PATHAK, J. - (1.) THE assessee deals in foodgrains and oil-seeds at Maudaha in the district of Hamirpur. He supplied foodgrains to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959. The turnover of foodgrains so supplied was assessed to sales tax under the U.P. Sales Tax Act. On appeal by the assessee, the Assistant Commissioner (Judicial) Sales Tax excluded that turnover from assessment. The Additional Judge (Revisions) Sales Tax upheld the exclusion, holding that the supplies effected by the assessee to the Regional Food Controller did not amount to a sale for the purpose of section 2(h) of the U.P. Sales Tax Act. At the instance of the Commissioner of Sales Tax, the Additional Judge (Revisions) has referred the following two questions : "(1) Whether the sales made to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959, are sales within the meaning of 'sales' under section 2(h) of the U.P. Sales Tax Act ? (2) Whether in the circumstances of the case the assessees are liable to pay sales tax on the sales made to the Regional Food Controller under the provisions of the U.P. Wheat Procurement (Levy) Order, 1959 ?"
(2.) THE case came on for hearing before a Division Bench, which because of the importance of the questions raised, referred the case to a larger Bench. The case has now been laid before us. To appreciate the controversy embodied in the questions referred, it is necessary to examine the U.P. Wheat Procurement (Levy) Order, 1959. The "Levy Order", as I shall describe it, was made in exercise of the powers conferred by section 3(2) of the Essential Commodities Act, 1955. It recites its purpose as the maintenance of supplies of wheat and the securing of its equitable distribution and availability at fair prices. Clause 3 of the Levy Order provides : "3. Levy on wheat procured or in stock :- (1) Every licensed dealer shall sell to the State Government at the controlled prices (a) Fifty (50%) per cent., of wheat held in stock by him at the commencement of this order; and (b) Fifty (50%) per cent of wheat procured or purchased by him every day beginning with the date of commencement of this order and until such time as the State Government otherwise directs. (2) The wheat required to be sold to the State Government under sub-clause (1) shall be delivered by the licensed dealer to the Controller or to such other person as may be authorised by the Controller to take delivery on his behalf." Clause 4 confers the power of entry, search and seizure on enforcement officers with a view to securing compliance with the Levy Order. The essential question before us is whether when a licensed dealer supplies wheat to the State Government pursuant to clause 3 of the Levy Order he has effected a sale as defined under section 2(h) of the U.P. Sales Tax Act and is liable to sales tax under that Act. The contention of the assessee is that the supplies made by it are not under any contract of sale between it and the State Government but wholly because of the compulsion imposed on it by clause 3 of the Levy Order, and, therefore, there is no sale and consequently no liability to sales tax. The Commissioner urges that the supplies effected under the Levy Order must be considered as made pursuant to an agreement between the assessee and the State Government and the provisions of clause 3 of the Levy Order do not wholly exclude such agreement. Learned counsel for the parties have sought to support their submissions on the basis of some recent Supreme Court decisions, each party contending that what has been said there supports him. Before anything, therefore, it is appropriate that I refer to those decisions.
(3.) THE first case is M/s. New India Sugar Mills v. Commissioner of Sales Tax, Bihar. ([1963] 14 S.T.C. 316; A.I.R. 1963 S.C. 1207.). The assessee there owned a factory in Bihar and in compliance with directions issued by the Controller under the Sugar and Sugar Products Control Order, 1946, despatched sugar to the agents of the State of Madras. In assessment proceedings under the Bihar Sales Tax Act, 1947, the assessee contended that the supplies made by it could not be described as sales because there was no contract of sale. The facts disclose that the Government of different States intimated their requirements of sugar to the Sugar Controller of India from time to time. After considering those requisitions and having regard to the statements of stock received from various sugar factories, the Sugar Controller made allotments. An allotment order was sent by him to the factory owner directing him to supply sugar to the State Government in accordance with despatch instructions to be conveyed by the latter. The State Government was notified of the allotment and upon despatch instructions communicated by it to the factory the sugar was despatched by the factory. It was admitted that those facts represented the course of dealing between the assessee and the State of Madras. The Supreme Court held, by majority (Kapur and Shah, JJ.), that the transactions of despatches of sugar by the assessee Pursuant to the directions of the Controller were not the result of any contract of sale. Reference was made to State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., ([1958] 9 S.T.C. 353; [1959] S.C.R. 379; A.I.R. 1958 S.C. 560.) where while examining the validity of statutes of Provincial Legislatures imposing sales tax on the value of goods used in the execution of building contracts, the Supreme Court observed that the expression "sale of goods" in entry 478 of List II in the Seventh Schedule of the Government of India Act, 1935, was a women juris and must be considered in the identical sense in which it had been understood in the Indian Sale of Goods Act, and the Provincial Legislatures had no power to tax a transaction which was not a sale of goods as understood in that Act. Now section 4 of the Indian Sale of Goods Act, which defines "the contract of sale" and "sale", has been borrowed almost verbatim from section 1 of the English Sale of Goods Act, and the court, therefore, adverted to what is said in Benjamin on Sale, Eighth Edition : "To constitute a valid sale there must be a concurrence of the following elements, namely : (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." It was pointed out that the second ingredient, namely mutual assent, was wanting in the course of dealing between the assessee, the New India Sugar Mills Ltd., and the State. There was no offer by the State Government to purchase sugar and no acceptance of any offer by the manufacturer. The manufacturer was left with no volition under the Control Order, and it was obliged to carry out the order of the Controller to supply the sugar on pain of punishment for breach of the order. Hidayatullah, J., found himself unable to agree. He pointed out that consent under the law of contract need not be express but could be implied, that a sale could also take place by operation of law rather than by mutual agreement, express or implied, and that in the case before the court when the State Government after receiving the allotment order sent instructions to despatch the sugar and the factory despatched it a contract emerged and consent had to be implied on both sides though not expressed antecedently to the allotment. He observed that although there was compulsion both in selling and buying, a compelled sale was nevertheless a sale, and it could not be said that there was no sale because the freedom to offer and accept was wanting.;