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PETITIONER: M/S NEW INDIA SUGAR MILLS LTD.

       Vs.

RESPONDENT: COMMISSIONER OF SALES TAX, BIHAR

DATE OF JUDGMENT: 26/11/1962

BENCH: SHAH, J.C. BENCH: SHAH, J.C. KAPUR, J.L. HIDAYATULLAH, M.

CITATION:  1963 AIR 1207            1963 SCR  Supl. (2) 459  CITATOR INFO :  R          1965 SC 913  (10,18)  R          1965 SC1396  (5)  RF         1966 SC 563  (5)  D          1968 SC 478  (2,13)  RF         1968 SC 599  (8)  R          1968 SC 838  (4)  D          1969 SC 343  (4,8,11)  RF         1970 SC2000  (5,9,10,12)  RF         1971 SC2089  (10)  RF         1972 SC  87  (24,28,31)  F          1973 SC 668  (2)  O          1978 SC 449  (3,7,9,14,37,39,40,41,43,47,52  F          1979 SC1158  (3)  R          1988 SC1487  (48)  O          1989 SC1371  (15)

ACT: Sales  Tax-Sugar Control-Allotment by Controller  Supply  of Sugar  under allotment order-If amounts to sale Bihar  Sales Tax  Act 1947 (Bihar 19 of 1947), s. 2 (g)-Sugar  and  Sugar Products  Control Order 1946-Sale of Goods Act, 1930  (3  of 1930),  s. 4-Government of India Act, 1935 (26.  Geo. 5  Ch. 2), Seventh Schedule, List II; Entry 48.

HEADNOTE: Under the Sugar and Sugar Products Control Order, 1946,  the consuming States intimated to the Sugar Controller of  India their  requirements  of sugar and the  factory  owners  sent statements of stocks of sugar held by them.  The  Controller made  allotments to various States and addressed  orders  to the  factory  owners directing them to supply sugar  to  the States   in  question  in  accordance  with   the   despatch instructions   from  the  State  Governments.   Under   such allotment  orders, the assesses, a sugar factory  in  Bihar, despatched sugar to the State of Madras.  The State of Bihar treated  these  transactions as sales and levied  sales  tax thereon,  under  the Bihar Sales Act,  1947.   The  assesses contended  that the despatches of the sugar pursuant to  the directions  of  the Controller did not amount to  sales  and that no sales tax was exigible on such transactions. Held   (per   Kapur  and  Shah,   JJ.    Hidayatullah,   J.,

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dissenting),  that the transactions did not amount to  sales and  were not liable to sales tax.  Under Entry 48, List  II of Government of India Act, 1935, the Provincial Legislature had no power to levy sales taxes on a transaction which  was not  of the nature of a sale of goods, as understood in  the Sale  of  Goods  act.   To constitute a  sale  of  goods,  . property in the goods must be transferred from the seller to the  buyer  under a contract of sale.  A  contract  of  sale between  the  seller and the buyer is a  prerequisite  to  a sale.   Despatches  of  sugar under the  directions  of  the Controller were not the result of any such contract of sale. There  was no offer by the assesses to the State  of  Madras and no acceptance by the latter; the assessee was, under the Control Order, compelled to carry out the directions of  the Controller and it had no volition in the matter.  Intimation by the State 460 of  its requirement of sugar to the controller  or  communi- cation of the allotment order to the assesses did not amount to  an  offer.  Nor did the mere  compliance  with  despatch instructions  issued by the Controller, which  the  assessee could  not decline to carry out, amount to acceptance of  an offer  or  to  making  of an  offer.   A  contract  of  sale postulates   exercise  of  volition  on  the  part  of   the contracting parties. State of Madraa v. Gannon Dunkerky & Co., [1959] S.    C. R. 379; relied on. The Tata Iron & Steel Co. Ltd. v. The State of Bihar, [1958] S. C. R. 1355, explained. Per Hidayatullah, J.-In these transactions there was a  sale of  sugar for a price and sales tax was payable  in  respect thereof.  Though consent is necessary for a sale, it may  be express  or implied, and it cannot be said that  unless  the offer and acceptance are in an elementary direct form  there can  be  no  taxable sale.   The  controller  permitted  the assesses to supply sugar of a Stated quality and quantity to the  State of Madras; thereafter the two parties  agreed  to "sell"  and  "purchase" the sugar.  So long as  the  parties trade  under controls at fixed price they must be deemed  to have agreed to such a price; there wasan implied  contract with  an implied offer  and an implied acceptance. The  same is  the position with respect  to the quality  and  quantity fixed  by the Controller. when the State ,  after  receiving the  permit, sent instructions to the assesses  to  despatch sugar and the assesses despatched it a contract emerged  and consent must be implied on both sides     though      not expressed  antecedently to the prmit. State, ofMadras  v. Gannon Dunkerky Co., [1959] S.C.R.  379 andThe  Tata Iron and SPA Co. Ltd. v.        The State  of Bihar, [1958] S. C. R. 1355, explained.

JUDGMENT: CIVIL APPELLATE JURISDICTION:Civil Appeal No. 237 of 1961. Appeal  by special leave from the judgment and  order  dated September 30, 1958, of the Patna High Court in M.J.C. No.  5 of 1956. S.T. Desai and B. P. Maheshwari, for the appellant. S. P. Varma, for the respondent.  461 1962.   November 26.  The judgment of Kapur and  Shah,  JJ., was  delivered  by Shah, J. Hidayatullah,  J.,  delivered  a separate judgment. SHAH,  J.-M/S. New India Sugar Mills Ltd.hereinafter  called

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’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  Commi- ssioner, but the Board of Revenue exercising jurisdiction in revision set aside the order, in so far 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  or between the assessees" 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 : "Whether  in  the facts and circumstances of the  case,  the disposal of sugar to the Province of Madras is liable to  be taxed." 462 The  High  Court answered the question  in  the  affirmative observing  that  the sugar despatched by  the  assessees  to different  Provinces including the Province of Madras  under orders  of the Controller was liable to be taxed  under  the provisions  of the Bihar Sales Tax Act, 1947.  With  special leave the assessees have appealed to this Court against the judgment of the High Court. 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 r.  81  of  the Defence  of India Rules.  The material clauses 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 cl. 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

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provinces,   areas   or   markets   or   such   persons   or organisations, in such 463 quantities,  of such types or grades, at such time, at  such prices  and  in  such  manner as may  be  specified  by  the Controller, an  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 subclause (1).  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. 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 :- "The  admitted course of dealing between the s was that  the Government  of various consuming States used to intimate  to the  Sugar  Controller  of India from  time  to  time  their requirement of sugar, and similarly the factory owners  used to send to the Sugar Controller of India statements of stock of   sugar  held  by  them.   On  a  consideration  of   the requisitions received from the various State Governments and also  the  statements  of stock received  from  the  various factories,  the  Sugar Controller used to  make  allotments. The allotment order was addressed by the Sugar Controller to the  factory  owner,  directing him to supply sugar  to  the               State  Government  in question  in  accordance               with  the despatch instructions received  from               the competent officer of the State Government.               A copy 464 of the allotment order was simultaneously sent to the  State Government  concerned,  on receipt of  which  the  competent authority  of  the  State Government  sent  to  the  factory concerned  detailed instructions about the  destinations  to which the sugar was to be despatched as also the  quantities of sugar to be despatched to each it is admitted   that   it also laid down the procedure  of payment, and the  direction was  that the draft should be sent to the State Bank and  it should  be  drawn on Parry and Company or  any  other  party which  had been appointed as stockist importer on behalf  of the Madras Government." The assessees contend that sugar despatched pursuant to  the directions  of  the Controller was not sold by them  to  the Government  of  Madras,  and  sales-tax  was  therefore  not exigible  in respect of those dispatches under the  relevant Sales  Tax  Acts of the province of Bihar.   The  assessment period  in  respect of which the dispute is  raised  is  one year-April  1, 1947, to March 31, 1948-for the  first  three months  the relevant law imposing liability to pay  tax  was Bihar  Act  6 of 1944 and from July 1, 1947,  to  March  31, 1948, liability to pay tax had to be determined under  Bihar Act 19 of 1947.  It is common ground that the scheme of  the two  Acts for levy of tax was similar and the definition  of "sale" on which primarily the dispute centred under the  two Acts was identical.  We will therefore refer in dealing with this appeal as if the liability arose under Act XIX of 1947. The expression "sale" as defined under s. 2(g) of the  Bihar

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Sales Tax Act, at the material time stood as follows :- "Sale means, with all its grammatical variations and cognate expressions  any transfer of property in goods for  cash  or deferred payment  465 or  other valuable  consideration, including a  transfer  of               property in goods involved in the execution of               contract  but  does not  include  a  mortgage,               hypothecation, charge or pledge : Provided that a transfer of goods on hire purchase or  other instalment system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale : Provided  further  that  notwithstanding  anything  to   the contrary  in  the  Indian Sale of Goods Act,  1930  (111  of 1930), the sale of any goods which are actually in Bihar  at the  time when, in respect thereof, the contract of sale  as defined  in section  4 of that Act is made, shall,  wherever               the said contract of sale is made, lie  deemed               for the purpose of this Act to have been  made               in Bihar." Apparently  in  the  first paragraph  of  the  definition  a transaction  (other than a transaction expressly  specified) in  which  there  is a transfer of  property  in  goods  for valuable  consideration, was included as a sale  within  the meaning of the Act.  By the first proviso transfer of  goods on  hire purchase or other instalment system of payment  are to  be  deemed sales.  The second proviso (which  has  since been repeated) dealt with the situs of the sale and was  not in truth a part of the definition of sale.  What constituted a  sale,  the  second proviso did not purport to  say  :  it merely fixed for the purpose of the Bihar Sales Tax Act  the place of sale in the circumstances mentioned therein. Tax  is leviable under the Bihar Sales Tax Act on the  gross turnover  (exceeding a prescribed Minimum) on  sales  "which have taken place in 466 Bihar".   Counsel for the assessees says that the  value  of sugar  despatched in compliance with the directions  of  the Controller  is  not  liable to be included  in  the  taxable turnover, for there was no sale of sugar, despatched by  the assessees, and that in any event the sale did not take place in  Bihar.   In elaborating his submission  counsel  says  : Under  the  Government  of India Act,  1935  the  Provincial Legislature  had  power to legislate for levy of  tax  on  " sale  of  goods" under Entry 48 of List II  of  the  Seventh Schedule; that the expression "’sale of goods" in the  Entry was used not in the popular but in the narrow and  technical sense  in which it is used in the Indian Sale of Goods  Act, 1930;  that  power under the entry could  be  exercised  for taxing  only  those transactions in which by  mutual  assent between parties competent to contract property in goods  was transferred  absolutely  from  one  person  to  another,  in consideration   of   price  paid  or   promised,   and   the transactions in which there was no mutual assent as a result of negotiations express or implied are not sales within  the meaning  of  the Sale of Goods Act and therefore  not  sales within  the  meaning of the Bihar Sales  Tax  Act.   Counsel alternatively  submits that even if the despatches  resulted in sales, as the sales did not take place in Bihar, the same were not liable to be taxed under the Bihar Sales Tax Act. In  popular parlance ’sale’ means transfer of property  from one  person  to another in consideration of  price  paid  or promised  or other valuable consideration.  But that is  not the  meaning  of  ’sale’ in the Sale  of  Goods  Act,  1930.

