HEGDE, - (1.) THE following Judgment of the court was delivered by
(2.) THESE appeals by special leave arise from the common order made by the Madras High court in T. C. Nos. 117 to 119 (revisions Nos. 71 to 73) on its file. The Indian Steel and Wire Products Ltd. a joint stock public limited company is the appellant in all these appeals. At the instance of the steel controller the appellant supplied certain steel products to various persons in the Madras State during the financial years 1953-54, 1954-55) and part of 1955-56 (from 1/04/195 5/09/1955). The State of Madras assessed the turnovers of the appellant relating to those transactions to sales tax under the Madras Gen. Sales Tax Act, 1939 (Madras Act 9 of 1939) (to be hereinafter referred to as the Act), the law in force at that time. The appellant has been assessed to tax on the basis of best judgment. The authorities under the Act have determined appellant's turnover during the year 1953-54 at Rs. 3,12,952.00 and levied a tax of Rs. 16,298.40 annas. During the financial year 1954-55, its turnover was determined at Rs. 37,59,216.00 . and the assessment levied is Rs. 58,737-12-0. For the broken period in the financial year 1955-56, the appellant's turnover was determined at Rs. 14,53,292.00 and the same was assessed to tax at Rs. 22,707-12-0. Even according to the appellant, its turnovers during 1953-54 was Rs. 29,12,533-14-0, in 1954-55, Rs. 39,71,493.70 and in 1955-56, Rs. 17,25,400.50 . Therefore, there is little room for controversy about its turnover in the relevant years. The appellant is contesting the right of the State of Madras to levy tax on the turnovers in question. According to the appellant, the turnovers in question could not have been considered as sales and consequently they could not have been brought to tax under the Act. The appellant asserts that deliveries in question were made under compulsion of law and there was no agreement between the parties. They were made in pursuance of the orders of the Controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order, 1941 (which will hereinafter be referred to as the order), which was issued under the Defence of India Act 1939. It was argued on behalf of the appellant that it was the controller who determined 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. In short, it was said that every facet of those transactions were prescribed by the controller and therefore those transactions cannot be considered as sales. On the basis of those assertions support was sought from the decision of the House of Lords in Kirkness v. John Hudson and Co., Ltd.(1) the decision of this court in M Is. New India Sugar Mills Ltd. v. Commissioner of Sales Tax. Bihar(1), the decision of the Calcutta High court in Calcutta Electric Supply Corporation Ltd. v. Commissioner of Income Tax, West Bengal(1) the decision of the orissa High court in Messrs. Cement Ltd. v. The State of orissa(1), and a few other decisions. It was further argued that even if those transactions are considered as sales the State before exercising its taxing power should have had in its possession material to show that the goods delivered by the appellant were delivered in that State for consumption which circumstance alone can make those transactions sales within that State; as no material was placed on record to show that the goods in question were delivered in that State for consumption it could not have brought the turnovers in respect of those transactions to tax under the Act. These contentions of the appellant have been rejected by the authorities under the Act as well as by the High court. Other contentions advanced on behalf of the appellant deserve to be summarily rejected for the reasons to be mentioned hereinafter. The principal question that falls for decision in these appeals. is whether the transactions with which we are concerned herein are sales. Sec. 2(h) of the Act defines 'sale' thus: ' 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, and includes also transfer of property in goods involved in the execution of works contract and in the, supply or distribution of goods by a co-operative society.. club, firm or any association to its members for cash or for deferred payment or other valuable consideration but does not include a mortgage. hypothecation, charge or pledge' (the explanations to that definition are not relevant for our present purpose). This wide definition undoubtedly covers those transactions. But then the power of a State to tax sales is derived from Entry 54 of List II of the VII Schedule in the Constitution. That entry as it stood at the relevant time empowered the State to tax on the sale or purchase of goods. The scope of the expression 'sale or purchase of goods' found in entry 48 in List II of Schedule VII of the government of India Act 1935 which is in pari materia with the aforementioned entry 54 came up for interpretation before this court in State of Madras v. Gannon Dunkerley(1). In that case, the question that fell for decision was whether the words 'sale of goods' should be given their popular meaning or whether they should have the meaning attached to them under the Sale of Goods Act. This court held that the expression 'sale of goods' was, at the time when the government of India Act, 1935 was enacted, a term of well recognised legal import in the general law relating to sale of goods and in the legislative practice relating to that topic and must be interpreted as having the same meaning as in the sale of Goods Act 1930: In the course of the judgment, Venkatarama Aiyar, J,who ,spoke for the court after examining the various decisions cited at the Bar, observed, as follows: 'Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course pre-supposes capacity to contract, that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. Thus, if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale. So also if the consideration for the transfer was not money but other valuable consideration, it may then be exchange or barter but not sale. And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale.' As laid down by this decision, to constitute a valid sale, there must be concurrence of the following elements viz. (1) parties competent to contract (2) mutual assent (3) a thing the absolute or general property in which is transferred from the seller to the buyer and (4) a price in money paid or promised. Therefore we have to see whether all these elements are found in the transactions before us. Before doing so it is necessary to refer to the 'order' and the manner in which those transactions were effected.
