UNION TERRITORY OF CHANDIGARHversusM/S. AMRIT ROLLER FLOUR MILLS

    14


A                     UNION TERRITORY OF CHANDIGARH
                                    v.
                      M/S. AMR.IT ROLLER FLOUR MILLS

                               JULY 8, 1985

B                (R.S. PATHAK & E.S. VENKATARAMIAH, JJ.j
                                                                        ·-
          Punjab General Sales Tax Act 1948, Section 2(h)

          Roller Flour Mi1ls - Licence holder under Wheat Roller
    Flour Mills (Licensing and Control) Order 1957 - Sale of maida,
    Suji and rawa to permit holders - Transactions whether constitute
c   sale - Whether liable to be. taxed.

          The respondent-Firm was a Roller Flour Mills and held a
    licence under the Wheat Roller Flour Mills (Licensing and
    Control) Order, 1957. Clause 3 of the said Order provides that ao
    owner or person in charge of a roller Mill shall manufacture or
    cause to be manufactured any wheat product eY.cept under and in
D   accordance with the terms and conditions of a licence issued
    under the Order. The licence was an annual licence renewable from
    year to year and liable to suspension or cancellation in the
    event of contravention of the Control Order or any of the condi-
    tions of the licence. The licensee was required to abide by any
    directions issued by the licensing authority in regard to
E   purchase of wheat, the extraction of maida, suji and rawa and
    also in regard to the distribution or disposal of the wheat pro-
    ducts.

          Wheat is supplied to the respondent under the orders of the
    Government of India. The respondent grinds the wheat and supplies
F   maida and suji emerging from that process to the holders of
    permits issued by the District Food and Supplies Officer.

          The respondent was assessed for the years 1964-65 to
    1967-68 to sales tax under the Punjab General Sales Tax Act, 1948
    on the turnover of the supplies. effected by it. During the
G
    assessment proceedings it was contended that the transactions en-
    tered into by it did not constitute "sales" within the meaning of
    the Act and as such sales tax should not be levied. The assessing
    authority relying on the decision in the Ezciee and Taxation
    Officer (Assessing Authority) Hissar and Another v. Jaswant Siugb
    (1971] 27 s.r.c. 582 rejected the pntention and assessed the
H
    firm. The assessment orders were maintained in appeal and in
    second appeal also.
..        U.T. CHANDIGARH v. AMRIT ROLLER FLOUR MILLS [PATHAK, J]   15


            At the instance of the assessee, the High Court called for    A
      a reference and held that as the respondent was obliged to follow
      the instructions of the concerned authority in regard to the pur-
      chase of wheat, or the extraction of maids, suji and raws as well
      as in regard to the distribution and disposal of such products,
      it followed the decision in Food Corporation of India & Another
      v. State of Punjab & Others [1971] 27 s.T.c. 582 and took the       B
,_;
      view that there was no •sale • •

            In the appeal to this Court on the question whether the
      transaction afffected by the respondent fall within the definiti-
      on of "sale" under Clause (h) of Sec. 2 of the Punjab General
      Sales Tax Act, 1948.                                                C

            Allowing the appeals

           Jll!U):   In VishW Agencies (Pvt.) Ltd. etc. v. CoHercial
      Tax Officer & Others etc. [1978] 2 s.c.R; 433, this Court held
      that notwithstanding the conditions imposed by the statutory        D
      framework of the Control Order within which the dealer operated
      the transaction effected by him must clearly be regardi.d as
      sales. The instant case is covered by that decision. The trans-
      actions effected by the respondent are 'sales' ·liable to tax.
      The Judgment of the High Court is set aside. The question referr-
      ed to the High Court is answered in the affirmative in favour of
      the appellant and against the respondent. [19 D-F]                  E

            CIVIL APPELLATE JURISDICTION     Civil Appeal Nos. 404-407
      of 1978.

             From the Judgment and Order dated 13.10.1976 of the Punjab
      and llaryana High Court in General Sales Tax Reference No. 15,17,   F
      18 and 19 of 1974.

            P.A. Francis, S,p. Nayar and Miss A. Subhashini for .the
      Appellant

            S.T. Desai and R.S. Sodhi for the Respondent.                 G

            The Judgment of the Court was delivered by

            PATHAK, J, These appeals by special leave are directed
      against the judgment of the High Court of Punjab and Haryana
      disposing of four references under the Punjab General Sales Tax     H
      Act, 1948.
        16              SUPREME COURT REPORTS      [1985] SUPP. 2 s.c.R.    ~

              The respondent firm, Messrs. Amrit Roller Flour Mills,
A       carries on business at Chandigarh. It is registered as a dealer
        under the Punjab General Sales Tax Act, 1948 (hereinafter called
        the "Act"). It holds a licence under the Wheat Roller Flour
        Mills (Licensing and Control) Order, 1957 (hereinafter referred
        to as the "Control Order"). Wheat is supplied to the respondent
        under the orders of the Government of India. The respondent
B
        grinds the wheat and supplies the atta, maida and suji emerging     ··-
        from that process to the holders of permits issued by the
        District Food and Supplies Officer under the Control Order.

