable for penalties if it issued the Declaration
Forms (Form III-Kha) as directed by the Court).

H The correctness of the said findings is called in question in these
HINDUSTAN VEG. Oll-5 CORPN. LTD. v. PROGRESSIVE INDS. (B.P. JEEVAN REDDY, J.) 395

appeals by the appellant-corporation. Sri Rohinton F. Nariman, learned A
senior advocate for the appellant-corporation submitted that inasmuch as
issuance of Declaration Forms in Form III-Kha in respect of tins which
were utilised for purposes other than those specified in Section 4-B(2)
would expose the corporation to penalties under the provisions of Uttar
Pradesh Sales Tax Act, no mandamus ought to have been issued by the
B
High Court compelling the appellant-issued by the High Court compelling
the appellant- corporation to issue such Declaration Forms. The proper
course would have been to direct the corporation to pay over to the
respondents-dealers (writ petitioners) the difference of tax which they were
made to pay to the State on account of the appellant-corporation's failure
to furnish the Declaration Forms to them. The corporation should not, c
however, be made liable to reimburse the respondents in respect of the
interest amount, if any, levied by the State upon the selling dealers on
account of or as a result of their failure to produce the Declaration Forms
(Form III-Kha) in their assessments. The learned counsel further con-
tended that so far as the period prior to April 23, 1984 is concerned, the D
appellant-corporation can in no event be held liable for issuing the said
forms. The provisions of the Acquisition Act are clear and emphatic, says
the learned counsel. The corporation is not responsible for any of the acts,
defaults or liabilities for the period prior to the date of acquisition. On the
other hand, Sri M. C. Dhingra, learned counsel for the respondents-writ
petitioners supported the reasoning and conclusions arrived at by the High E
Court. He emphasised in particular the fact that while in case of some
dealers, the appellant-corporation has been issuing such Declaration
Forms (Form III-Kha), it has declined to do so in the case of respondents-
writ petitioners alone. This, the learned counsel complained, is dis-
criminatory and that the appellant-corporation being a State cannot be F
permitted to indulge in such discriminatory treatment.

For a proper appreciation of the questions arising herein, it would
be appropriate to set out sub-sections (1), (2) and (6) of Section 4 of the
Uttar Pradesh Sales Tax Act along with sub-rule (1) of Rule 25-B of the
Uttar Pradesh Sales Tax Rules: G

"4-B. Special relief to wtain Manufacturers. - (1) Notwithstanding
anything contained in Sections 3, 3-A 3-AAAA and 3-D:--

(a) Where any goods, liable to tax under sub-section (1) of H
396 SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.

A Section 3-D are purchased by a dealer who is liable to tax on
the turnover of first purchases under that sub-section or
where any goods are purchased by any dealer in circumstan-
ces in which such dealer is liable to purchase tax in respect
thereof under. Section 3-AAAA and the dealer holds a recog-
nition certificate issued under sub-section (2) in respect
B thereof, he shall be liable in respect of those goods to tax at
such concessional rate, or be wholly or partly exempt from
tax, whether unconditionally or subject to the conditions and
restrictions specified in the behalf, as may be notified in the
Gazette by the State Government in that behalf;
c
(a-1) Where any declared goods liable to tax under sub-
section (1) of Section 3-D are sold or supplied by a dealer,
who is the first purchaser thereof, to another dealer, holding
a valid recognition certificate issued under sub-section (2) in
respect thereof, the dealer who made the first purchase shall
D in respect of such purchase and subject to such conditions
and restrictions as may be specified by notification in that
behalf, be exempt from tax or be liable to tax at such conces-
sional rate as may be notified by the State Government :

(Provisos omitted as unnecessary)
E
(b) Where any goods liable to tax under any other provisions
of this Act are sold by a dealer to another dealer and such
other dealer furnishes to the selling dealer in the prescribed
form and manner a certificate to the effect that he holds a
F recognition certificate issued under sub-section (2) in respect
thereof, the selling dealer shall be liable in respect of those
goods to tax at such concessional rate, or by wholly or partly
exempt from tax, whether unconditionally or subject to the
conditions and restrictions specified in that behalf, as may be
notified in the Gazette by the State Government in that
G
behalf.