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Section  4  of the Sale of Goods Act provides by  its  first sub-section  that a contract of sale of goods is a  contract where the seller agrees to transfer the property in goods to the  buyer for a price.  "Price" by cl. (10) of s.  2  meanS the money consideration for sale goods, and "’where Under  a contract  of sale property in the goods is transferred  from the seller to the buyer,                             467 the contract is called a sale, but where the transfer of the property  in the goods is to take place at a future time  or subject  to  some  condition thereafter to  be  fulled,  the contract is called an agreement to sell" (sub-section (3) s. 4).   It  is manifest that under the Sales of  Goods  Act  a transaction   is   called   sale  only   where   for   money consideration  property  in  goods is  transferred  under  a contract  of sale.  Section 4 of the Sale of Goods  Act  was borrowed  almost verbatim from s. 1 of the English  Sale  of Goods  Act 56 & 57 Vict. c. 71.  As observed by Benjamin  in the  8th Edn. of his work on ’sale’, "to constitute a  valid sale  there must be a concurrence of the following  elements viz.  (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". The  Provincial  Legislature  by Entry 43  List  II  of  the Seventh  Schedule  of the Government of India Act  1935  was invested  with power to legislate in respect of "’ Taxes  on sale  of  goods".  The expression "’sale of goods"  was  not defined  in  the  Government of India Act,  but  it  is  now settled law that the expression has to be understood in  the sense  in which it is used in the Sale of Goods  Act,  1930. In  the State of Madras v. Gannon Dunkerley & Co.  (1)  this Court in considering whether s. 2 (1) Explanation I (i),  of the  Madras General Sales Tax Act IX of 1939 as  amended  by the  Madras General Sales Tax Amendment Act XXV of 1947  was intra vires the Provincial Legislature, has decided that the expression ’sale of goods’ in entry 48, List 11, is used not in  the Popular but in- the restricted sense of the Sale  of Goods  Act,  1931.  The primary question which  fell  to  be determined in that case was whether in a "building  contract which  was  one, entire and indivisible" there was  sale  of goods  of  the  building materials used  in  the  execution, liable to be taxed under the Madras General Sales Tax Act (1)  [1959] S.C.R. 379. 468 which  by s. 2 (c) defined "goods’ as meaning all  kinds  of movable  property  (except  certain  kinds  which  arc   not material   in  this  case)  and  included   all   materials, commodities  and articles including those to be used in  the construction,   fitting  out,  improvement  or   repair   of immovable  property, and by s. 2 (h) defined the  expression "sale’ as meaning every transfer of property in goods by one person  to  another in the course of trade or  business  for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods-  involved in  the  execution  of  a  works  contract.   Power  of  the Provincial Legislature of Madras to legislate in respect  of a levy of tax on the value of goods used in the execution of a  works  contract  was challenged by  a  firm  of  building contractors, and this Court held that the power under  Entry 48,  List  11, Seventh Schedule, did not  include  power  to legislate  for levying tax on the value of goods  used  "’in the course of a building contract which was one, entire  and indivisible".  The Court held that the expression "’sale  of goods" in Entry 48 List II was used not in the popular sense

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but in the strictly limited sense in which it was defined in the  Sale  of  Goods  Act and  that  the  Madras  Provincial Legislature  had  no  power to  legislate  under  the  power derived  under ]Entry 48 in List II for taxing  transactions other than those of sales strictly so called under the  Sale of  Goods  Act.  It was observed "the expression "  sale  of goods’  in  Entry  48  is  a  nomen  juris,  its   essential ingredients being an agreement to sell movables for a  price and property passing therein pursuant to that agreement.  In a  building contract which is, as in the present case,  one, entire  and  indivisible and that is its norm, there  is  no sale  of goods, and it is not within the competence  of  the Provincial Legislature under Entry 48 to impose a tax on the supply of the materials used in such a contract treating  it as  a  sale." In Gannon Dunkerley & Company’s case  (1)  the Court was (1)  (1959) S.C.R. S79,  469 concerned to adjudicate upon the validity of the  provisions enacted   in  acts  of  Provincial   Legislatures   imposing liability to pay sales tax-on the value of goods used in the execution  of  building contracts, and the judgment  of  the Court proceeded on the ground that power conferred by  Entry 48  List II was restricted to enacting legislation  imposing tax  liability in respect of sale of goods as understood  in the  Sale  of  Goods Act, 1.930,  and  that  the  Provincial Legislature  under the Government of India Act, 1935 had  no power to tax a transaction which was not a sale of goods, as understood in the Sale of Goods Act.  The ratio decidendi of that  decision must govern this case.  According to  S.4  of the  Sale  of  Goods  Act to constitute  a  sale  of  goods, property in goods   must   be   transferred    from   the the  seller  to  the buyer under ;a  contract  of  sale.   A contract  of  sale between the parties is therefore  a  pre- requisite  to  a sale.  The transactions  of  despatches  of sugar  by  the assessees pursuant to the directions  of  the Controller were not the result of any such contract of sale. It  is common ground that the Province of  Madras  intimated its  requirements  of  sugar  to  the  Controller,  and  the Controller called upon the manufacturing units to supply the whole  or  part  of the requirement  to  the  Province.   In calling  upon the manufacturing units to supply  sugar,  the Controller did not act as an agent of the State to  purchase goods  :  he acted in exercise of his  statutory  authority. There was manifestly no offer to purchase sugar by the  Pro- vince,  and no acceptance of any offer by the  manufacturer. The  manufacturer  was  under  the  control  Order  left  no volition  : he could not decline to carry out the order;  if he  did so lie was liable to be punished for breach  of  the order  and  his  goods were liable  to  be  forfeited.   The Government  of  the  Province and the  manufacturer  had  no opportunity to negotiate, and sugar was despatched  pursuant to the direction of the Controller and not in acceptance  of any offer by the Government. 470 The  High  Court  observed "as soon as  an  application  for allotment  is made, there is an implication of an  offer  to purchase  the  quantity of sugar at the price fixed  by  the Controller from the producer to whom the allotment order  is to be made by the Controller.  It is also clear that if  the allotment  order  is communicated by the Controller  to  the assessee   and  the  latter  appropriates  the   sugar’   in accordance  with the allotment order and in accordance  with the despatch instructions of the competent officer appointed by  the  Madras Government, there is in the eye  of  law  an

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acceptance  of the offer by the assessee and a  contract  is immediately brought into existence between the parties".  We are  with respect unable to hold that this view is  correct. The  Provincial Government of Madras gave intimation of  its requirements  of  sugar to the Controller  and  applied  for allotment  of sugar : thereby the Government was not  making any offer to purchase sugar.  Evidently the offer could  not be  made to the Controller because the Controller was not  a manufacturer  of sugar or his agent.  The  communication  of the  allotment order to the assessees was again not  of  any offer  made by the State which it was open to the  asscssecs to  accept  or decline.  Mere compliance with  the  dispatch instructions  issued  by the Controller, which  in  law  the assessees could not decline to carry out, did not amount  to acceptance  of  an  offer.  A contract  of  sale  postulates exercise of volition on the part of the contracting parties. and  there  was in Complying With the orders passed  by  the Controller  no such exercise of volition by  the  assessees. By the Indian Contract Act 9 of 1872 a proposal or an  offer is defined as signification by one person to another of  his willingness to do or to abstain from doing anything, with  a view  to obtaining the assent of that other to such  act  or abstinence.  When the person to whom the proposal is made or signified  assents  thereto,  the proposal  is  said  to  be accepted.  The person making the proposal is called the                             471 promisor  and the person accepting the. proposal  is  called the  promisee, and every promise or every set  of  promises, forming  the consideration for each other is  an  agreement. These provisions of the Contract Act are by s. 2 (15) of the Sale  of Goods Act, incorporated therein.  There was on  the part  of  the  Province of Madras no  signification  to  the assessees  of  their willingness to do or  to  abstain  from doing  anything, with a view to obtaining the assent of  the assessees to such act or abstinence, and the Controller  did not  invite any signification of assent of the  assesses  to the  intimation  received by them.  He did not  negotiate  a sale  of sugar : he in exercise of his statutory  authority, ordered  the assesses to supply sugar to the  Government  of Madras.   We are unable to hold that from the intimation  of order  of  the Controller, and compliance therewith  by  the assessees any sale of goods resulted in favour of the  State of Madras. Mr.  Varma appearing for the State of Bihar  contended  that even if there was no offer and no acceptance when intimation was sent by the Government of Madras to the Controller,  and the  Controller directed the assessees to deliver  specified quantities  of sugar, still by the conduct of the  assessees in   despatching  sugar  to  Madras  in  pursuance  of   the directions  of  the Controller and acceptance  of  price  by them,  a contract of sale resulted.  But the action  on  the part  of  the assessees in despatching the  goods.  was  not voluntary  :  they were compelled to send the  goods.   They could  not be deemed by despatching sugar to have  made  any offer to supply   goods and in the absence of any offer,  no contract  resulted  by  the  acceptance  of  goods  by   the Provincial  Government.   To  infer  a  contract  from   the compulsory delivery of sugar and acceptance thereof would be to  ignore  the  true  position  of  the  parties,  and  the circumstances  in  which goods were  delivered.   Mr.  Varma contended that in any event the 472 Legislature had by the definition included in the expression "sale  of’  goods’ all transfers of property  in  goods  for consideration  and the transactions which are sought  to  be

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taxed  by  the State of Bihar fell within  that  definition. Counsel submitted that a literal meaning should be given  to the words of the Act without any pre-disposition as to  what the  expression  ’sale’ means under the Sale of  Goods  Act. But  if  the Bihar Legislature had under the  Government  of India Act, 1935 no power to legislate in respect of taxation of  Transactions  other  than  those of  sale  of  goods  as understood  in  the Sale of Goods Act, a transaction  to  be liable to pay sales-tax, had to conform to the  requirements of  the  Sale  of Goods Act, 1930.   Attributing  a  literal meaning  to the words used would amount to imputing  to  the Legislature  an  intention deliberately  to  transgress  the restrictions  imposed  by  the  Constitution  Act  upon  the Provincial  Legislative authority.  It is a recognised  rule of  interpretation  of statutes that  the  expressions  used therein should ordinarily be understood in a sense in  which they  best  harmonise with the object of  the  statute,  and which  effectuate  the  object of the  Legislature.   If  an expression is susceptible of a narrow or technical  meaning, as  well as a popular meaning, the Court would be  justified in assuming that the Legislature used the expression in  the sense which would carry out its object and reject that which renders  the exercise of its power invalid.  If  the  narrow and technical concept of sale is discarded and it be assumed that the Legislature sought to use the expression sale in  a wide  sense as including transactions in which property  was transferred  for  consideration from one person  to  another without   any  previous  contract  of  sale,  it  would   be attributing  to  the  Legislature  an  intention  to   enact legislation  beyond  its  competence.   In  interpreting   a statute  the Court cannot ignore its aim and object.  It  is manifest  that  the  Bihar  Legislature  intended  to  erect machinery within the frame-work of the Act for  473 levying  sales tax on transactions of sale and the power  of the Legislature being restricted to imposing tax on sales in the  limited  sense,  it  could  not  be  presumed  to  have deliberately  legislated  outside its  competence.   In  the definition of the expression "sale’ in s. 2 (g) of the Bihar Sales  Tax  Act  it must be regarded as  implicit  that  the transaction was to have all the elements which constitute  a sale  within the meaning of the Sale of Goods Act.   Use  of the  expression "including a transfer of property  in  goods involved  in  the execution of the contract"  in  the  first paragraph  of  the  definition also  does  not  justify  the inference that the transfers of property in goods under  the earlier part of the definition were not to be the result  of a contract of sale, If any such intention was attributed  to the  Legislature,  the  legislation  may,  for  the  reasons already stated, be beyond the competence of the Legislature. The non-obstante clause in the second proviso is in truth in the  nature of an explanation to the charging section  :  it merely  fixes  the situs of sale.  If there is no  sale  the second proviso will have no application. Mr.  Varma finally contended that in the Tata Iron  &  Steel Co.  Ltd.  v. The State of Bihar(1) by  implication  it  was decided  that  the definition of ’sale’ in s.  2(g)  of  the Bihar  Sales Tax Act included transactions in  which  good-, were  supplied in compliance with directions which  left  no volition  to  the manufacturers, But this  argument  is  not borne  out by what was actually decided in that  case.   The Tata  Iron  &  Steel  Company Ltd.,  which  carried  on  the business  of manufacturing iron and steel in its factory  at Jamshedpur  in  Bihar was assessed to sales  tax  under  the Bihar Sales Tax Act, 1947.  Tile company sent its goods from

