NEW INDIA SUGAR MILLS LIMITED Vs. COMMISSIONER OF SALES TAX BIHAR

JUDGEMENT

(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 :

(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 :