(2) Where a dealer requires any goods, referred to in sub-section
(1), for use in the manufacture by him, in the State of any notified
goods, or in the packing of such notified goods manufactured or
H processed by him, and such notified goods are intended to be sold
HINDUSTAN VEG. OILS CORPN. LTD. i·. PROGRESSIVE INDS. [B.P. JEEVAN REDDY. J.) 397

by him in the State or in the course of inter-State trade or A
commerce or in the course of export out of India, he may apply
to the assessing authority in such form and manner and within such
period as may be prescribed, for the grant of a recognition certifi-
cate in respect thereof; and if the applicant satisfies such require-
ments and conditions as may be prescribed, the assessing authority
B
shall grant to him in respect of such goods a recognition certificate
in such form, and subject to such conditions, as may be prescribed.

(6) Where a dealer, in whose favour a recognition certificate has
been granted under sub-section (2), purchases any goods for use
in the manufacture or packing of any notified goods without C
payment of tax or by paying tax at a concessional rate of less than
four per cent, and such notified goods are sold or disposed of by
such dealer' otherwise than by way of sale in the State or in the
course of inter-state trade or commerce or in the course of export
out of India, such dealer shall be liable to pay as penalty such
amount as the assessing authority may fix, which shall not be less D
than the amount of tax that would have been payable under the
provisions of this Act, on the sale or purchase 0£ such goods and
not more than double the amount of such tax, less any amount
which he may have actually paid as tax on the purchase of such
goods. E
25-B. Authority from which Declaration Forms may be obtained :
use, custody and maintenance of records of such forms and matters
incidental thereto-- (1) Where a dealer holding a recognition
certificate purchases any goods referred to in clause (b) of sub-
section (1) of Section 4-B for use as raw material for the purpose F
of manufacture of any notified goods, he shall, if he wishes to avail
of the concessional referred to therein, furnish to the selling dealer
a certificate in Form III-B (hereinafter called a 'Declaration
Form').
G
It would equally be appropriate to set out at this stage the relevant
provisions of the Acquisition Act :

The preamble to the Act recites that for sustaining and strengthening
the nucleus of public owned. or controlled units required for ensuring
supply of wholesome vanaspati and refined edible oils, etc. to the public at H
398 SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.

A reasonable prices and for giving effect to the State policy specified in clause
(b) and (c) of Article 39 of the Constitution, it has been decided to acquire
the undertakings of the Ganesh Flour Mills, the management whereof was
taken over by the Central Government under the J.D.R. Act, 1951.

Section 3 provides that "on the appointed day (January 28, 1984), The
B Ganesh Flour Mills and the right, title and interest of the Company in
relation to the Ganesh "Flour Mills, shall, by virtue of this Act, stand
transferred to, and shall vest in, the central Government". Section 4 sets
out the consequences of such vesting. Section 5 provides that notwithstand-
ing anything contained in Sections 3 and 4, if the Central Government is
c satisfied that a government company is willing to comply with or has
complied with such terms and conditions as the Government may think fit
to impose, the Ganesh Flour Mills and the right, title and interest of the
I
company in relation thereof which is vested in the Central Government can
be vested in turn in such government company under a notificatl.on issued
by the Central Government. Sub-section (2) of Section 5 says that where
D such further vesting takes place "the government company shall, on or from
the date of such vesting, the deemed to have been become the owner of
the Ganesh Flour Mills" and all the rights and liabilities of the Ce~tral
Government in relation to the Ganesh Flour Mills shall become the rights
and. liabilities of such-government company on and from the date of such
E vesting. It is pursuance of Section 5 that Ganesh Flour Mills was vested by
the Central Government in the appellant-corporation under and by virtue
of the notification dated April 23, 1984.

Section 6 of the Acquisition Act is relevant for our purposes and
must be extracted in toto:
F
"6. (1) Every liability, other than the liability specified under
sub-section (2), of the Company in relation to the Ganesh Flour
Mills in respect of any period prior to the appointed day shall be
the liability of the Company and shall be enforceable against it and
not against the Central Government or, where the Ganesh Flour .
G
Mills vest in a Government company, against the Government
company.

(2) Any liability in respect of the amount advanced, after the dated
of taking over, to the Company in relation to the Ganesh Flour
H Mills, together with interest due thereon and the wages, salaries
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.] 399

and other dues of persons employed in the Ganesh Flour Mills in A
respect of any period after the date of taking over shall, on and
from the appointed day, be the liability of the Central Government
and shall be •discharged by the Central Government or, for and on
behalf of that Government, by the Government company as and
when repayment of such amount becomes due and as and when
B
such wages, salaries and other dues become due and payable.