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its  factory  to different Provinces and  Indian  States  by rail, the railway receipts being obtained by the company  in its own name as consignor and consignee.  The Branch Offices of the company or its Bankers at the destination handed (1)  [1958] S.C.R. 1355. 474 over the railway receipts to the purchasers against  payment of  the price.  The Sales Tax Officer of the State of  Bihar included  in the gross turnover of the Company the value  of goods  manufactured  in  Bihar but  delivered  and  consumed outside  the  State of Bihar in the manner  already  stated. The contention of the company that the goods delivered  were not  liable  to  be included in  the  taxable  turnover  was negatived  by the taxing authorities and the High  Court  of Patna.  The matter was then carried in appeal to this Court, and it was held that the provisions of s. 4(1) read with  s. 2.(g)  proviso 2 of the Bihar Sales Tax Act was  within  the legislative  competence  of the Province of Bihar.   It  was pointed  out  that the second proviso to the  definition  of sale  in  s. 2(g) of the Act did not extend the  meaning  of sale  so as to include therein a contract of sale:  what  it actually did was to lay down certain circumstances in  which a  sale, although completed elsewhere, was to be  deemed  to have  taken  place in Bihar.  Those  circumstances  did  not constitute a sale, but only located the situts of such sale. The  Court  in  that case was not called  upon  to  consider whether  a  transaction to be a sale must be preceded  by  a contract  of  sale : the Court was  merely  considering  the vires  of the second proviso to s. 2(g) of the  Bihar  Sales Tax  Act.   Das, C. J., in delivering the  judgment  of  the majority of the Court observed "the basis of liability under s.  4(1) remained as before, namely, to pay tax  on  ’sale’. The  fact  of the goods being in Bihar at the  time  of  the contract  of sale or the production or manufacture of  goods in  Bihar did not by itself constitute a ’sale’ and did  not by itself attract the tax.  The taxable event still remained the  ’sale’  resulting in the transfer of ownership  in  the thing  sold from the seller to the buyer.  No tax  liability actually  accrued  until there was a concluded sale  in  the sense  of transfer of title.  It was only when the  property passed  and  the ’sale’ took place that  the  liability  for paying the sales tax under the 1947 Act arose.  There                             475 was no enlargement of the meaning of ’sale’ but the  proviso only raised a fiction on the strength of the facts mentioned therein and deemed the sale’ to have taken place in  Bihar. Those  facts did not by themselves constitute a  ’sale’  but those facts were used for locating the situs of the sale  in Bihar.   It  follows, therefore, that the provisions  of  s. 4(1) read with s. 2(g), second proviso, were well within the legislative competency of the Legislature of the Province of Bihar".   In  Tata Iron & Steel Company Ltd’s  case  (1),the question as to the true content of the expression "sale’  in the Bihar Sales ’Fax Act did not fall to be determined,  and the  principle  of  the  case can  have  no  application  in deciding the present case. It would be fruitless to enter upon a detailed discussion of the  two decisions of the House of Lords cited at the Bar  : The  Commissioner of In lan Revenue v. New Castle  Breweries Ltd (2 ) and Kirkness (Inspector of Taxes) v. John Hudson  & Company  Ltd. (3).  It may be sufficient to observe that  in the  first  of these cases goods belonging to  the  assessee were taken over by order of the Admiralty, acting under  the relevant regulations, and in compliance with the order of  a Compensation   Court,  the  assessee  was  paid  an   amount

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exceeding  pound  5000/- being the  difference  between  the amount  originally paid and the amount settled as due  under the order of the Compensation Court.    House of Lords  held that  the  transaction under which the  Administrative  took over  the goods was a sale in the business, and although  no doubt it affected the circulating capital of the assessee it was  none the less proper to be brought into the profit  and loss  account  arising  from the assessee’s  trade  for  the purpose  of computation of liability to pay  Excess  Profits duty.   In  Kirkness (Inspector of Taxes) v.  John  Hudson’s case (3) it was held by the House of Lords that the  vesting of  a company’s railway wagons in the  Transport  Commission under  s. 29 of the, Transport Act, 1947, with  compensation fixed in (1) ( 1958) S.C.R. 1355.    (2) [1927) 12 T.C. 927.  (3) [1955] A.C. 696. 476 the  form of transport stock under the relevant sections  of that Act did not constitute a sale for the purpose of s.  17 of  the  Income-tax Act, 1945 so as to  render  the  company liable to a balancing charge under that section.  The  cases turned upon the meaning of or sale’ for the purposes of  the Excess Profits Tax legislation and the Income-tax Act,  1945 (8  &  9 Geo. 6, c. 32) and observations made  therein  have little   relevance   in  determining  the  limits   of   the legislative  power of the Provincial legislature  under  the Government  of  India Act, 1935, and the  interpretation  of statutes enacted in exercise of that power. The  second contention raised by counsel for  the  assessees requires no elaborate consideration.  If it be assumed  that the intimation of the requirement by the State of Madras  to the  Controller amounted to an offer, delivery of  sugar  by the  assessee pursuant to such an order would  constitute  a sale  within the meaning of s. 2(g) of the Bihar  Sales  Tax Act,  by the second proviso which has been held intra  vires by this Court in Tata.  Iron & Steel Company Ltd.’s case (1) the  assessees would be liable to pay sales tax, for  it  is not  in  dispute  that  at the time  when  the  orders  were received from the Controller the goods were within the State of  Bihar  and the condition prescribed by  s.  2(g)  second proviso for locating the situs of the sale is fulfilled. But  the  intimation  by  the  Province  of  Madras  of  its requirements  did not amount to an offer, and the supply  of goods   pursuant  thereto  could  not  amount  to  a   sale; consequently  liability  to pay sales tax  under  the  Bihar Sales Tax Act on the amounts received by the assessees  from the Government of Madras for sugar supplied did not arise. HIDAYATULLAH  J.-I regret my inability to agree that  Gannon Dunkerley’s case (2) can be (1) [1958] S.C.R. 1355 (2) [1959] S.C.R. 379.  477 extended  to  cover  the facts here.  I  would  confirm  the decision of the High Court and dismiss these appeals for the reasons   proceed to give.  These reasons are applicable  to all the appeals in today’s group. This case is concerned with the levy of sales tax under  the Bihar Sales Tax Act 1944 (VI of 1944) for a period of  three months-April 1, 1947, to June 30,. 1947, and another of  the nine  months following, under the Bihar Sales Tax Act,  1947 (XIX of 1947).  The assessee companies in all these  appeals run sugar mills and are admittedly dealers under these  Acts and the commodity on the sale of which tax was sought to  be levied was sugar. . The disputed tax relates to supplies  of sugar made by the assessee companies under the orders of the

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Sugar Controller of India to certain Provincial  Governments in  the relevant periods.  There is only one  contention  of the  assessee companies in these appeals and it is  that  in the circumstances of the case there was no "sale’ of  sugar, regard  being  had to the decision of this Court  in  Gannon Dunkerley’s  case  (1)  and the amounts  received  from  the Provincial Governments should not be included in the taxable turnover. I have already mentioned that the assessment period in  this case is one whole year-April 1., 1947 to March 31, 1948, and that  it is divided into two parts of three months and  nine months respectively governed by the Acts.  There was however no difference in the mode of dealing in this case in the two periods.   In  the other cases the assessment  periods  were different   but   there  was  no  other   difference.    The transactions  were  stereotyped being under  the  Sugar  and Sugar  Products  Order,,  1946,  which  was  passed  by  the Government  of India on February 18.. 1946, in the  exercise of  powers  conferred  by sub-rule (2) of Rule  81  of the Defence  of India Rules.  The mode, which has been  accepted by the (1)  (1959) S.C.R. 379. 478 parties, as correctly summarised was as follows:-- "The admitted course of dealing between the parties was that the   Governments  of  various  consuming  States  used   to intimate       to the Sugar Controller of India from time  to               time   their   requirement   of   Sugar,   and               similarly. the factory owners used to send  to               the  Sugar Controller of India  statements  of               stock   of   sugar  held  by   them.    On   a               consideration  of  the  requisitions  received               from  the various State Governments  and  also               the  statements  of stock  received  from  the               various  factories, the Sugar Controller  used               to  make allotments.  The allotment order  was               addressed  by  the  Sugar  Controller  to  the               factory  owner, directing him to supply  sugar               to   the  State  Government  in  question   in               accordance  with  the  despatch   instructions               received  from  the competent  office  of  the               State  Government.   A copy of  the  allotment               order  was  simultaneously sent to  the  State               Government concerned, on receipt of which  the               competent  authority of the  State  Government               sent   to  the  factory   concerned   detailed               instructions  about the destinations to  which               the  sugar  was to be despatched as  also  the               quantities  of sugar to be despatched to  each               place.   In the case of the Madras  Government               it  is  admitted that it also  laid  down  the               procedure  of payment, and the  direction               was that the draft should be sent to the State               Bank  and  it  should be drawn  on  Party  and               Company  or  any other party  which  had  been               appointed  as stockist importer on  behalf  of               the  Madras  Government.  It should  be  added               that  in  this, case the assessee  was  called               upon to produce nessary documents relating  to               the transactions in question, but the assessee               (lid not produce the documents.  The assessee,               however, admitted 479 that general arrangement between the parties was the one set out in this paragraph."

