- (1.) These appeals by certificates are from the judgment and order of the High Court of Karnataka dated 16th of August, 1985. By the impugned judgment and order the writ petitions filed by the Coffee Board and others were dismissed. In order to appreciate the questions involved in the decision, it may be noted that the appellant herein - Coffee Board contended that the compulsory delivery of coffee under the Coffee Act, 1942 extinguishing all marketing rights of the growers was 'compulsory acquisition' and not sale or purchase to attract levy of purchase tax; it was further contended that the appellant was only a 'trustee' or 'agent' of growers not exigible to purchase tax and that all export sales were 'in the course of export' immune to tax under Article 286 of the Constitution.
(2.) It was held by the Division Bench of the Karnataka High Court that an element of consensuality subsists even in compulsory sales governed by law and once there is an element of consensuality, however minimal that may be, whether express or implied, then that would be sale or purchase for purposes of Sale of Goods Act and the same would be exigible to sales or purchase tax as the case may be under the relevant Sales Tax Law of the country.
(3.) The power conferred on the Board under section 25(2) of the Coffee Act, to which we will make reference later, to reject coffee offered for delivery or even the right of a buyer analogous to section 37 of the Sale of Goods Act showed that there was an element of consensuality in the compulsory sales regulated by the Act. The amount paid by the Board to the grower under the Act was the value or price of coffee in conformity with the detailed accounting done thereto under the Act. It was further held by the High Court that the amount paid to the grower was neither compensation nor dividend. The payment of price to the grower was an important element to determine the consensuality test to find out whether there was sale under section 4(1) of the Sale of Goods Act. The Act also ensures periodical payments of price to the growers. The Rules provide for advancing loans to growers. Therefore, according to the Division Bench of the Karnataka High Court without any shadow of doubt these elements indicated that in the compulsory sale of coffee, there was an element of consensuality. When once the Board was held to be a 'dealer' it also followed from the same that there was sale by the grower, purchase by the Board and then a sale by the Board. The purchases and the exports if any made by the Board thereafter on any principle would not be 'local sales' within the State of Karnataka. Explanation 3(2)(ii) to section 2(1) of the Karnataka Sales Tax Act had hardly any relevance to hold that the later export sales were 'local sales' to avoid liability under section 6 of the Karnataka Sales Tax Act. The direct export sales made by the appellant for the period in challenge were not 'in the course of export' and they did not qualify for exemption from purchase tax under section 6 of the Karnataka Sales Tax Act. The levy of sales tax on coffee. it was held by the High Court fell, under Entry No. 43 of the second schedule of the Act and it was governed by section 5(3)(a) of the Act and not by section 5(1) of the Act. It was further held that under section 5 of the Central Sales Tax Act, 1956 purchases and exports made by the Coffee Board are 'for export' and not in the course of export and thus did not qualify for exemption under Article 286 of the Constitution of India. It was observed by the High Court that the Board did not purchase or take delivery of any specific coffee or goods of any grower and exported the same under prior contracts of sale. The Board did not purchase any specific coffee of any specific grower for purposes of direct exports at all. The purchases made and exports made would be 'for export' only and not 'in the course of export' to earn exemption under Article 286 of the Constitution of India. It was further held that sections 11 and 12 of the Act which regulate the levy and payment of Customs and Excise Duties when closely examined really established according to the High Court that what was grown by the growers and delivered to the Board was not at all compulsory acquisition but was sale. If it was compulsory acquisition and there was payment of compensation, then these provisions would not have found their place in the Coffee Act at all, according to the High Court. Levy of Customs and Excise Duties on compensation was something unheard of, an incongruity and an anachronism in compulsory acquisition, according to the High Court.;