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PETITIONER: SALAR JUNG SUGAR NULLS LTD. ETC.

       Vs.

RESPONDENT: STATE OF MYSORE & ORS.

DATE OF JUDGMENT01/11/1971

BENCH: RAY, A.N. BENCH: RAY, A.N. MITTER, G.K. ROY, SUBIMAL CHANDRA PALEKAR, D.G. SIKRI, S.M. (CJ) SHELAT, J.M. DUA, I.D.

CITATION:  1972 AIR   87            1972 SCR  (2) 228  1970 SCC  (2)  23  CITATOR INFO :  R          1976 SC2478  (12)  APR        1978 SC 449  (46,52)  F          1985 SC1199  (6)

ACT: Mysore  Sales Tax Act, 1957 as amended by Mysore Act  11  of 1961--Levy  of  purchase  tax  on  sugarcane  purchased   by factories  from  growers--Purchase and supply  of  sugarcane regulated by Central and State Control  Orders--Transactions whether amounted to sale within meaning of s. 2(f) of Mysore Sales  Tax Act--Mutual assent between purchaser  and  seller whether Present--Factories whether dealer within meaning  of s.  2(k) of Act--Different rates of tax In different  States whether violative of Art. 14 of Constitution.

HEADNOTE: By Mysore Act 11 of 1961 which came into force on October 1, 1961 sugarcane was included at Serial No. 11-A in the  Third Schedule to the Mysore Sales Tax Act, 1957.  As a result  of the  amendment the appellants were subjected to levy of  tax on purchase of sugarcane.  Their writ petitions  challenging the  levy were dismissed by the High Court.  In  appeals  by certificate the appellants contended before this Court  that :  (i)  on  account of the Central &  State  Control  Orders applicable to the transactions there was no mutual assent by and  between the appellants and the growers of sugarcane  in regard  to  supply  of  sugarcane by  the  growers  and  the acceptance  by  the  factories and therefore  there  was  no purchase  and sale of sugarcane-, (ii) the  appellants  were not  dealers  within the meaning of s. 2(k)  of  the  Mysore Sales  Tax  Act;  (iii)  the levy  of  tax  on  purchase  of sugarcane  at different rates in different States  was  dis- criminatory and in violation of Art. 14. HELD  :  (i) The decisions relating  to  ’compulsory  sales’ establish  that statutory orders regulating the  supply  and distribution  of goods by and between the parties under  the Control  Orders in a State do not absolutely impinge on  the

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freedom  to  enter into contract.  Legislative  measures  or statutory  provisions  fixing the price,  delivery,  supply, restricting areas for transactions are all within the  realm of   planning   economic  needs  ensuring   production   and distribution of essential commodities and basic  necessities of  community.   The  recent trends  in  these  legal  rules delimit the variety of structure of rights and duties  which individuals  may create by such acts and transactions.   The complexity   of   modern  activities  and   the   consequent difficulty  of providing for every eventuality  have  shaken fervour  for  freedom of contract as there  was  during  the nineteenth  century.  The economic environment has  changed. The  individual  freedom is to be reconciled  with  adequate performance  by the Government of its functions in a  highly organised  society.   Delimiting areas for  transactions  or parties or denoting price for transaction are all within the area  of individual freedom of contract with limited  choice by  reason  of ensuring the greatest good for  the  greatest number by achieving proper supply at standard or fair prices to  eliminate the evils of hoarding and scarcity on the  one hand and availability on the other. [244 G-Z45 B] In the present case the Control Orders are to be kept in the forefront   for   appreciating   the   true   character   of transactions.   It is apparent that the area is  restricted. The parties are’ determined by the order.  The 229 minimum  price is fixed. The minimum quantity of  supply  is also regulated.  These features do not complete the picture. The  entire transaction indicates that the parties agree  to buy  and sell.  The parties choose the terms. of  delivery.. The parties have choice with regard to obtaining supply of a quantity higher than 95 per cent of the yield.  The  parties can  stipulate  for a price higher than  the  minimum.   The parties  can  have terms for payment in advance as  well  in cash.   A grower may not cultivate and there may not be  any yield.  A factory may be closed or wound up and may not  buy sugarcane.   A  factory can reject goods  after  inspection. Inspection and appropriation of goods, which in the  present case were unascertained goods indicates not only freedom  in the formation but also in the performance of contracts.  The combination of all these factors indicates that the  parties entered into agreement with mutual assent and with  volition for transfer of goods in consideration of price. [248  B-E;, 247 B] The  transactions accordingly amounted to sales  within  the meaning of s. 2(t) of the Mysore Sales Tax Act. Indian Steel & Wire Products Ltd. v. State of Madras  [1968] 1  S.C.R. 479, Andhra Sugars Ltd. & Anr. v. State of  Andhra Pradesh,  [1968] 1 S.C.R. 706 and State of Rajasthan &  Anr. v.  M/s.  Karam Chand Thappar & Bros. Ltd. [1969]  1  S.C.R. 861, relied on. State  of  Madras v. Gannon Dunkerley &  Co.  (Madras)  Ltd. [1959]  S.C.R.  379,  M/s.  New India Sugar  Mills  Ltd.  v. Commissioner of Sales Tax, Bihar, [1969] Supp. 2 S.C.R. 459, M/s.   Chitter Mal Narain Das v, Commissioner of Sales  Tax, [1971]  1  S.C.R. 671, Newcastle Breweries  Ltd.  v.  Inland Revenue  Commissioners  (1927)  96  L.J.K.B.  735,  Kirkness (Inspector of Taxes) v John Hudson & Co. Ltd., [1955]  A.696 and  Ridge  Nominees Ltd. v.  Inland  Revenue  Commissioners [1962] Ch. 376, Considered. (ii)  If  a  person carries on the  business  of  buying  or selling  a commodity it is not necessary that he shall  sell the same commodity to become a dealer.  The commodity may be converted into another saleable commodity or it may be  used as  an  ingredient  in  the  manufacture  of  a   commodity.