(3) For the removal of doubts, it is hereby declared that --

(a) save as otherwise expressly provided in this section or in any
other section of this Act, no liability, other than the liability C
specified in sub-section (2) of the company in relation to the
Ganesh Flour Mills, in respect of a period prior to the appointed
day shall be enforceable against the Central Government or the
Government company, as the case may be.

(b) no award, decree or order of any court, tribunal or other D
authority in relation to the Ganesh Flour Mills, passed after the
appointed day, in respect of any matter, claim or dispute in relation
to any matter, not being a matter referred to in sub- section (2),
which arose before that day shall be enforceable against the
Central Government or the government company, as the case may E
be;

(c) no liability incurred by the Company before the appointed day,
for the contravention, in relation to the Ganesh Flour Mills, of any
provision of law for the time being in force, shall be enforceable
against the Central Government or the Government company, as F
the case may be."

In view of the fact that Section 22 has been relied upon by the High
Court, it would be appropriate to set out the said section as well :

"22. Every contract, entered into by the Company in relation to the G
Ganesh Flour Mills which has vested in the Central Government
un'der Section 3, for any service, sale or supply and in force
immediately before the appointed day, shall, on or before the
expiry of a period of thirty days from the appointed day, cease to
have effect unless such contract is, before the expiry of that period, H
400 SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.

A ratified, in writing, by the Central Government or the Government
company and in ratifying such contract the Central Government
or the Government company may make such alteration or
modification therein as it may think fit.

Provided that the Central Government or the Government
B company shall not omit to ratify a contract and shall not make any
alternation or modification in a contract --

(a) Unless it is satisfied that such contract is unduly onerous or·
has been entered into in bad faith or is detrimental to the interests
of the Central Government or the Government company; and
c
(b) except after giving the parties to the contract a reasonable
opportunity of being heard and except after recording in writing
its reasons for refusal to ratify the contract or for making any
1

al~eration or modification therein."
D
We /shall first take up the issue relating to the peliod subsequent to
April 23, 1984. We are of the opinion that having placed orders for
purchase of tins undertaking to supply Declaration Forms in Form 111-I{ha
and having received the supplies on that basis, it is not open to the
appellant- corporation to refuse to issue the said declaration forms on the
E plea that they have used the tins for purposes other than those mentioned
in Section 4-B(2). The user for purposes other than those mentioned in
Section 4-B(2) was a voluntary act on the part of the corporation. There-
fore, it alone should take the blame for it and be responsible for conse-
quences flowing therefrom. The corporation ought not to have made such
F a representation while purchasing that quantity of tins which it did not . ,...
intend to use for purposes specified in Section 4-B(2). The High Court I
cannot, therefore, be held to be in error in issuing the direction which it
did. We, however, wish to provide. a modification to the direction issued
by the High Court in view of the provisions of sub-section (6) of Section
4-B of the Uttar Pradesh Act and particularly in view of the time-lapse
G since the controversy has arisen. In all likelihood, the assessments of the
respondents under the Uttar Pradesh Act must have been completed long
ago and the question of filing the Declaration Forms now, by the respon-
dents, appears to be an impracticable thing. The modification is this : if
the appellant is not in a position to issue the Declaration Forms, it may
H not issue them but in such a case it shall reimburse the respondents-selling
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.J 401

