- (1.) This is an appeal by special leave from the judgment of the Allahabad High Court in a reference made under section 11 of the u. P. Sales Tax Act, 1948, hereinafter called the Act. The High Court answered the following question which was referred in the affirmative and against the assessee: "Whether on the facts and in the circumstances of the case, cloth given by the syndicate to its members on payment was a sale within the meaning of the U. P. Sales Tax Act -
(2.) In the year 1944 control was imposed on the import and distribution of cloth by the Government. The assessee which is a syndicate was constituted under the name and style of Kanpur Kapra Committee. It was to act as an importing agency and the cloth was to be distributed by it to the retailers to be sold at controlled rates. The syndicate consisted of 92 wholesalers who fulfilled the condition of having been continuously in business during the years 1940 to 1944. Every quota-holder has to surrender 3 per cent. profit to the syndicate. The syndicate was allowed a margin of 3 per cent. profit in addition to the 3 per cent. margin of profit originally allowed to the importers. The cloth was to pass from the importing agency direct to the retailers who had deposited money with the importing agency and who were entitled to obtain the cloth from specified godown or godowns. In 1948 the control was removed. The syndicate thereafter ceased to function. The members then resolved, inter alia, that cloth would be given to the shareholders according to their contribution at retail prices. The goods had to be removed between February 23, 1948, and March 9, 1948, on payment of the amount noted against each shareholder. If there was any delay in making the payment interest was to be charged at 10 as. per cent. from the defaulters. Cloth was then distributed to the members. The syndicate did not file any return nor did it pay any sales tax on the said turnover. According to the assessee there had been no sale of the cloth to its members or shareholders and the cloth had been merely distributed to them fro rata according to their contribution. The Sales Tax Officer rejected this contention and held that the syndicate had sold the stocks which remained with it at a price at which it would have been sold to the retailers. It was found that the syndicate in the sale invoices issued to its members had charged a profit over and above the price of the cloth in the same manner as any retailer would have been charged. The Judge (Appeals) upheld the order of assessment. The High Court considered the definition of "sale" as given in section 2 (h) of the Act and came to the conclusion in view of the following facts that the syndicate had effected sale of cloth. (1) The majority of the transactions were for cash. (2) In the transactions there was no element of compulsion. Cloth was in short supply and if any member did not wish to take his quota it could have been readily disposed of. (3) According to the resolution passed by the members of the syndicate the price which was to be paid was the same at which it was being sold to the retailers. (4) The syndicate and its members were two different entities.
(3.) The contention which has been pressed before us is that the syndicate and its members or shareholders happened to be one entity. Thus there could be no sale by one entity to itself. This point does not appear to have been agitated before the departmental authorities. Moreover the facts as they appear in the various orders are altogether meagre about the constitution of the syndicate. It is not even clear whether it got itself registered under the Indian Companies Act, 1913. In the absence of proper facts which could be established before the departmental authorities by the assessee the contention that the syndicate and its members constituted one entity cannot be entertained at this stage. On the findings on which the high Court based its conclusion it is not possible to hold that any other answer could have been returned to the question referred.;