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Therefore,  the  factories which bought sugarcane  could  be said’  to  carry  on  the business  of  buying  and  selling sugarcane and the factories were ’dealer’ within the meaning of s. 2(k) of the Mysore Sales Tax Act, [249 C] State of Andhra Pradesh v. Abdul Bakshi & Bros.  A.I.R. 1965 S.C. 531, relied on. (iii)  It was not disputed that all the factories in  Mysore had  been treated equally.  Different rates of purchase  tax in different States are applicable on various grounds.   The quantity  available, the conditions of  agriculturists,  the number  of  factories will all  have  distinctive  features. Therefore  there  could be no infraction of Art. 14  of  the Constitution.[249 E] (iv)  In view of the decision of this Court in Tata  Iron  & Steel  Co.’s  case  the appellants  could  not  impeach  the imposition  and  levy  of sale tax on the  ground  that  the appellants  could not collect from the purchasers  of  sugar the  purchase  tax  paid by the appellants  on  purchase  of Sugarcane. [249 G-H] Tata Iron & Steel Co. v. State of Bihar, [1958] S.C.R. 1355, applied. 230

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  2002  to 2005 and 2014 to 2017 of 1968. Appeals from the judgment and order dated April 16, 1968  of the  Mysore High Court in Writ Petitions Nos. 2225 of  1967, 29 to 31, of  1968,  2208  of  1967 and 32  to  34  of  1969 respectively. G.Vasanta Pai, G. L. Sanghi, P. C. Bhartari, B. Datta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appel- lants (in all the appeals). V.  S.  Desai,  S.  S.  Javali and R.  B.  A  tar,  for  the respondents (in all the appeals). The Judgment of the Court was delivered by Ray,  J.  These  appeals  are  by  certificate  against  the judgment and order dated 16 April, 1968 of the High Court of Mysore  dismissing the applications of the appellants  under Article  226  of  the Constitution  for  writs,  orders  and directions  prohibiting the respondent-State of  Mysore  and the  Commissioner  for Commercial Taxes  at  Bangalore  from levying  or taking proceedings to levy any purchase  tax  on purchase of sugarcane from the grower or from collecting  or taking any proceedings for recovery of any such tax with  or without  penalty from the appellants.  The  appellants  also asked for orders, writs and directions for refund of several sums of money collected as and for purchase tax. The appellants are the India Sugars and Refineries Ltd.  and the  Salar Jung Mills Ltd.  The India Sugars and  Refineries Ltd. is situated at Hospet in Bellary District in Mysore and the Salar Jung Sugar Mills Ltd. is situated at Munirabad  in Raichur District in Mysore. The appellant, the India Sugars and Refineries Ltd. in  four applications now Civil Appeals No. 2015, 2016, 2017 and 2014 of 1968 impeached the demand and collection made against the appellant  for large sums of money as and for  purchase  tax and  penalty on the purchase of sugarcane from  the  growers for  the period 1 April, 1962 to 30 June, 1967  and  further asked for refund of large sum of money collected as purchase tax. The   appellant  Salar  Jung  Sugar  Mills  Ltd.   in   four applications  now  Civil Appeals No. 2003, 2004,  2005,  and