dealers in_full for the difference amount of tax which the respondents were A
made to pay on account of the appellant's failure to furnish the said
Declaration Forms and also in respect of interest or the penalties, if any,
imposed in that behalf and paid by them. We cannot appreciate the
argument of Sri Nariman that the appellant- corporation should be made
liable only for reimbursing the difference of tax amount but not the interest.
B
We see no justification behind such a plea. Indeed, if the selling dealers
have been made liable to any penalties on account of their failure to
produce in their assessments the Declaration Forms (which ought to have
been furnished by-the appellant-corporation to such selling dealers) then
the appellant-corporation shall equally be liable to reimburse the selling
dealers in that behalf as well. c
We may now take up the main question urged before us, viz, the
liability, if any, of the appellant-corporation to issue Declaration Forms or
to reimburse the selling dealers (as directed hereinabove) in respect of the
period prior to April 23, 1984. This calls for an examination of the relevant D
provisions of the Acquisition Act, which we have set out hereinabove.
Section 5(2), the relevant portion whereof has already been extracted
hereinabove, says that with effect from the date of vesting of the Ganesh
Flour Mills in the Corporation, the Corporation shall take over the rights
and liabilities of the said government company (Ganesh Flour Mills, which
had become the Government company on its statutory vesting in the E
Central Government on January 28, 1984). Sub-section (1) of Section 6
clearly states that "every liability other than the liabilities specified under
sub-section (2) of the company in relation to the Ganesh Flour Mills in
respect of any period prior to the appointed day shall be the liability of the
company and shall be enforceable against it and not against Central F
Government or where the Ganesh Flour Mills vest in a government com-
pany, against the government company". The sub-section is clear and
emphatic. ["Company" in the above provision means the Ganesh Flour
Mills Company limited prior to its vesting in the Central Government-Sec-
tion 2(c) - and the expression "government company" means the appellant-
corporation - Section 2(i).] It is agreed before us that the obligation in G
question is not one of the matters specified in sub-section (2) of Section 6.
Sub-section (3) makes the matter further clear and beyond any doubt. It
declares, in the interest of removal of doubts, that "(a) save as otherwise
expressly provided in this section or any other section of this Act, no
liability, other than the liability specified in sub-section (2) of the company H
'402 SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.

A in relation to the Ganesh Flour Mills in respect of a period prior to the
appointed day shall be enforceable against the Central Government or the
government company, as the case may be". Clause (b) of sub-section (3)
says that no award, decree or order of any Court, Tribunal or other ...•
authority in relation to Ganesh Flour Mills with respect to any matter,
claim or dispute not being a matter referred to in sub- section (2) and
B
which arose before the date of vesting shall be enforceable either against
the Central Government or against the government company, as the case
may be. Similarly, clause (c) of sub-section (3) states that "no liability
incurred by the company before the appointed day, for the contravention,
in relation to the Ganesh Flour Mills of any provision of law for the time
C being in force shall be enforceable against the Central Government or the
government company, as the case may be". ("Company" is defined in clause
(c) of Section 2, as stated above, to mean the Ganesh Flour Mills Company
Limited, Delhi, a company within the meaning of Companies Act, 1956 and
having its registered office at Subzi Mandi, Delhi.) The provisions in
D Section 6 thus make it clear beyond any doubt that any liability of Ganesh
Flour Mills prior to the date of vesting in the Central Government (January
28, 1984) shall not be enforceable against the Central Government and that
"' similarly no such liability shall be enforceable. against the government
company/appellant-corporation. Sub-section (3) also puts the matter
beyond any doubt.
E
Now, let us see whether Section 22 qualifies Section 6 in any manner
or whether it makes the appellant-corporation liable to issue Declaration
Forms for purchasers made prior to April 23 1984. The first thing be
noticed is that Section 22 and Section 6 being provisions of the same
F enactment have to be construed harmonicusly; the effort should be to give
effect to both. Be that as it may, let us see what does Section 22 say. It says
that a contract entered into the Ganesh Flour Mills Company Limited, with
respect to the said mills, for any service, sale or supply and which was in
force immediately before the appointed day (January 28, 1984) shall on and
from the expiry of a period of thirty days from the appointed day cease to
G have effect unless such contract is, before the expiry of the said period,
ratified in writing by the Central Government or the government company
(appellant-corporation), as the case may be. Even where the Central
Government or the appellant-corporation ratifies such contract, it is open
to them to make such alternations or modifications therein as they may
H think fit. The proviso to Section 22 says that the Central Government or
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, .f.I 403

