CHHITTER MAL NARAIN DAS vs. COMMISSIONER OF SALES TAX

CIVIL APPEAL No. 2483/1969Supreme Court[1971] 1 S.C.R. 67121 July 1970Bench: 2 JudgesAuthor: J.C. SHAH, K.S. HEGDE12 pages
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What did the Supreme Court hold?

The Supreme Court held that the supplies of wheat made pursuant to Clause 3 of the U.P. Wheat Procurement (Levy) Order, 1959, and the acceptance thereof, do not result in a contract of sale. Clause 3 establishes a machinery for compulsory acquisition by the State Government, imposing a bald injunction to supply wheat with penalties for default, and does not envisage any consensual arrangement. The order ignores the volition of the dealer, and the State Government is not required to enter into a contract. A sale predicates a contract of sale between competent parties for a price. A transaction where an obligation to supply goods is imposed without an obligation to enter into a contract cannot be called a sale, even if the supplier is entitled to a determined value. The Court distinguished previous cases where liberty of contract was not entirely excluded. Therefore, there was no contract between the assessees and the State for the sale of goods within the meaning of the U.P. Sales Tax Act. The appeals were allowed, and the High Court's order was set aside. The answer to both questions was in the negative.

What were the facts?

The appellants, dealers in food-grains, supplied wheat to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959. The Sales Tax Officer levied tax on these supplies, considering them sales. The assessees contended that the wheat was not sold. The Assistant Commissioner (Judicial) Sales Tax and the Additional Judge (Revision) Sales Tax agreed with the assessees, holding the supplies were not taxable as they did not constitute a "sale" under the U.P. Sales Tax Act. The High Court, however, answered the questions in favour of the revenue, holding the transactions to be taxable sales. The assessees appealed to the Supreme Court.

What were the issues?

1. Whether the supplies of wheat made to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959, constitute "sales" within the meaning of Section 2(h) of the U.P. Sales Tax Act, 1948? (Question of law) 2. Whether, in the circumstances, the assessees are liable to pay sales tax on the price of wheat supplied to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959? (Question of mixed law and fact) Assessee's contentions: The assessees argued that the transactions were not "sales" as defined under the U.P. Sales Tax Act, which requires a contract of sale and mutual assent. They relied on the principle that a compulsory acquisition under a levy order does not amount to a sale, citing cases like Kirkness (Inspector of Taxes) v. John Hudson & Co. Ltd. Revenue's contentions: The revenue contended that the supplies were taxable sales. The judgment does not explicitly record the revenue's specific arguments or authorities cited, but it implies their reliance on the High Court's decision which found the transactions to be sales.

Which sections of the Income-tax Act were involved?

Section 2(h),Section 4

AI-generated summary — verify with the full judgment below

A B c D E F G H CHHITTER MAL NARAIN DAS v. COMMISSIONER OF SALES TAX July 21, 1970 (J.C. SHAH AND K. S. HEGDE, JJ.] 671 U.P. Sales-tax Act 1948 S. 2(/1)-Supply of whrnt tu Regional Food Controller uncler U.P. Wheat Procurenient (Levy) Order-If lt1.1:ablc.

The, asscssees who were dealers in food-grains supplied to the Regional Food Controller diverse quantities of wheat in compliance with the pro- visions of the U.P. Wheat Procurement (Levy) Order. 1959. The Sales-tax Otliccr levied tax under the U.P. Sales-tax Act on the aggregate ol the price of wheat supplied by the assessees, rejec.ting the assessccs' conten- tion that the wheat supplied was not sold to the Controller.

In appeal, the Assistant Commissioner (Judicial) Saleo Tax held the supply was not taxable since there was no "sale" within the U.P.

Sales-tax Act.

This order was confirmed by the Additional Judge (Revision) Sales-Tax.

On reference, the High Court answered the question against the asscssces.

Allowing the assessees' appeal by special leave, this Court. HELD : The supply, pursuant to cl. 3 of the U.P. Wheat Procurement (Levy) Order, 1959 and acceptance: thereof, does not result in a con

The order continues below.

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