              The respondent was assessed for the years 1964-65 to
        1967-68 to sales tax under the Act on the turnover of the
        supplies effected by it. During the assessment proceedings it
c       contended that the transactions entered into by it did not
        constitute sales within the meaning of the Act and consequently
        no sales tax could be levied. The contention was rejected. The
        assessing authority relied on 'lbe Excise and Taxation Officer
        (Assessing Authority), Hissar and Another v. Jaswant Singh.
        [1971] 27 s.T.c. 582. The assessment orders were maintained in
        appeal and therea.ter in second appeal also. At the instance of
D       the asses see, th<' High Court called for a reference on the
        following questioJ of law in each of the four cases:

                   "Whether on the facts and in the circumstances of the
                   case, the sale of wheat products against permits
                   issued by the District Food and Supplies Controller,
E                  Chandigarh, is liable to be taxed under the Punjab
                   General Sales Tax Act, 1948?"

        The High Court referred tc the provisions of s.3 of th~ Essential
        Commodities Act, 1955, under which the Control Order had been
        issued, and to clause V of the Licence under which the respondent
        carried on his business, and holding that the respondent was
        obliged to follow the instructions of the concerned authority in
        regard to the purchase of wheat, or the extraction of maida, suji
        and rawa as well as in regard to the distribution and disposal of
        such products, the High Court took the view that there was no
        sale. In adopting that view the High Court preferred to follow
        its decision in The Food Corporation of IDdia and Another v.
        State of Punjab and Others [1976] 38 S.T.C. 144.

              In these appeals by the Union Territory of Chandigarh, the
        sole question is whether the transactions effected by the respon-
        dent fall within definition of "sale" under the Act. Clause(h)
    H
     U.T. CHANDIGARH v. AMRIT ROLLER FLOUR MILLS (PATHAK, J]   17


of s.2 of the Act defines a "sale" to mean "any transfer of pro-     A
perty in goods •••••• for cash or deferred payment or other valu-
able consideration, but does not include a mortgage, hypothe-
cation, charge or pledge." The broad basis on which the High
Court has proceeded is that a sale necessarily implies the
freedom to contract, and that all the four elements, that is to
say, that the parties should be competent to contract, that there     B
should be mutual assent, that property or goods should pass from
the seller to the buyer and that the price in money should be
paid or promised must all exist together, and that inasmuch as
they do not so exist in the transactions in question, it must be
held that there is no sale.
                                                                      c
       The Essential Commodities Act, 1955, under which the
Control Order was issued, is an Act to provide, in the interest
of the general public, for the control of the production, supply
and distribution of and trade and commerce in, certain commodi -
ties. Sub-s.(l) of s.3 empowers the State Government to make
prders providing for regulating or prohibiting the production,        D
supply and distribution of an essential commodity, and trade and
coomerce in such commodity, if it is .of opinion that it is
necessairy or expedient so to do for maintaining or increasing
supplies of such essential commodity, of securing its equitable
distribution and availability at fair prices or for securing such
essential commodity for the Defence of India or the efficient
conduct of military operations. Sub-s.(2) of s.3 details that an     E
order under sub-a. (1) may provide for controlling the price at
which any essential commodity may be bought or sold, and for
regulating by licences, permits or otherwise the storage, trans-
port., distribution, disposal, acquisition, use or consumption of
any essential commodity and for requiring any person holding in
stock, or engaged in the production, or in the business of buying    F
or selling, of any essential commodity, to sell the whole or a
specified part of the quantity held in stock or produced or
received by him, or likely to be produced or received by him, to
the Central Government or a State Govenunent or such other person
as may be specified in the Order. In the exercise of that power
the Central Government made the Control Order with which we are      G
concerned. Clause 3 of the Order provides that no owner or
person in charge of a roller mill shall manufacture, or cause to
be manufactured, any, wheat product except under and in accordance
with the terms and conditions of a licence issued under that
Order. The licence was to be in Form II. It was an annual
licence renewable from year to year, and liable to suspension or     .H
cancellation in the event of a contravention of the Control Order
    18            SUPREME COURT REPORTS           [1985] SUPP.2 s.c.R.