the appellant corporation shall not omit to ratify a contract and shall not A
make any alternation or modification in the contract while ratifying it,
unless it is satisfied that such contract is unduly onerous or has been
entered into in bad faith or is detrimental to the interests of the Central
Government or the government company.* The proviso· further says that
before refusing to ratify or before effecting any alteration or modification
B
in the contract, the central Government/appellant-corporation shall give
the parties to the contract reasonable opportunity of being heard and shall
record its reasons for refusal to ratify or for effecting alteration/modifica-
tion, as the case may be. The High Court has understood Section 22 to
mean that unless the existence of circumstances mentioned in proviso (a)
are made out in these proceedings, the appellant-corporation would be c
bound by any contract made by Ganesh Flour Mills for supply of any goods ·
prior to its vesting in the Central Government. With respect, we are unable
to agree. A reading of sections 22 shows that unless ratified in writing
within thirty days of the appointed day, no contract entered into by Ganesh
Flour Mills prior to January 28, 1994 (appointed day) shall be binding upon D
the Central Government/government company. The proviso, no doubt,
states that the Central Government/appellant-corporation shall not omit to
ratify a contract and shall not effect any alteration or modification therein
unless it is satisfied that such contract is unduly onerous or has been
entered into in bad faith or is detrimental to their interest which satisfac-
tion has to be arrived at after hearing the parties to the contract; the E
reasons for such action are also required to be recorded in writing. But
this only means that if a particular contract is refused to be ratified or is
altered or modified in any particular manner, the affected party (i.e., party
to such contract) shall be entitled to question the same in accordance with
law. But the writ petitions-from which these appeals arise were not such F
proceedings. These were not the writ petitions questioning the omission of
the central Government/appellant-corporation to ratify a particular con-
tract or contracts. The writ petitions - all of them - were filed for a different
purpose, viz., for a direction to the appellant-corporation to issue Decla-
ration Forms III-kha) pursuant to the supply orders issued by the Ganesh

.. Flour Mills (prior to its vesting under Section 3 of the Acquisition Act).** G

• "Government company" is defined in clause (i) of Section 2 to mean "the government
• company in which the Ganesh Flour Mills are directed to vest under sub-section (1)

.. of Section 5" - in short, the appellant-corporation.
The period subsequent to vesting in appellant corporation was not in dispute explained
above. H
404 SUPREME c.OURTREPORTS [1995] SUPP. 3 S.C.R.

A Whereas the vesting in Central Government-as also in the appellant-cor-
poration - was in the year 1984, the present writ petitions were filed in 1987
(one writ petition) and in 1990 (the rest). If the petitioners wanted to
question the non-ratification of any particular contract within thirty days
of the date of vesting, they should have come to Court soon after the expiry
of the said thirty days from the date of vesting. If they had done so, question
B would then have arisen whether Section 22 is attracted to such a contract,
whether the contract which they were seeking to enforce was "a contract... ..
for ariy service, sale or supply and in force immediately before the appointed
day". and so on. Such a writ petition would also have given an opportunity
to ihe central Government and the appellant corporation to explain and
C 'put forward their reasons for not ratifying the contract. We are of the
opinion that having regard to the pleadings in the present writ petitions
and the prayers asked for therein, the enquiry contemplated by Section 22
could not have been done or entertained in these writ petitions. The
position, therefore, is that on account of non ratification, the contract -
D assuming that it was contract in force before the appointed day - ceased
to have effect on expiry of thirty days from the appointed day, i.e., even
before the appellant-corporation came into the picture. The remedy of the
respondents-writ petitioners in relations to the period prior to April 23,
1984 is not against appellant-corporation. Any claim of theirs in respect of
the period to the date of vesting (January 28, 1984) can only be against the
E Central Government which was in management of the said company by
virtue of the notification issued under the I.D.R. Act. In this context, there
may be a distinction between Central Government which has become the
owner o~ the Ganesh Flour Mills by virtue of the vesting provided by
Section 3 of the. Acquisition act and the Central Governmel).t which was in
F management of the said company by virtue of the notification under section
l8AA of the I.D.R. Act. Be that as it may, we need not pursue this line
of thought inasmuch as these appeals are filed only by the appellant-cor-
poration and not by the Central Government. Accordingly, we confine
ourselves to the liability of the appellant-corporation alone.

G The appeals are accordingly allowed in part. It is declared that in
respect of the contracts entered into and supplies received by the appel-
lant-corporation on or after April 23, 1984, the appellant-corporation shall
either furnish Form III-kha or if it cannot do so, it shall reimburse the
respondents-writ petitioners in full for the difference amount of tax which
H the respondents were made to pay to the State on account of the
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.J 405

appellant's failure to furnish Declaration Forms to the respondents, as also A
for the interest and penalties, if any, imposed upon the respondents in that
behalf. But so, far as the orders placed or supplies made prior to April 23,
1984 is concerned, the appellant-corporation is not liable either to furnish
the Declaration Forms to the respondents-writ petitioners or to reimburse
them in any manner.
B
No costs.

V.M.· Appeal allowed.