- (1.) M/s. New India Sugar Mills Ltd. herein after called 'the assessees -own a factory at Hasanpur in the State of Bihar. During the assessment period April 1, 1947 to March 31, 1948 the assessees who were registered as dealers under the relevant Sales Tax Acts despatched sugar valued at Rs. 6,89,482/- to the authorised agents of the State of Madras in compliance with the directions issued by the Controller exercising powers under the Sugar and Sugar Products Control Order, 1946. The Sales Tax Officer, Darbhanga rejected the plea of the assessees that despatches of sugar to the Province of Madras in compliance with the instructions of the Controller were not liable to be included in the taxable turnover, and ordered the assessees to pay sales tax on a taxable turnover of Rs. 27-,62,226/-. The order of assessment was confirmed by the Deputy Commissioner, but the Board of Revenue exercising jurisdiction in revision set aside the order, in so tar as it related to the inclusion into the taxable turnover the value of sugar despatched to the Province of Madras. The Board of Revenue observed that the "Controller passed orders in exercise of statutory powers which, as a result of mere compliance, could not create a contract in law," and there was no evidence justifying the view that there could "possibly be any contract between the assessees" and some dealers in Madras and the Sugar Controller. The Board of Revenue under the direction of the High Court of Judicature at Patna submitted under S. 25 (3) of the Bihar Sales Tax Act, 1947, the following question for the opinion of the High Court : "Whether in the facts and circumstances of the case, the disposal of sugar to the Province of Madras is liable to be taxed." The High Court answered the question in the affirmative observing that the sugar despatched by the assessees to different Provinces including the Province of Madras under orders of the Controller was liable to be taxed under the provisions of the Bihar Sales Tax Act, 1947. With special leave the assessees have appealed to this Court against the judgment of the High Court.
(2.) The only question arising in the appeal is whether there was a sale by the assessees of sugar despatched by them to the Provincial Government of Madras in compliance with the directions issued by the Controller in exercise of authority under the Sugar and Sugar Products Control Order, promulgated on February 18, 1946 by the Central Government under powers conferred by sub-rule (2) of Rule 81 of the Defence of India Rules. The material Causes of the Order concerning sugar are these: By cl. (3) of the Order producers of sugar were prohibited from disposing of or agreeing to dispose of or making delivery of any sugar except to or through a recognised dealer or persons specially authorised in that behalf by the Controller to acquire sugar on behalf of the Central Government or of a Provincial Government or of an Indian State. Clause 5 enjoined upon every producer or dealer duty to comply with such directions regarding production sales, stocks or distribution of sugar as may from time to time be issued by the Controller. By cl. 6 the Controller was authorised to fix the price at which sugar may be sold or delivered, and upon fixation of the price all persons were prohibited from selling or purchasing or agreeing to sell or purchase sugar at a price higher than the fixed price. By sub-clause (1) of c1.(7) the Controller was authorised, inter alia, to allot quotas of sugar for any specified province; or area or market and to issue directions to any producer or dealer to supply sugar to such provinces, areas or markets or such persons or organisation, in such quantities, of such types or grades, at such times, at such prices and in such manner as may be specified by the Controller, and sub-clause (2) provided that every producer shall, notwithstanding any existing agreement with any other person, give priority to, and comply with directions issued to him under sub-clause (I). Clause 11 provided that against a person contravening the provisions of the Order without prejudice to any other punishment to which he may be liable, an order of forfeiture of any stocks of sugar in respect of which the Court trying the offence was satisfied that the offence was committed, may be passed. By sub-rule (4) of Rule 81 of the Defence of India Rules, 1939 contravention of orders made under the Rule was liable to be punished with imprisonment for a term which may extend to three years or with fine or with both.
(3.) The course of dealings between the assessees and the State of Madras to which sugar was under the directions of the Controller, supplied by the assessees is stated by the High Court as follows : "The admitted course of dealing between the parties was that the Government of various consuming States used to intimate to the Sugar Controller of India from time to time their requirement of sugar, and similarly the factory owners used to send to the Sugar Controller of India statements of stock of sugar held by them. On a consideration of the requisitions received from the various State Governments and the statements of stock received from the various factories, the Sugar Controller used to make allotments. The allotment order was addressed by the Sugar Controller to the factory owner, directing him to supply sugar to the State Government in question in accordance with the despatch instructions received from the competent officer of the State Government. A copy of the allotment order was simultaneously sent to the State Government concerned, on receipt of which the competent authority of the State Government sent to the factory concerned detailed instructions about the destinations to which the sugar was to be despatched as also the quantities of sugar to be despatched to each place. In the case of the Madras Government it is admitted that it also laid down the procedure of payment, and the direction was that the draft should be sent to the State Bank and it should be drawn on Parry and Company or any other party which had been appointed as stockist importer on behalf of the Madras Government." The assessees contend that sugar despatched pursuant to the directions of the Controller was not sold by them to the Govt. of Madras, and sales-tax was therefore not exiigible in respect of those despatches under the relevant Safes-tax Acts of the Province of Bihar The assessment period in respect of which the dispute is raised in one year -- April 1, 1947 to March 31, 1948- for the first three months the relevant law imposing liability to pay tax was Bihar Act 6 of 1944 and from July 1, 1947 to March 31, 1948 liability to pay tax had to be determined under Bihar Act 19 of 1947. It is common ground that the scheme of the two Acts for levy of tax was similar and the definition of "sale" on which primarily the dispute centred under the two Acts was identical. We will therefore refer in dealing with this appeal as if the liability arose under Act XIX of 1947. The expression "sale" as defined under S. 2 (g) of the Bihar Sales Tax Act, at the material time stood as follows : "Sale means with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deterred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge : Provided that a transfer of goods on hire purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale : Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930) the sale of any goods which are actually in Bihar at the time when, in respect thereof; the contract of sale as defined in S. 4 of that Act is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have been made in Bihar." Apparently in the first paragraph of the definition a transaction (other than a transaction expressly specified) in which there is a transfer of property in goods for valuable consideration, was included as a sale within the meaning of the Act. By the first proviso transfer of goods on hire purchase or other instalment system of payment are to be deemed sales. The second proviso (which has since been repealed) dealt with the sites of the sale and was not in truth a part of the definition of sale. What constituted a sale, the second proviso did not purport to say: it merely fixed for the purpose of the Bihar Sales Tax Act the place of sale, in the circumstances mentioned therein.;