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Two  typical  documents in this connection may be  read  and they are the permit by the Controller and the despatch order sent  by the Provincial Government.  They were not  produced in this case but can be seen in the record of C. A. No.  633 of 1961 at pages 15, 16.  First the permit : No. 78 p (1)/46/7132 Office of the Sugar Controller for India GOVERNMENT OF INDIA Department of Food. Dated Simla, the 12-11-56                            ORDER In exercise of the power conferred by clause 7 of the  Sugar and Sugar Products Control Order, 1943. 1.Shashi  Kiran,  Assistant Sugar Controller  for  India, having been duly authorised in this regard under clause 2 of the  said  order by the Sugar Controller  for  India  hereby direct you to supply 1200 tons/maunds of Sugar by 31-1-47 to Bengal  in accordance with the despatching  instructions  of the Director of Civil Supplies Bengal, Calcutta. 2.A  permit No. 1988 to enable you to despatch  sugar  in compliance with this order is attached. (Sd.) Shashi Kiran, Asstt.  Sugar Controller for India. 480 To  the  Motilal Padampat Sugar Mills Co.  Ltd.,  Majhawlia, District Champaran. And now the despatch order :- EXPRESS                           STATE                           MOTIPAT                          MAJHOWALIA UNDERSTAND SUGAR CONTROLLER ISSUED PERMIT FOR 600 TONS SUGAR THIS   PROVINCE  FULLSTOP  DESPATCH  IMMEDIATELY  300   TONS MANGALORE DRAFTS ON ME THROUGH CENTRAL BANK CALICUT 300 TONS COIMBATORE DRAFTS OF ME THROUGH CENTRAL BANK MADRAS FULLSTOP SEND  RAIL  RECEIPTS FOR EACH WAGON LOAD OR  100  BAGS  LOAD WAGONS  FULL  CAPACITY FULLSTOP BOOK AT RAILWAY RISK  IF  NO SPECIAL RATES IN FORCE.                            PRICES                     T.R.L. Narsinmhan,                     Assistant Secretary. Post  copy in confirmation to Motilal Padampat  Sugar  Mills Ltd.  Majhowlia, Cliamparan District.                     Forwarded/By Order,                     (Sd.) Illegible,                     Supdt.  Board of Revenue,                     (Civil Supplies) Chepauk, Madras. Kitta 10-5-47.  481 These  documents between them disclose that free trading  in sugar  was  not  possible.  All  Provinces  intimated  their requirements to the Controller who was kept informed by  the Mills   about  the  supplies  available.   The   price   was controlled  and  the  Controller directed the  supply  of  a certain  quantity  from a particular Mill  to  an  indenting Province.   After  giving his permit and sending a  copy  of this permit to each party, the Controller passed out of the. Picture  and the Mill supplying aid the  Province  receiving the  supply  (I am avoiding the words seller &  buyer  since that is the point to decide) arranged the rest of the affair including  the issue of despatch instructions regarding  the quantity  and the quality to be sent to different areas  and the payment of price. The   question  is  whether  there  was  a  ’sale’  in   the circumstances  and  the  price should  be  included  in  the turnover for purposes of Sales tax under the Bihar Sales Tax

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Act for the time being in force.  The definition of sale  in the two Bihar Acts at all material times was :- "2(g)         "’sale"   means,  with  all  its   grammatical               variations   and  cognate   expressions,   and               transfer  of  property in goods  for  cash  or               deferred    payment    or    other    valuable               consideration,   including   a   transfer   of               property in goods involved in the execution of               contract  but  does not  include  a  mortgage,               hypothecation, charge or pledge; Provided  that a  transfer  of goods on  hire-purchase  other               instalment    system   of    payment    shall,               notwithstanding  the  fact  that  the   seller               retains  a title to any goods as security  for               payment of the price, be deemed to be a sale : Provided  further  that  notwithstanding  anything  to   the contrary in the Indian Sales of Goods Act, 1930 the sale  of any good which 482 are actually in, Bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act  is made,  shall wherever the said contract of sale is made,  be deemed  for the purposes of this Act to have taken place  in Bihar." In the present case, we arc required only to decide whether, regard being had to the decisions of this  Court expounding the  ambit of entry No. 48 of ,List II Seventh  Schedule  of the  Government  of  India Act 1936, the tax  could  not  be demanded as there was no sale of sugar at all.  The entry in question is "48.  Taxes on the sale of goods and on advertisement." "Goods" was defined in section 311 as follows "Goods" include all materials, commodities and articles." The  white  Paper  had  the entry  "taxes  on  the  sale  of commodities and on the turnover".  It was altered to "’taxes on the sale of goods" and as pointed out by Gwyer, C. J., In re  The Central Province & Berar Act No-.  XIV of 1938,  (1) it is idle to speculate what the reason was.  The expression "’sale of commodities" would not have taken the mind to  the Sale of Goods Act as the redrafted entry does. There  is  no provision in the whole of  the  Government  of India Act 1935 which expressly seeks to limit the meaning of the  plain words "taxes on the sale of goods" which  include all materials, commodities and articles.  Such a  limitation could of course arise from a competing entry in List No.  1. Otherwise the entry conferred powers as large and plenary as those of any sovereign legislature.  The ambit of (1)  (1939) F.C.R. 18.  483 the  entry, prior to the inauguration of  the  Constitution, was  the subject of three leading decisions by  the  Federal Court, in one of which there was also an appeal to the Privy Council.  The first case was In re The Central Provinces and Berar Act No. XIV of 1938, (1) a reference under section 213 of the Constituting of 1936.  In that case the imposition of sales tax on retail sales of motor spirit and lubricants was questioned on the ground that though described as tax on the sale of motor spirit etc., the tax was, in effect, a duty of excise  under entry 45 of List I and there being an  overlap between  the  two  entries  that in  List  I  must  prevail. Legislative  practice in respect of Excise Duty was  invoked but  as sales-tax legislation did not exist in India  before 1938  there was no legislative practice to consider  on  the meaning  of  the  express  "tax  on  sale  of  goods".   The Government  of India claimed that the entry 48 List II  must

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be limited to a direct tax like a turnover tax which is  not identifiable  in the price.  Taxes on retail sales,  it  was argued,, being indirect and identifiable in the price,  were more  of  the  nature of an excise duty  and  the  pith  and substance of the Act being this the impugned Act was bad. The  main  argument on behalf of the  provinces,  which  was accepted,  was  that  the  Constitution  Act  must  not   be construed  in any narrow and pedantic sense.   Gwyer,  C.J., expressed himself forcefully on this point in the  following words:-, " I conceive that a broad and liberal spirit should  inspire those whose duty it is to interpret it................." The essence of the argument on the part of the Provinces was that  if only a turnover tax (which was a species of  sales- tax) was meant why was a wider expression used in the  entry ? It was, therefore, contended that the entry should not  be truncated and the (1)  [1939] F.C.R. 18. 484 plain  words of the entry should be given their  normal  and ordinary   meaning.    The  contention  of   the   Provinces prevailed.   Though the learned judges pointed out that  the words were "taxes on the sale of goods" and not "sales  tax" simpliciter,  thereby excluding taxes on services  which  in some systems are regarded also as sales-tax, the words  were wide  enough to include more than a mere turnover  tax.   It was  held that the power included a power to levy a  tax  or duty  on the retail sale of goods and this did  not  impinge upon  the  power of the Legislative Assembly  to  make  laws "with respect to" duties of excise. In the next case the Province of Madras v. Boddu Paidanna  & Sons  (1).   Government  of India  reversed  its  stand  and contended that the power of the Provincial Legislatures  did not  extend  to levying sales-tax on first  sales  but  only after   the   goods  were  released  by  the   producer   or manufacturer.   The argument of the Government of India  was not accepted and it was declared that the power of a Provin- cial Legislature to levy a tax on the sale of goods extended to sales of every kind and at all stages between a  producer or manufacturer and a consumer.  The Central Government  had filed a suit and the third case before the Federal Court was an  appeal from that decision.  The Federal  Court  followed its  own decision in Boddu Paidanna’s Case. (1) The  Central Government  appealed  to  the  judicial  Committee  and  the judgment  is to be found in Governor-General in  Council  v. Province  of Madras. (2) The Judicial Committee examined  in detail  the provisions of the Madras General Sales  Tax  Act 1938 to emphasize its essential character and observed that- "Its  real  nature,  its "pith and substance,"  is  that  it imposes  a  tax  on the sale of goods.   No  other  succinct description could be given of it (1) [1942] F.C.R. 90. (2) [1945] F.C.R. 179 P.C.  485 except  that it is a "tax on the sale of ’goods.’ It is,  in fact,  a  tax  which according to  the  ordinary  canons  of interpretation appears to fall precisely within entry No. 48 of the Provincial Legislative List." In  repelling  the  contention that  first  sales  were  not included  in the entry their Lordships observed that it  did violence to the plain languages and implied the addition  of the  words "other than first sale of goods  manufactured  or produced in India." The judicial Committee expressed  itself in complete agreement with the two decisions of the  Federal Court.

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The  ambit  of  the entry was thus settled  to  be  that  it included all "sales of goods’ though not ’services’ from the first sale by the producer or manufacturer to the last  sale to  the  consumer  and that the tax could  be  collected  on wholesales  or retail sales as well as on the turnover.   It was however pointed out that the expressions "sales-tax" and "taxes  on the sale of goods" were not the same,  the  first including sales other than those of goods.  No definition of what is "’sale" was attempted in these cases either with  or without reference to the Sale of Goods Act. Thus it was firmly established that the entry ""taxes on the sale  of  goods"  authorised  the making  of  laws  for  the imposition of tax on all transactions of sale of goods  from the manufacturer or producer to consumer.  It also could  be imposed on the turnover which meant the sum total of  prices for  which taxable goods were sold in a  particular  period. The definition of "goods" was enlarged to include  "commodi- ties,  materials  and  articles."  The  word   "commodities" indicated  "articles  of  trade", the  word  ire  materials" indicated  "matter from which things are made", (the use  of the   word  being  the  same  as  in  the  expression   ’raw materials’)  and  by "articles" was  meant  "any  particular thing.  " in this way it was 486 clearly  indicated that articles sold by way of a  trade  or otherwise  were  equally within the expression  (goods’  and also finished articles and raw materials from which finished articles are made. The  entry was framed in 1935 in the form with which we  are concerned.  Previously it read in the white paper "taxes  on sale  of commodities and turnover." The reframed  entry  was wider in one respect (it included materials and articles  in the sense explained) and apparently narrower in another  (by omitting  turnover’) than the original entry.  There was  no occasion  to  expound  the meaning of  ’goods’  in  the  two Federal  Court  decisions but the decisions laid  down  that ’turnover’ was included even though not expressly mentioned. I  have already said above that prior to 1938 a tax  on  the sale of goods was not imposed in India.  It is claimed  that in ancient times sales-tax was levied in India but we do not have  to delve into these matters.  The tax, as it is  known today,  is of comparatively modem growth  though  economists have  traced  it to Ptolemies, Greeks and  Romans.   Findlay Shirras  and other writers give us the history of  the  tax. It  was imposed in a recognisable form in Spain in 1342  and was known as the skabala.  This notorious tax continued  for five  hundred years.  In France it was also imposed  in  the fourteenth  century but was soon given up.  We are not  con- cerned  with  these ancient progenitors of  the  modem  tax. They  could not have influenced the selection of the tax  or its  form.  The modem tax was the result of the First  World War.   Germany  imposed in 1916 a turnover tax  called  ’die Umatzsteuer’  and  that  is the form in  which  the  tax  is collected  there.  France followed a year later but  with  a transaction  tax which was known as ’L’impot sur le  chiffre d’affaires’.  Soon other countries followed as it was almost as productive as Customs and income-tax.  487 By the time the Government of India Act 1935 was passed,  no less than thirty countries had imposed this tax in different forms.  India, however, was not one of them. The  period  in India following the First World  War  opened with  the Government of India Act with its Devolution  Rules and the allocation of taxes by’, the Scheduled-tax Rules, to the  Provinces framed in 1920.  The latter  Rules  contained