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2002  of  1968 asked for similar orders  and  directions  in respect of ’the period 1 July, 1963 to 30 June, 1967. In the fifties practically all the States in which sugarcane was  grown  for the purpose of manufacturing sugar  used  to levy  cess on sugarcane brought into the premises  of  sugar factories.  This 231 Court  in Diamond Sugar Mills v. State of U.P. (1) [1961]  3 S.C.R.  242 held that section 3 of the U.P.  Sugarcane  Cess Act,  1956  which  empowered the Governor of  the  State  to impose  cess  on entry of sugarcane into the premises  of  a factory did not fall within Entry 52 of List II and as there was no entry in the State List or in the Concurrent List  in which the said Act could fall, it was beyond the legislative competence  of the State Legislature.  The decision of  this Court  was given on 13 December, 1960.  The  Sugarcane  Cess (Validation)  Act, 1961 was passed by Parliament  validating the  imposition  of collection of cess  on  sugarcane  under several  State  enactments before the  commencement  of  the Validation Act of 1961, The  Mysore  State Legislature imposed tax  on  purchase  of sugarcane  purchased by sugar factories.  By Mysore Act  No. 11  of  1961  which  came into  force  on  1  October,  1961 sugarcane  was  included  at Serial No. 11-A  in  the  Third Schedule  to the Mysore Sales Tax Act, 1957.   The  relevant provision in the Mysore Act is as follows "11-A  Sugarcane--Purchased by the last dealer in the  State liable to tax under this Act.-Fifteen per cent". As  a result of the amendment the appellants were  subjected to levy of tax on purchase of sugarcane. The  appellants raised three principal contentions.   First, there was no mutual assent by and between the appellants and the growers of sugarcane in regard to supply of sugarcane by the  growers  and  the  acceptance  by  the  factories   and therefore  there  was  no purchase and  sale  of  sugarcane. Secondly, the appellants are not dealers within the  meaning of  section  2(k) of the Mysore Sales Tax Act.   Third,  the levy  of tax on purchase of sugarcane at different rates  in different  States  was discriminatory and  in  violation  of Article 14. In  order to appreciate the rival contentions on  the  first ground  as  to  whether  there was a  purchase  or  sale  of sugarcane the relevant legislation has to be looked into and facts  and circumstances have to be ascertained for  finding out as to what the actual transaction was. In  exercise  of the powers conferred by section  3  of  the Essential Commodities Act, 1955 the Central Government on 27 August,  1955 made the Sugarcane Control Order,  1955.   The Central  Government  was  empowered  by  clause  3  of   the Sugarcane  Control Order, 1955 to fix the minimum  price  of sugarcane  to  be  paid by purchasers  of  sugar.   Sale  or purchase of sugarcane at a price lower than the price  fixed under section 3 was prohibit- 232 ed. The Central Government, however, could fix an additional price under certain circumstances and contingencies.  Clause 4 of the Order of 1955 gave the Government power to prohibit or  restrict or otherwise regulate export of sugarcane  from any  area  for  supply to different factories  and  also  to direct  that no jaggery or sugar shall be manufactured  from sugarcane except under and in accordance with the conditions specified in a licence issued in that behalf. On  4 October, 1963 in exercise of the powers  conferred  by section  3  of the Defence of India Act,  1962  the  Central Government  introduced  Rule 125-B to the Defence  of  India