A
    or any of the conditions of the licence.    Paragaraph V of      the
    licence required the licensee to abide by any directions issued
    by the Hcensing authority in regard to the purchase of wheat,
    the extraction of maida, suji and rawa and also in regard to the
    distribution or disposal of the wheat products.

          Now the High Court considered the matter and found itself
    obliged to follow its decision in 1be Food Corporation of India
    (supra).   That was    a case under the Punjab Rice Procurement
    (Levy) Order, 1958 where rice was procured by the State Govern-
    ment and its officers from licensed dealers and licensed millers
    and then supplied to the Food Corporation of India, which in turn
    made: supplies to various State Governments. The Food Corporation
c   of India was assessed to sales tax under the Punjab General Sales
    Tax Act. The High Court held that the chain of transactions
    between the miller and the dealer on the one hand and the State
    Government on the other and thereafter between the State Govern-
    ment and the Corporation and then between the Corporation and the
    other States was a single composite process originating in art
D
    arrangement between the Central Government and the State Govern-
    ments. under which the State Governments were required to contri-
    bute to a central pool a certain percentage of f oodgrains inten-
    ded for supply to deficit States through the agency of the Cor-
    poration, that there was no profit motive at any   stage   and   the
    Corporation did not act as a dealer in the legal sense when it
    passed on the goods to other. States. Accordingly, the Food Cor-
E
    poration of India, the High Court concluded, could not be said to
                                                                           '•'
    sell the rice and was therefore not liable to pay sales tax,
    there being no freedom of contract within the meaning of the law
    laid down in Salar Jung Sugar Mills Ltd. v. State of Mysore
    [l972J 29 S.T.C. 246 and the element of mutual assent, implicit
    or explicit, being non-existent. The High Court observed that
F
    the facts of the case brought it within the law explained by this
    Court in Chit tar Mall Narain Das v. Commissioner of Sales Tax,
     [1970] 26 S.T.C. 344.
         I
         We think that the case before us is distinguishable from
    The Food Corporation of India (supra). It is a case which falls
G
    more appropriately within the rule laid down by this Court in
    Vishnu Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer & Ors.
    etc. [1978) 2 s.c.R. 433 where the majority judgment discussed
    the entire   case     law on the subject,   including   the earlier
    decisions in Salar Jung su8ar Mills Ltd.(supra) as well as
H
    Chittar Mall Narain Das (supra). The appellants in Vishnu
    Agencies (Pvt.) Ltd. (supra) had carried on business as agents
     u.r. CHANDIGARH v •.AMKIT ROLLER FLOUR MILLS [PATHAK, J]   19


 and distributors of 'cement in the State of West Bengal.     The     A
 distribution of cement was regulated by the West Bengal Cement
 Control Act, 1948 and by the Control Order made thereunder.
 Sub-s.(1) of s.3 of the Cement Control Act is framed in language
 analogous to sub-s.(l)· of s.3 of the Essential Commodities Act,
 1955. And under the Cement Control Order, 1948 issued under
- that Act, no sale or purchase of cement can be made, except in      li
 accordance with conditions contained in a written order issued by
 a specified statutory authority and at a price not exceeding the
 notified price. The appellant, who was a licensed stockist of
 cement was permitted to stock cement in its godown and to supply
 it to persons in whose favour allotment orders were issued and at
 the price stipulated and in accordance with the ~onditions in the    c
 permits issued by the authorities. Pursuant to the allotment
 orders the appellant supplied· cement to various allottees from
 ti.me to time in accordance with the terms of the licence obtained
 by it. The appellant was assessed to Sales tax, and in appeal it
 contended that there was· no sale because having regard to the
 stringent provisions of the Cement Control Order no violation or
 bargaining power was left to it and there was no element of
 mutual consent or agreement between l t and the allot tees. This     D
 Court ceme to the firm conclusion that notwithstanding the
 cond.iti.ons imposed by the statutory framework within -which the.
 dealer operated the transactions effected by it must clearly be
 regarded as sales. After the decision by this Court in Vishnu
 Agencies (Pvt.) Ltd. (supra) we do not feel called upon to enter
 into the question arising in the present case in any detail. We
 are satisfied that upon the facts of the present case the            E
 question is concluded by the view taken by this Court in Vishnu
 Agencies (Pvt.) Ltd. (supra) and that the transactions effected·
 by the appellant must be regarded as sales.

       Accordingly, we allow the appeals, set aside the judgment
 of the High Court of Punjab and Haryana and answer the question
 referred to the High Court in the affirmative, in favour of the      F
 Union Territory of Chandigarh and against the respondent. In the
 circumstances, there is no order as ·ta costs.




                                                  Appeals allowed.