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only octroi and taxes on markets and trades, professions and callings  which resembled very distantly, the  modem  sales- tax., Indeed, sales-tax was first visualized in the  Report, of  the  Taxation Enquiry Committee 1924-25) but only  as  a modification of the octroi through the intermediate steps of taxing  markets  and slaughterhouses.  It  was  hoped that price  competition  would stop inclusion of the tax  in  the price.   It  would have been a vain attempt  to  convert  an indirect tax into a direct one.  The Committee visulised  it as  a composition tax from traders but it was realised  that the  ’tax would soon get converted into a tax, on  sales  of goods,  or, of services like those of a doctor or  goldsmith and  that  it would be difficult to separate  services  from goods  in  case where the two were combined.   It  was  also recognised that turnover taxes imposed on persons in respect of raw materials and finished goods tended to be cumulative, but  taxes  imposed at one point did not have  that  vicious tendency: The difficulty of entrepot trade in octroi,  where goods bore the tax whether or not consumed, sold or used was avoided  because the tax under retail sales-tax  scheme  was payable only when the goods were actually sold and being  ad valorem bore lightly on cheap goods.  The suggestions were- (1) A turnover tax on retail merchants; (2)  registration of such dealers; (3)  collection of taxes quarterly; 488 (4)  licensing  of and charging of fees from  petty  traders and  hawkers whose. turnovers were uncertain as no  accounts were maintained by them. Sales-tax particularly that imposed on goods assumed by 1935 different  forms in different countries.  Its incidence  was sometimes  the turnover, sometimes wholesale  and  sometimes the  retail  sale.   In  Canada  and  Australia  it  was   a producers’  or  manufacturers’ tax almost of the  nature  of excise.    In   France  the  excise   and   sales-tax   were interchangeable,  the former being a replacement tax on  the turnover  of the manufacturer.  In Germany the tax  included both  goods and services, in France services  were  excluded unless  there was a commercial element’ In England, it  took the  form of a purchase tax.  France also devised a  simpler method  by imposing a forfait a lump sum which  represented, so  to  speak, a quit tax.  In Belgium it was  collected  by stamps from both the seller and the buyer according to their respective  invoices.  In America the position  was  unique. It  can  be  stated from a  passage  from  Beuhler’s  Public Finance (3rd Edn.) page 410- "’A  sale tax is an excise in so far as it is  imposed  upon domestic  transaction of commodities, and it may  also  have some of the aspects of customs duties because national sales taxes commonly fall upon importing and sometimes upon expor- ting.  The popular name for American excises is sales taxes. Not  all excises are imposed upon sales or the privilege  of selling,  however, for they may be placed upon the  purchase or use of commodities, including services." The  varieties  this  elastic tax took in  that  country  is illustrated from the following passage from the same author- "’Here,  again,  there is no standard  usage,  for  selected sales taxes are often called sales taxes,  489 limited  sales  taxes, selective sales  taxes,  and  special sales  taxes, while general sales taxes may be called  sales taxes,  turnover taxes, manufacturers’ sales-taxes,  retails sales-taxes and gross receipts or gross income-taxes." It was in the background of these laws of foreign  countries and  the recommendations of the Taxation  Inquiry  Committee

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that  the  entry  in the Government of India  Act  1935  was framed.   Taxes  on  the  sale of  goods  being  a  kind  of commodity  taxes had to be demarcated from  other  commodity taxes  like excise, octroi, terminal tax, market  dues  etc. The  difficulty  was  solved by viewing  the  goods  as  the subject of taxation in different stages.  These stages  were production,   movement  sale  and  consumption.   Taxes   on production  of goods which were excise proper were given  to the  centre  with certain exceptions (Entry 45  list  I  and Entry  40 of list II), taxes on sale of goods were given  to the Provinces (Entry 48 List II), while taxes on movement of goods  were divided-those carried by railway and  air  being allotted  to the centre as terminal taxes (Entry 58 List  1) and those carried by inland waterways being allotted to  the Provinces  (Entry 52 List II).  Taxes on the entry of  goods in a local area for consumption, use or sale (octrois)  were allotted to the Provinces (Entry 49 List II).  This was  the demacation of commodity taxes in addition to local taxes for local purposes. The  two  cases  of  the Federal  Court  to  which  detailed reference  has  been  made  above  outlined  the  scope   of competing entries relating to duties of excise and taxes  on the sale of goods.  It was pointed out that though there was an overlap the taxes were different.  In the recent case  of The  Automobile Transport (Rajasthan) Ltd. v. The  state  of Rajasthan (1).  I have given the history of the distribution of  the  heads of revenue on the eve of  the  Government  of India Act 1935 and have there (1)  [1963] 1 S.C.R. 491, 490 pointed out that the attempt was to give adequate  resources to  the  Provinces’  to  enable  Provincial  Governments  to undertake nation-building activities.  It was there  pointed out  by  me  that experts at that time  were  in  favour  of alloting  an elastic tax like sales-tax to the Provinces  as the  main  source  of revenue  and  abolish  altogether  the category  of deficit Provinces and the subventions.  It  was expected  that  land revenue would have to  be  reduced  and income-tax could not be increased beyond a point.  The  only tax  that was new and fell imperceptibly upon consumers  was the sales-tax and it was allotted to the Provinces.  It  was expected  to be a very productive tax, an expectation  which has  been  amply  fulfilled.  In  1954-55,  this  tax  alone yielded about 60 crores and it has been even more productive since. The  inroads upon the tax were many but they- were  resisted in  the  pre-Constitution period by the  Provinces  both  in Courts and in administration.  Indeed, appeals were made  in cases  before the Federal Court, not to cut down unduly  the ambit of the natural words and Mr. justice jayakar mentioned them  in  his judgment with sympathy.  I feel that  what  he said will bear repetition here: "A  powerful appeal was made to us by the  Advocates-General of the Provinces that, consistently with its terminology, we should  so interpret  entry No.41 (List II) as to give it  a               content sufficiently extensive for the growing               needs  of the Provinces.  It was  argued  that               the  provincial  autonomy granted by  the  new               scheme  of government would be  unmeaning and               empty,  unless  it was fortified  by               adequate  sources of revenue.  Whatever  value               such   an  appeal  may  have  in  a   judicial               decision,  I personally appreciate it,  and  I               feel  no doubt that the interpretation that  I               am placing on

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491 entry No. 48 (list II) is sufficiently practical to leave an               adequate source of revenue in the hands of the               Provinces  without making inroads  on  Central               preserves.   I may add here that  the  several               authors  I have been able to consult  on  this               point  agree in their opinion that, since  the               War, a tax on the sale of goods has proved  to               be  both  productive and practicable  in  many               countries, under circumstances not very diffe-               rent from those prevailing in the Provinces of               ,India.   The yield naturally varies with  the               scope   and   rates  of  the   tax,   business               conditions and administrative efficiency,  but               it is stated that the tax itself has become  a               major  source  of  revenue  in  a  number   of               countries,  yielding more than the  income-tax               in  a  few instances, and nearly  as  much  as               other sources of revenue in others." In re The               Central Provinces & Berar Act No. XIV of  1938               (1). The  two cases of the Federal Court having  established  the area of operation of entry No. 48 List II in relation to the competing entry relating to excise, the Provinces  attempted to extend the tax to cover all situations.  This was done by incorporating  definitions of ’sale’ which in some  respects were inconsistent with the definition in the Indian Sale  of Goods  Act.  The Taxation Enquiry Commission (1953-54)  gave in its report an analyses of how these definitions ran and I find  it convenient to quote from the report (page 10,  para 24 Vol.  III) :- "In  Madras, Mysore, Travancore-Cochin and  Hyderabad,  sale means  transfer  of  property  in the  course  of  trade  or business.   By  implecation, all other sales  are  excluded. Casual  sales  by  individuals,  sales  of  food  by  hotles attached  educational institutions, sales of old  furniture, for example, by firms not dealing (1)[1939] F.C.R. 19 at p. 119. 492 in  furniture and so on are, therefore, not liable  for  the tax in these States.  The States of Bengal and Delhi define sale   as   transfer  of  property  in   goods   for   money consideration,  which  accordingly  excludes  transfers  for other  consideration like exchange or barter.  According  to the Acts of certain States, the Sale is deemed to have taken place in the territory of the State, if at the time when the contract  of  sale  or purchase was  made,  the  goods  were actually in those States.  In certain States, the  transfer of property in goods supplied in the execution of a contract is also included in the definition of sale." The definitions led to a variety of decisions on the meaning of the word "sale" which were likely to bewilder the  common man.  The Taxation In Commission summed up the situation  in the following words :- ""The  layman who asks : "What is a sale" would not have  to go without an answer, he would find plenty of replies in the reported  judgments of courts of law; and he would not be  a layman  if, piecing them together, he was able to say  when, where  and how a sale because a sale which a sales  tax  may tax." From the earliest times the extension of the word "sale" was in  three recognisable directions.  Firstly, the  definition by a fiction took in transactions of sale in which the goods were  produced in the Provinces or were in the  Province  at the  time the contract of sale took place, no  matter  where

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the contract could, in law, be said to have taken place.  In other words, by a fiction incorporated in the definition  of sale’  the  situs  of  sale  could  be  established  in  the Province.   Secondly,  forward  transactions  in  which  the passing  of property was postponed to a future date,  if  at all  it  took  place, were included  in  the  definition  of "’sale".  Thirdly,  493 materials  in a works contract, where the bargain was for  a finished thing, were treated as the subject matter of sale. Laws  in which transactions of sale were sought to be  taxed on  the ground that goods were in the province or some  part of  the component elements of a contract of sale took  place in  the Province were generally upheld by the  High  Courts. In these cases the doctrine of nexus was extended to  sales- tax legislation following the analogy of the decision of the Privy Council in Wallace Brothers etc. & Co. v. Commissioner of   Income-tax,  Bombay.  (1)  The  cases  recognised   the sovereignty of Provincial Legislatures which were erected by the British Parliament in its own image and which within the jurisdiction conferred by a legislative entry enjoyed powers as  large and ample as those of the British Parliament.   It was  generally held that in the Plenitude of that  power  it was open to the Provincial Legislatures to tax  transactions of  sale in which there was a sufficient nexus  between  the Province and the taxable event namely the sale, and that the Provincial   law  could  by  a  function  bring  the   whole transaction into the Province for purposes of tax. The  Supreme Court also took substantially the same view  in the  State of Bombay v. The United Motors Ltd., (2);  Bengal Immunity Co. Ltd. v. State of Bihar (3); Tata Iron and Steel Co. Ltd. v. State of Bihar (4) and Commissioner of Sales-tax v. Husenali (5). The  meaning of the world "sale’ in the Entry was laid  down in several cases but I shall refer to only one of them.   In Poppatlal  v.  State of Madras, (6) Venkatarama  Ayyar,  J., (Rajamannar, C.     J.  concurring)  observed as  follows  : "’The  word  "sale’ has both a legal and  a  popular  sense. In the legal sense it imports (1) [1948] F.C.R. I P.C.         (2) (1953] S.C.R. 1069. (3)  [1952] 2 S.C.R. 603. (5)  [1959] Supp. 2 S.C.R. 702. (4)  [1958] S.C.R. 1355. (6)  A.I.R. (1953) Mad. 91. 494 passing of property in the goods.In its    popular   sense it signifies the transactionswhich  results in the  passing of property. To alawyer    the  legal sense would  appear to be thecorrect one to be given to the word in’ the  Sales Tax  Act.  That is the conception which is  familiarised  in the  provisions of Sale of Goods Act.  If one leaves out  of account  sales  tax legislation which  is  of  comparatively recent  origin, questions relating to sale of goods  usually come  up before the Courts only in connection with  disputes between  the sellers and purchasers.  If the  goods  perish, on-  whom  is the loss to fall?  If  the  purchaser  becomes insolvent  before payment of price can the goods be  claimed by the trustee in bankruptcy? For deciding these and similar questions it is necessary  to determine at what point of time the property in goods passed to   the   purchaser.    Sometimes  when   the   point   for determination  is as to jurisdiction of Courts to  entertain suits  based  on contract, it may be  material  to  consider where  property in the goods passed, that being part of  the cause of action.  These being the questions which are accus-