(3.) DURING the World War IT iron and steel goods became scarce. Therefore it became necessary for the government to control the production and distribution of those goods. In order to do so, the government issued the 'order' on 26/07/1941, and the same came into force on 1/08/1941. The provisions in that order which are material for our present purpose are set out hereinbelow: '2. Definitions In this Order, unless there is anything repugnant in the subject context: - (a) 'Controller' means the person appointed as Iron -and Steel Controller by the central government, and -includes any person exercising, upon authorisation by the central government, all or any of the powers of the Iron and Steel Controller; (b) 'Producer' means a person carrying on the business of manufacturing iron or steel. (c) 'Registered Producer' means a producer who is registered as such by the Controller. (d) 'Stockholder' means a person holding stocks of Iron or Steel for sale who is registered as stockholder by the Controller. (e) 'Controlled Stockholder' means a stockholder appointed by the Controller to hold stocks of iron or steel under such terms and conditions as he may prescribe from time to time. (f)'Pressure Pipes' include all Pipes and Tubes 1/8' nominal bore and above which will withstand or may be used for a working pressure of 25 lbs. per square inch and above. 3. Application of Order-(I) The provisions of this Order shall apply to all iron or steel of the categories specified in the Second Schedule to this Order. (2) A certificate signed by the Comptroller or by any officer authorised by him in this behalf, in respect of any category of iron or steel, shall be conclusive proof that it is an article to which this Order is applicable. 4. Acquisition-No person shall acquire or agree to acquire any iron or steel from a Producer or a Stockholder except under the authority of and in accordance with the conditions contained or incorporate d in a general or special written order of the controller. 5. Disposal-No Producer or Stockholder shall dispose of or agree to dispose of or export or agree to export from British India any iron or steel, except in accordance with the conditions contained or incorporated in a general or special written order of the Controller. 10B. Power to direct sale-The Controller may' by a written Order require any person holding stock or iron and steel, acquired by him otherwise than in accordance with the provisions of Clause 4 to sell the whole or any part of the stock to such person or class of persons and on such terms and conditions as may. be specified in the Order. 10C. Power to prohibit removal-The Controller may order any producer (including a registered producer), any stockholder (including a controlled stockholder) or any other person not to remove or permit the removal of any iron or steel, whether sold or unsold, from his stockyard or from any other part of his premises to any place outside the precincts of such stockyard or premises, except with the written permission of the Controller. 11 AA (3). No producer, stockholder, or other person holding stocks of iron and steel shall without sufficient cause, refused to sell any iron or steel which he is authorised to sell under this Order. Explanation-The possibility or expectation of obtaining a higher price at a later date shall not be deemed to be a sufficient cause for the purpose of this clause. 11B. Power to fix prices-(1) The Controller may from time to time by notification in the Gazette of India fix the maximum prices at which any iron or steel may be sold (a) by a Producer, (b) by Stockholder including a Controlled Stockholder and (c) by any other person or class of persons. Such price or prices may differ for iron and steel obtainable from different sources and may include allowances for contribution to and payment from equalising freight, the concession rates payable to each pro ducer or class of producer under agreements entered into by the Controller with the producers from time to time. and any other disadvantages. (2) For the purpose of applying the prices notified under sub-clause (1) the Controller may himself classify any iron and steel and may, if no appropriate price has been so notified, fix such price as he considers appropriate. (3)No producer or stockholder or other person shall sell, or offer to sell. (and no person shall acquire) any iron or steel at a price exceeding the maximum prices fixed under sub-clause (1) or (2). 13. Any court trying a contravention of this Order may, without prejudice to any other sentence which it may pass, direct that any Iron and Steel in respect of which the court is satisfied that this order has been contravened shall be forfeited to His Majesty.' The appellant has set out in para 4 of the statement of the case the procedure adopted for acquiring iron and/ or steel products under the order. This is what is stated therein: 'That Order was at all material times administered principally by the Iron and Steel Controller having his office in the city of Calcutta in the State of West Bengal who controlled the entire production and distribution of the iron and/or steel products. Any party desiring to acquire any product has to apply to the Controller. Upon processing such application or requisition entirely at his option and discretion, the Controller would pass such a requisition an to the Appellant for manufacture and/or despatch. The appellant has, upon receipt of the said requisition from the Controller to prepare a Works Order for the manufacture of the products concerned and to advise the Controller; and later on completion of the manufacture the appellant has to make the product conform to the requisition processed by the Controller and then deliver the requisite quantity in the requisite shape to the Indian State Railways siding maintained at the appellant's own factory site, in Indranagar. in the suburbs of Jamshedpur, in the State of Bihar, and to advise the requisitionist as well as the Controller accordingly..';