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tomed to be debated in connection with sale of goods, it  is natural  that  a  lawyer  should,  as  a  matter  of   first impression approach the question of sale under the Sales Tax Act with the same concept of a sale.  ’But if the matter  is further considered it will be seen that considerations which arise under the Sales Tax Act are altogether different  from those which arise under the Sale of Goods Act. The  object of the Sales Tax Act is to impose a tax  on  all sales   and  it  is  a  tax  imposed  on  the  occasion   of sale............  So far as the Government is concerned,  it would be  495 immaterial  at which  point  of time property  in  the  goods               actually passed from the seller to the  buyer.               Of  course,  there must be  a  completed  sale               before tax can be levied and there would be  a               completed sale when property passes.  That  is               the  scope  of  the definition  of  ’sale’  in               section 2 (h).  But when once there is a comp-               leted sale, the question when property  passed               in  the goods would be a matter of no  concern               or  consequence for purposes of the Sales  Tax               Act.   The  Government is interested  only  in               collecting tax due in respect of the sale  and               the  only fact about which it has  to  satisfy               itself  is whether the sale took place  within               the  Province of Madras.  In this context  the               popular  meaning  of  the  word  is  the  more               natural and there is good reason for  adopting               it......... Our conclusion accordingly is that               the  word ’sale’ in the Madras  General  Sales               Tax Act must be understood in a popular  sense               and  sales tax can be levied under the Act  if               the  transaction  substantially  takes   place               within  this Province,,  notwithstanding  that               the property in the goods does not pass within               the State." Against  the decision of the High Court of Madras an  appeal was  filed in this Court and the .judgment of this Court  is reported in [1953] S.C.R. 677.  The appeal was allowed.   On the question of territorial nexus this Court agreed with the Madras High Court but on the question of the meaning of  the word "sale’ it expressed itself differently.  In an  earlier case  (State  of Travancore Cochin v. The  Bombay  Co.  Ltd. (1)), this Court had reserved the question whether the  word ’sale’  had the same meaning as in the law relating  to  the sale of goods or a wider meaning.  In Poppatlal Shah’s  case (2)  the  Supreme  Court, referred to the  decision  of  the Madras High Court that the word was used in a popular  sense and without any expression of (1) [1952] S.C.R. 1112. (2) A.I.R. (1953) Mad. 91. 496 disapproval held that there was no indication of the popular meaning  of  sale in the definition in  the  Madras  General Sales  Tax  Act where unmistakably stress was laid  ’on  the clement of transfer of property in a sale and no other.’ The Bench  held that, the presence of goods within the  province at  the  time of the contract would have made the  sale,  if subsequently completed, a sale within the province by reason of  the  Explanation  added by Act XXV of 1947  but  as  the Explanation was not in operation during the relevant  period the  assessment  of  sale tax was held  to  be  illegal  and unwarranted by the law as it then stood. It would appear from this that this Court took the view that

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the  word ’sale’ in the entry "Taxes on the sale  of  goods" was used in a sense wider than that commonly accepted in the law  relating  to  sale  of  goods,  and  the  judgment   of Venkatarama Ayyar, J., in the Madras High Court on this part was  not questioned.  Then came a decision of the  Allahabad High  Court from which an appeal was brought to this  Court. The  judgment  of this Court is reported in  the  Sales  Tax Officer,  Pilibhit v. Messrs Budh Prakash Jai  Prakash  (1). The definition of the word " sale’ in the U.P. Sales Tax Act (XV of 1948) included ’forward contracts’, and this part  of the  definition was declared ultra vires entry 48 in List  I of  the Government of India Act 1935 and Explanation III  to section  2  (h)  of that Act  which  provided  that  forward contract  "’shall  be deemed to have been completed  on  the date originally agreed upon for delivery and also section 3- B  taxing turnover of dealers in respect of transactions  of forward   contracts   were  also   declared   ultra   vires. Venkatarama  Ayyar,  J., speaking for this Court  held  that under the statute law of England and also of India there was a   well-recognised   distinction   between   "sales"    and "’agreement  to  sell" though they were  grouped  under  the generic name of "contract of sale." The distinction, it  was pointed  out,  lay  in the transfer of  property  which,  if simultaneous (1)  [1955] 1 S.C.R. 243.  497 with  agreement,  made  for a sale, but if  in  the  future, operated only for an agreement to sell.  In the latter  case property  could only pass as required by section 23  of  the Sale  of Goods Act.  Relying on the observation of  Benjamin on Sale that- "In order to constitute a sale there must be (1)  An agreement to sell, by which alone the property  does not pass; and (2)  an actual sale, by which the property passes," the  learned judge observed that though the definition of  a contract  of sale included a mere agreement to sell as  well as  an actual sale, there was a distinction between the  two which  led  to different remedies and entry No. 48  when  it spoke of "sale’ meant a completed sale involving transfer of title.  The question whether the legislature in the exercise of its sovereign powers for purposes of taxing the event  of sale  could treat a sale as complete when there was a  final agreement  for purchase and sale even though price  was  not paid was apparently not mooted before this Court.   Emphasis was  laid on the definition of ’turnover’ as "the  aggregate of the proceeds of sale by a dealer’ and it was pointed  out that there could be no aggregate of prices unless the  stage had  been  reached when the seller could recover  the  price under  the contract, it being well-settled in the law  under the sale of goods that "an action for price is  maintainable only when there is a sale involving transfer of the property in the goods to the purchaser" and that "where there is only an  agreement to sell, then the remedy of the seller  is  to sue for damages for breach of contract and not for the price of  the goods".  The exceptional circumstance when under  an agreement between the parties the price is payable on a  day certain irrespective of delivery was considered not material for the purpose of the discussion. 498 In  these  cases  by  the  application  of  the  legislative practice  relating  to  sale of goods  the  meaning  of  the expression  "taxes  on  sale of goods"  was  determined  and future contracts in which delivery and payment of price were deferred  were held to be outside the purview of the  Entry.

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There  can hardly be any doubt that the entry  is  concerned with  a completed sale because it is only a sale’ which  can be taxed and not anything which is short of a sale and if  a transaction  which  is sought to be taxed is merely  in  the region of an agreement de futuro there is no taxable  event. The  opinion that if there be a completed sale then the  law dealing with taxation would be indifferent whether price was paid or not. expressed by Venkatarama Ayyar,J., in Poppatlal Shah’s case(1) of the Madras High Court was not accepted. Then  came  the  third  batch  of  cases.   This  batch  was concerned  with the taxing of materials which were  supplied and  used  as part of building or  repair  operations,  like bricks,  timber  and fittings in buildings  girders,  beams, rails  etc.  in  bridges, spare parts  in  repair  of  motor vehicles  etc.   Two distinct views were held  by  the  High Courts.  The Madras High Court in sub nom Gannon Dunkerley & Co, v. State of Madras (2 ) held that such transactions  did not  involve a sale of goods and there could be no  tax.   A contrary  view was expressed in Pandit Banarsi das v.  State of Madhya Pradesh (s) where it was held that such contract-, involved both labour as well as materials and in as much  as materials  were  goods and property in them passed,  it  wag within  the  competence of the  Provincial  legislatures  to separate  the  sale of goods from the composite  and  entire transactions  and  to  tax them.  It was  pointed  out  that legislative  practice in relation to the Sale of  Goods  Act was not conclusive, and though it could not be doubted  that a  limited legislature could not create a power  for  itself which  did not flow from an entry, the entry itself must  be given the widest amplitude (1) A.I.R. (1953) Mad 91.    (2) (1954) 5 S.T.C. 216. (3) (1955) 6 S.T.C. 93.  499 possible  and its scope should not be cut down  by  anything not found in the Constitution Act 1935.  It was,  therefore, concluded :-- "The  text being explicit, the text is conclusive  alike  in what  it  directs  and what  it  prohibits.   The  necessary conditions  for the impost, however, were that there  should be a sale of goods.  The selection of the taxable event  and the   severance   of  transactions  of   sale   from   other transactions in which they might be embedded was a necessary part  of  the power.  The legislature could not say  that  a contract  of service amounted to a sale of services  (goods) but  it  could tax a genuine transaction of  sale  of  goods whatever form it took." x        x        x       x        x "’If a building contract was not split up into its component parts,  that is to say, material and labour, in  legislative practice  relating  to the ordinary regulation  of  sale  of goods there is no warrant for holding that it could not  be, so split up even for purposes of taxation." Some High Courts accepted the decision in Gannon Dunkerley’s case  and  some others the decision in  Pandit  Banarsidas’s case.(1),  In  all these cases there were  appeals  to  this Court.  All these appeals were heard together.  The  leading Judgment  was  delivered in Gannon  Dunkerley’s  case.   The Madras  view was accepted and the view expressed  in  Pandit Banarsidas’s case (1) was not accepted.  It is contended for the appellants that this view of the Supreme Court  controls the  present case and it is, therefore, necessary to  follow the reasoning in some detail.  Before I do so I shall  refer to a case of the House of Lords which influenced in no small measure the decision of this Court.  ’that case is  Kirkness v. John Hudson & Co. Ltd. (2).

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( 1) (1955) 6 S.T.C. 93. (2) (1955) A.C. 696. 500 Under  section  29 of the Transport Act 1947 (10 &  11  Geo. C.49) the company’s railway wagons were vested on January 1, 1948,  in  the British Transport Commission.   These  wagons were already under requisition to the Ministry of  Transport under  the powers contained in Regulation 53 of the  Defence (General)  Regulations,  1939.  Later the  company  received compensation.  This amount was higher than the written  down value.   A balancing charge of pound, 29,021 was made  under section 17 of the Income-tax Act, 1945 (8 & 9 Geo. 6 C.  32) in an assessment under clause I of schedule D to the Income- tax  Act, 1918.  The company appealed against the  balancing charge and succeeded.  Section 17 (1) of the Income-tax  Act 1945 (which in its purport resembled section 10 (2) (vii) of the  Indian Income-tax Act (1922) ordained that a  balancing charge  or  allowance  should  be  made  if  certain  events occured, one such event being "(a) the machinery or plant is sold,  whether  still  in use or  not".   The  question  was whether  there  was such a " sale’  justifying  a  balancing charge.  It was contended for the Revenue that the word sale had a wider meaning than a contract and a conveyance of pro- perty  and  that in its legal meaning it did not  involve  a contract  at a but just the transfer of the property  in  or ownership  of  something  from A to B  for  a  money  price, whether  voluntary  or  affected  by  operation  of  law  or compulsory.  Passages were cited from Benjamin on sale  (2nd Edn.  p. 1), Halsbury’s Laws of England (2nd Edn.  vol.  xxi p.5), Blackstones Commentaries 19th Edn. (1836) vol.  If  p. 446,  and Chalmer’s Sale of Goods(11th Edn. p. 161) to  show that  a  bargain only shows a mutual assent but  it  is  the transfer  of property which is the actual sale.  Analogy  of Lands  Clauses Consolidation Act 1845, Stamp Act  and  other Acts was invoked and later Finance Acts were also called  in aid  where  such compulsory transactions were  described  as sale or purchase.  The House of’ Lords by a majority of  501 4  to 1 overruled these contentions.  It was held  that  the vesting  of  the  wagons  in  the  Transport  Commission  by operation of section 29 of the Transport Act and the payment of  compensation  in the shape of transport  stock  did  not constitute a sale and the analogy of compulsory  acquisition of land  did  not apply, since  the  procedure  there  was entirely different.  The word ’sale’ in s. 17 of the Income- tax  Act 1945, it was held, imported a  consensual  relation and  the  meaning  of the section being plain,  it  was  not possible  to  go to later Acts to construe the  section.   I shall  quote  a few passages from the speeches to  show  how this conclusion was reached so as to be able to show how the same  reasoning  was used in connection  with  the  building contracts. Viscount  Simonds pointed out that what was to be  construed were  the two words ’is sold’ in section 17 (1) (a)  of  the Income-tax  Act 1945, that there was nothing in the  Act  to give  a  special  colour or meaning to the  words  and  that analogous transactions could net help to decide that  should be  the  meaning.  Agreeing with Singleton L.  J.  where  he said-"what  would anyone accustomed to the use of the  words ’sale’ or ’sold’ answer ? It seems to me that everyone  must say "Hudsons did not sell," Viscount Simonds went on to  say :- "When  Benjamin said in the passage quoted by Singleton  and               Birkett.   JJ.,  from his  wellknown  book  on               sale,  2nd. ed.p.1, that by the common  law  a

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             sale of personal property was usually termed a               ’bargain and sale of goods’ he was by the  use               of  the word ’bargain’  perhaps  unconsciously               emphasizing that the consensual relation which               the  word  ’bargain’ imports  is  a  necessary               element  in  the concept.  In  this  there  is               nothing  new, the same principle is  exhibited               in  the  Roman Law, for the opening  words  of               Title 23 of the third book of the 502 Institutes  of  Justinian "De Emptione  et  venditione"  are "emptio   et  venditio  contrahitur  simulatque  de   pretio convenerit........ sometimes the contract for sale is itself the sale, as so often in the sale of goods : sometimes,  and particularly  in the sale of land, it is regarded as a  part of  the  sale as, for example, when it is said by  a  modern writer  that  "the  first step in the sale of  land  is  the contract  for sale (see Cheshire, Modern Real  Property  7th Ed.p.631).  But  it is immaterial whether  the  contract  is regarded as the sale itself., or as a part of it, or a  step in, the sale or as a prelude to the sale : there is for  the present  purpose no substance in any such distinction.   The core  of it is that the consensual relation is  connoted  by the simple word ’sale’ ". Lord Reid also emphasised the consensual relation in  "sale’ as its vital element and observed :- " ’Sale’ is, in my opinion, a nomen juris, it is the name of a  particular consensual contract.  The law with  regard  to sale  of chattels or corporeal movables is now  embodied  in the  Sale of Goods Act, 1893.  By section I (1) "A  contract of sale of Goods is a contract whereby the seller  transfers or agrees to transfer the property in goods to the buyer for money consideration, called the price," and by section 1 (3) : "where under a contract of sale the property in the  goods is transferred from the seller to the buyer the contract  is called a sale; but where the transfer of the property in the goods  is to take place at a future time or subject to  some condition thereafter to be fulfilled the contract is  called an  agreement to sell." As a contract of sale,  as  distinct from  an  agreement . to sell and  unlike  other  contracts, operates  by  itself and without delivery  to  transfer  the property in the thing sold, the  503 word  ’-sale" connotes both a contract and a  conveyance  or transfer of property." Lord  Reid  agreed "that sale’ is a word which  has  become capable in an appropriate context of having a meaning  wider than  its  ordinary  and correct meaning.  But  it  is  only permissible  to give to a word some meaning other  than  its ordinary  meaning if the context so requires".  Lord  Tucker in agreeing observed :- "I  feel  that  the  answers  must  be  that  the  word is unambiguous  and  denotes  a transfer  of  property  in  the chattel in question by one person to another for a price  in money as the result of a contract express or implied.   This is in substance the definition of "sale" given in the second edition of Benjamin on sale, but for present purposes it  is sufficient to emphasize that natural assent is an  essential element  in the transaction.  It is no doubt true  that  the contract  or  agreement  to  sell  may  precede  the  formal instrument  or  act  of delivery under  which  the  property passes  but to describe a transfer of property in a  chattel which  takes  place without the consent  of  transferor  and transfer  as a sale would seem to me a misuse  of  language. By  express enactment or by necessary implication  from  the

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context  any word may be given a meaning different  from  or wider  than  that which it ordinarily bears,  and  this  may apply  to  the  word "sale" where it appears  in  a  context relating  to  the  process  of  compulsory  acquisition of land..........." I  do not find it necessary to quote from the minority  view of  Lord  Morton of Henryton but he did point out  that  the word ’sale’ for 100 years was being used in connection  with transactions by which the property of A had been transferred to B, on payment of compensation to the owner but without 504 the  consent of the owner and said of the question posed  by Singleton  L.  J.  that  if  it  were  put  to  ten  persons unconnected with the company, five of them   might say  "No, the wagons were taken over under   the  Transport  Act"  and the other five might say,""Yes", adding, possibly, "’but  it was a compulsory sale" or "’because they had to do it". I have paused long over this case but only because the  line of  reasoning  of  this case has been  closely  followed  in Gannon  Dunkerley’s  case.   The decision of  the  Court  of Appeal,  later  approved  by the House of  Lords,  had  also influenced  in  a large measure the decision of  the  Madras High Court earlier in the same case. In Gannon Dunkerley’s case Venkatarama Aiyar, J., posed  the question thus :- "The  sole  question  for determination in  this  appeal  is whether  the provisions of the Madras General Sales Tax  Act are  ultra vires, in so far as they seek to impose a tax  on the  supply  of materials in execution  of  works  contract, treating  it  as a sale of goods by the contractor  and  the answer  to it must depend on the meaning to be given to  the words  "’sale of goods" in Entry 48 in List II of Sch.   VII of the Government of India Act, 1935." His  Lordship accepted that building materials were  ’goods’ in  view  of  the definition and  narrowed  the  inquiry  to whether  there  was "a sale of those  materials  within  the meaning  of that word in Entry 48." The learned  judge  then pointed  out that in interpreting a Constitution  a  liberal spirit  should inspire courts and the widest amplitude  must be  given to the legislative entries and they should not  be cut down by resort to legislative practice and that subjects of taxation in particular should be  505 taken  in rerum natura irrespective of previous laws on  the subject.  The learned judge next asked the question in  what sense the words ’sale of goods’ were used, "Whether  popular or  legal,  and what its connotation is either  in  the  one sense  or the other." After noticing meanings of  "sale"  as given  by  divars authors, it was laid down  that  it  meant transfer  of property in a thing from one person to  another for a money price.  It was next pointed out that in  popular sense  a  sale ",is said to take place when the  bargain  is settled  between the parties, though property in  the  goods may not pass at that stage" and the Observations of  Sankey, J.,  (later  Viscount Sankey L. C.., in Nevile Reid  & Co. Ltd.  v. C. 1. R. (1) that the words ’sale’ in  the  British Finance  Act, 1918, should not be construed in the light  of the Sale of Goods Act, 1893 but in a commercial and business sense  were rejected as obiter and opposed to the  decisions of  this Court in Poppatlal Shah’s Case and  Budh  Prakash’s Case. (3) where "’executory agreements" were not held to  be sales   within  the  Entry.   It  was   observed-"’We   must accordingly  hole  that the expression "sale  of  goods’  in Entry  48 cannot be construed in its popular sense and  that it  must  be  interpreted  in its  legal  sense.   What  its

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connotation in that sense is must now be ascertained.  For a correct  determination it is necessary to  digress  somewhat into the evolution of the law relating to sale of goods". The  learned  judge  next referred to Roman  Law  of  emptio venditio  and  pointed out that the  consideration  of  sale could  not be anything but only money or something  valuable and  that it was so recorded in the Institutes of  Justinian Title  XXIII  and  that Emptio  Venditio  was  a  consensual contract.   The learned judge next referred to  Benjamin  on sale  and observed that according to that learned author  to Constitute a valid sale there must be a concurrence (1) (1927) 12 Tax.  Cas. 545. (2) A.r.R. (1953) Mad. 93. (3) (1955) 1 S.C.R. 243. 506 of the following elements vis:- "(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." (Vide 8th edn. p. 2) "In 1893 the Sale of Goods Act, 56 & 57 Vict. c. 71 codified the law on the subject., and s.    1   of  the   Act   which embodied the rules of    the common law runs as follows : 1  .-(1) "A contract of sale of goods is a contract  whereby the  seller transfers or agrees to transfer the property  in goods  to  the buyer for a money consideration,  called  the price.   There  may be a contract of sale between  one  part owner and another. (2)A contract of sale may be absolute or conditional. (3)Where under a contract of sale the property in the  goods is transferred from the seller to the buyer the contract  is called a sale; but where the transfer of the property in the goods  is to take place at a future time or subject to  some condition thereafter to be fulfilled the contract is  called an agreement to sell. (4)An agreement to sell becomes a sale when the time elapses or the condition are fulfilled subject to which the property               in the goods is to transferred." It  was  then pointed out that in section 77 of  the  Indian Contract  Act  1872 sale was defined as   "the  exchange  of property for a price involving the  507 transfer  of  ownership  of the thing sold  from  seller  to buyer".  It was then held that in view of the scheme of  the Indian Contract Act sections 1-75 a bargain was an essential element and that even after the Indian Sale of Goods Act the position  had  not changed.  It was next  pointed  out  that ,Thus,  if  merely title to the goods passed but  not  as  a result  of  any  contract between the  parties,  express  or implied, there is no sale.  So also if the consideration for transfer was not money but other valuable consideration,  it may  then be exchange or barter but not sale.  And if  under the  contract  of sale, title to the goods has  not  passed, then  there  is  an agreement to sell and  not  a  completed sale".   The State in the case urged four points  to  resist the  conclusion that the words "’sale of goods" in Entry  48 must  be  interpreted in the sense which they  bear  in  the Indian  Sale  of  Goods Act 1930.   These  contentions  were examined seriatum and rejected and it was concluded thus :- ""To sum up, the expression "sale of goods" in Entry48 is a nomen juris, its essential ingredients     being        an agreement to sell movables for a price and property passing therein pursuant to that agreement.  In a building  contract which   is,  as  in  the  present  case,  one   entire   and indivisible-and that is its norm, there is no sale of goods,

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and  it  is  not within the  competence  of  the  Provincial Legislature under Entry 48 to impose a tax on the supply  of the  materials  used  in such a contract treating  it  as  a sale ." In  so far as building contracts were concerned two  reasons why there could not be a sale of goods were mentioned.   The first was that there was no agreement express or implied  to sell ’goods’.  It was observed :- "...............  We  are  concerned here  with  a  building contract, and in the case of such a 508 contract,  the  theory  that it can be broken  up  into  its component  parts and as regards one of them it can  be  said that  there  is a sale must fail both on  the  grounds  that there  is no agreement to sell materials as such,  and  that property in them does not pass as movables." The  second  reason was that the property  in  the  building materials does not pass in the materials regarded as ’goods’ but as part of immovable property.  It was observed :- "When the work to be executed is, as in the present case,  a house,  the  construction  imbedded on the land  becomes  an               accretion  to  it on  the  principle  quicquid               Plantatur solo, solo cedit and it vests in the               other  party not as a result of  the  contract               but as the owner of the land." I  shall  refer to two other cases which were  decided  with Gannon Dunkerley’s case.  In Pandit Banarasi Das v. State of Madhya Pradesh (1) it was observed at page 437. "It  should be made clear, however, in accordance with  what we  have  already  stated,  that  the  prohibition   against imposition of tax is only in respect of contracts which  are single  and  indivisible and not of contracts  which  are  a combination of distinct contracts for sale of materials  and for  work,  and  that  nothing that we  have  said  in  this judgment  shall bar the sales tax authorities from  deciding whether  a particular contract falls within one category  or the  other  and imposing a tax on the agreement of  sale  of materials,   where  the  contract  belongs  to  the   latter category." In  Mithanlal  v.  State  of  Delhi  (2)  from  a  composite transaction involving work and materials, the (1) [1959] S.C.R. 427. (2) [1959] B.C.R. 445.  509 materials were held liable to sales tax under a law made  by Parliament for a Part C State.  This was held to fall within the  residuary  powers of Parliament  without  any  specific reference to any particular entry or entries in  Legislative Lists.   I  shall now proceed to discuss the facts  of  the. present  case  in relation to the decisions on Entry  48  of List  11,  Seventh Schedule of the Government of  India  Act 1935. Before  considering the facts of this case in the  light  of the  Sugar and Sugar Products Order 1946, I shall  summarise what  I have said so far.  Sales tax is a tax which  may  be laid  on goods or services.  It assumes numerous shapes  and forms.   It is a modern tax being the product of  the  First World  War.  The concept of ’sale’ is of course  much  older and even the English Sale of Goods Act 1893 on which our own statute  is based, was prior to the first imposition of  tax in modern times.  In India, the tax was first levied in 1937 under laws made under entry No. 48 which read-"’Taxes on the sale  of  goods".  It was introduced as the main  source  of revenue  to  the  Provinces under  a  scheme  of  Provincial Autonomy.   Being a commodity tax it came  into  competition

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with other commodity taxes like excise but it was held  that the  entry comprised, wholesale, retail and  turnover  taxes from the stage of manufacture or production to  consumption. Later  textual interpretation based on statutes relating  to sale of goods and books on the subject of sale, pointed  out intrinsic  limitations.   One such limitation was  that  the term  "sale’ was used in the limited sense it bears in  that part of the law of contract which is now incorporated in the Sale  of  Goods Act.  As a result of this  fundamental  con- sideration  forward contracts’ were held to be  outside  the scope  of  the Entry.  The sale, it was held, had  to  be  a completed sale with passing of property before the tax could become  payable.   A further limitation was pointed  out  in certain cases relating to building 510 contracts  in  which  it was held that  though  property  in materials passed, it did so without an agreement, express or implied, in that behalf, and only when the materials  ceased to be goods and became immovable property.  It was held that the supremacy of the Provincial Legislatures did not  extend to  levying  a  tax  on  sales  in  these  circumstances  by modifying the definition of sale.  It was however held  that if the parties agreed to divide a works contract into labour plus materials, the tax might be leviable.  It was also held that  a  tax  on  building materials  was  leviable  by  the legislature  having  power  to  levy  a  tax  not  expressly mentioned.   It  was,  however,  held  that  if  the  taxing Province had the goods at the time of the contract or  there was other substantial connection with the contract by reason of  some element having taken place there,  the  Legislature could validly make a law which treated the whole transaction as having taken place in the Province. The argument in this case is that the tax can only be placed upon  a  transaction of sale which is the result  of  mutual assent  between  the buyer and seller  and  observations  in Gannon  Dunkerley’s  case  where stress  is  laid  upon  the consensual  aspect of " sale’ are relied upon.  It  is  true that consent makes a contract of sale because sale is one of the  four consensual contracts recognised from early  times. "Consensu  fiunt obligationes in emptionibus  venditionibus" and  "Ideo  autem isti modis Consensu  dicimus  obligationes contrahi".   But  consent may be express or implied  and  it cannot  be  said that unless the offer  and  acceptance  are there  in an elementary form there can be no  taxable  sale. The  observations  in Gannon Dvnkerley’s case were  made  in connection  with materials utilised in the  construction  of buildings,  roads,  bridges etc.  It was there  pointed  out that  there  must  at  least be  an  agreement  between  the parties,  express or implied, in respect of some ’goods’  as ’goods’ and the levy of the tax on building  511 materials was struck down because "there is no agreement  to sell  materials as such, and that property in them does  not pass as movables." The commodity with which we are concerned is sugar and it is delivered  as  sugar.  Thus one part of the  reasoning  from Gannon  Dunkerley’s  Case  which rested on  the  passing  of property in building materials as a part of realty does  not apply.   It  is  also  quite clear that  the  tax  is  being demanded after the sugar has changed hands or expressing  it in  legal  phrase  when property in it has  passed.   It  is argued  that  by reason of the Control Order  there  was  no bargaining.   It  is pointed out that the control  of  sugar operated to fix ex-factory price, to determine who should be the  supplier and who should receive the supply, to fix  the

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quantity,  quality and the time of delivery.   The  question which  we are deciding is not a question arising  under  the Sale   of  Goods  Act  but  under  a  taxing  entry   in   a Constitution.   The entry described a source of  revenue  to the  Provinces.   The Provincial Legislature made  its  laws taxing  sales  of commodities like sugar.  In  a  period  of emergency the Federal Government imposed certain controls to regulate  prices  and  supplies.  This  control  involved  a permit  system under which every Province had to indent  its requirements  to the Controller and every sugar mill had  to inform  the  Controller of the existing and  future  stocks. What  the Controller did was to permit a particular mill  to supply  sugar  of a stated quality and quantity to  a  named Province.   The mill then had to send the sugar on  pain  of prosecution  and forfeiture and receive price  according  to the  fixed rates.  Bargaining, it is said, was not  possible but  bargaining in the sense of offer and acceptance may  be express or implied.  That after the permit was obtained  the two  parties agreed to ’sell’ and purchase’ sugar admits  of no doubt. I  shall now analyse the whole transaction and see  how  the element of compulsion and control affect 512 the  existence  of a sale.  First there is the  fixation  of price  by the Controller.  Can it be said that there  is  no sale because the price is fixed by a third person and not by the  buyer and seller.  This is the old controversy  between Labeo and Proculus that if price is fixed by a third  person a contract of sale results or not.  Labeo with whom  Cassius agreed,  held that there was not, while Proculus was of  the contrary opinion : "Pretium autem certum esse debet. nam alioquin si its  inter nos  convenerit, ut quanti Titius rem  aestemasuerit,  tanti sit  empta,  Labeo negavit ullam uim  hoc  negotium  habere, cuius  opinionem Cassius probat.  Ofilius et earn  emptionem et uenditionem cuius opinionem Proculus secutus est." (Gaius III, 140). This was solved by justinian holding that there was : "Sed nostra decisio  its hoc constituit." (Inst.  III, 23, 1) I do not think the modem law is any different.  So. long  as the  parties trade under controls at fixed rice  and  accept these  as any other law of the realm because they must,  the contract  is at the fixed price both sides having or  deemed to  have agreed to such a price.  Consent under the  law  of contract  need not be express it can be implied.  There  are cases  in which a sale takes place by the operation  of  law rather  than  by mutual agreement express or  implied.   See Benjamin  on  Sale (8th Edn. p. 91).  The  present  is  just another example of an implied contract with an implied offer and  implied  acceptance by the parties.  What I  have  said about price applies also 10 quantity and quality.  The entry in  No.  48 of List II Seventh Schedule dealt with  sale  of goods in all its forms.  We have seen above how numerous are these  forms.  The entry was expressed in six  simple  words but was meant to include a power to  513 tax  sale of goods an all: its forms.  It, was apt meant  to operate only in those elementary cases where there is  offer by A and an acceptance by B with the price as consideration. The  concept of taxes on sale of goods is  more  complicated and  the, relations of people do not always take  elementary forms.When   the,  Province  after  receiving   the   permit telegraphed  instructions  to despatch sugar  and  the  mill despatched it, a contract emerged and consent must, be in on

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both side’s though not expressed antecedent the permit.  The indent  of the Province was the offer to purchase  sugar  of such  and such quality and quantity.  The mills  by  quoting their  stocks  offered  to sell  sugar.   The  controller  , brought the seller and purchaser together and gave them  his permission  with  respect  to  a  particular  quantity   and quality.  There was thus an implied contract of sale in the words of the Digest (XII, 1, IX, 4) "’Si  cui  libera  universorum  negotiorum  administratio  a domino permissa fuerit, isque ex hic negotiis rem vendiderit et tradiderit facit cam accipientis." No  doubt, there is compulsion in both selling, and  buying, perhaps  more for the mills than for the Provinces.   But  a compelled  sale  is nevertheless a sale as was held  by  the House  of  Lords in New Castle Breweries v.  inland  Revenue Commissioner (1927) 96 L. J.K.B. 735.  The case in  Kitkness V. John Hudson & Co. Ltd, was different because the  section there  interpreted required a ’sale’ and there was  no  sale express  or  implied  when the wagons were  taken  away  and compensation  was  paid  in the shape  of  transport  stock. There  a  sale in its ordinary forms  wag,  obviously  meant though  it  was recognise that ,sale’ in other  context  has other meanings. It was argued that there must be mutuality.  That one  party must be free to offer and must offer and the other side must be free to accept and must 514 accept  ’the offer before a sale tan be said to arise.   But sales  often take place without volition of a party. A  sick man  is given medicines under the orders of his  doctor  and pays  for  them to the chemist with tax oil the  price.   He does  not even know the names of the medicines. Did he  make an  offer to the chemist from his sick bed ? The affairs  of the  world are very complicated and sales are not always  in their   elementary   forms.    Due  to   short   supply   or maldistribution  of  goods,  controls have  to  be  imposed. There are permits, price controls, rationing and shops which are  licensed. can it be said that there is no sale  because mutuality is on one account or another?  It was not said  in ’the  Tata  Iron  and Steel case (1) which  was  a  case  of control,  that  there  was no sale.   The  entry  should  be interpreted  in a liberal spirit and not cut down by  narrow technical  considerations.  The entry in other words  should not  be  shorn of all its content to leave a  mere  husk  of legislative power.  For the purposes of legislation such  as on sales tax it is only necessary to see whether there is  , a  sale  express or implied.’ Such a sale was not  found  in ""forward  contracts"  and in respect of materials  used  in building  contracts.   But the same cannot be  said  of  all situations.   I  for  one would not curtail  the  entry  any further.   The entry has its meaning and within its  meaning there  is a plenary power.  If a sale express or implied  is found  to  exist  then the tax must follow.   I  am  of  the opinion that in these transactions there was a sale of sugar for  a price and the tax was payable.  I  would,  therefore, dismiss these appeals with costs. BY COURT: Having regard to the judgment of the mojority, all these appeals(Nos. 237 and 633-636 of 1961) would be allowed with costs-one hearing fee. (1) [1958] S.C.R.  1355.  515