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Rules.   Rule  125-B inter alia stated that if  the  Central Government was of opinion that it was necessary or expedient for regulating or increasing the supply of sugarcane or  for securing the equitable distribution of sugarcane the Central Government   could  pass  orders  to  reserve  areas   where sugarcane was grown for a factory; determine the quantity of sugarcane which a factory would require for crushing  during a  year; fix with respect to any specified sugarcane  grower in  a reserved area the quantity or percentage of  sugarcane grown  by such grower for supply to the  factory  concerned; require a factory to enter into an agreement with the grower to  purchase  the quantity of sugarcane so  determined;  and further  direct that no sugarcane shall be exported  from  a reserved  area except under and in accordance with a  permit issued by the Central Government. On 26 September, 1963 sugar was notified under Rule 125-B of the Defence of India Rules as a thing essential to the  life of the community. On 7 October, 1963 the Central  Government directed  that  the powers conferred by Rule  125-B  of  the Defence  of  India  Rules shall be exercised  by  the  State Government. In  this  background the Mysore Government on  14  November, 1963  in exercise of the powers conferred by Rule  125-B  of the Defence of India Rules brought into existence the Mysore Sugarcane (Regulation of Supply) Order, 1963.  In Schedule I of  the  Order factories were specified and  reserved  areas were enumerated in the said Schedule for supply of sugarcane to  the specified factory and the sugarcane growers  in  the reserved areas were to supply 95 per cent of sugarcane grown to the factory concerned.  Every factory to which supply  of sugarcane  was  to  be made was required to  enter  into  an agreement  with  each  sugarcane  _grower  to  purchase  the quantity of sugarcane determined.  Purchase of sugarcane  by power  crusher  or  for manufacture of  gur,  shakkar,  gul, jaggery,  rab or khandsari sugar was prohibited.  Export  of sugarcane from 233 a  reserved  area was also prohibited except  under  permit. Contravention of the Mysore Sugarcane Control Order was made punishable  by  forfeiture of property in respect  of  which there  was  a contravention.  The Mysore  Sugarcane  Control Order,  1963 specified the India Sugars and Refineries  Ltd. as the factory and enumerated the areas reserved for  supply of  sugarcane  to the specified factory.  It may  be  stated here that the Salar Jung Sugar Mills Ltd. was also specified in  the Schedule and it remained specified until  1965  when the  Mysore  Sugarcane  Munirabad Order, 1965  was  made  as specially applicable to Salar Jung Sugar Mills Ltd. On 14 February, 1964 in exercise of the powers conferred  by section  3  of the Essential Commodities  Act,  the  Central Government  amended  the  Sugarcane  Control  Order,   1955. Clause  4 of the Sugarcane Control Order, 1955  was  amended and substituted by a new clause.  The new clause 4 conferred powers  on  the Central Government to  reserve  areas  where sugarcane was grown for a factory, determine the quantity of sugarcane  which  the  factory would  require  for  crushing during the year, fix with respect to any specified sugarcane grower  in  a reserved area the quantity  or  percentage  of sugarcane  grown  by  such grower which  such  grower  would supply  to  the  factory concerned;  require  the  sugarcane grower and the factory to enter into an agreement for supply and  purchase  of the quantity of sugarcane  so  determined. Clause  4 as amended further provided that  every  sugarcane grower  or factory to whom the order applied would be  bound to  supply or purchase the quantity of sugar covered by  the

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agreement  entered  into and wilful failure on the  part  of anyone  would constitute a breach of the provisions  of  the said Order. On 20 February, 1964 in exercise of the powers conferred  by clause 6 of the Sugarcane (Control) Order, 1955, the Central Government directed that the powers conferred on the Central Government  by  clause  4  of  the  said  Order,  shall   be exercisable  by  the State Governments  of  Andhra  Pradesh, Assam,  Bihar,  Gujarat,  Kerala,  Madhya  Pradesh,  Madras, Maharashtra,   Mysore,  Orissa,  Punjab,  Rajasthan,   Uttar Pradesh  and  West  Bengal and  the  Chief  Commissioner  of Pondicherry. On 15 January, 1965 the Mysore Government in exercise of the Powers conferred by clause 4 of the Sugarcane Control Order, 1955  as  amended and read with the  notification  dated  20 February,  1964  made the Mysore  Sugarcane  (Regulation  of Supply)  (Munirabad)  Order,  1965.   The  Mysore  Sugarcane (Munirabad) Order of 1965 in clause 2(c) defined factory  to mean  the premises of the appellant Salar Jung  Sugar  Mills Ltd.  at Munirabad.  In Schedule I of the  Mysore  Sugarcane (Regulation of Supply) (Munira- 234 bad)  Order, 1965 the area reserved for supply of  sugarcane to  the factory was enumerated setting out the names of  the villages.   The Mysore Sugarcane Order, 1955 determined  the crushing  capacity of the appellant Salar Jung  Sugar  Mills Ltd.  to be 1000 tons per day and the quantity of  sugarcane required  by  the factory during the crushing season  to  be 1,50,000  tons.  The Order further stated that  the  factory was  to  secure  the quantity of  sugarcane  from  the  area specified in Schedule I and the quantity of sugarcane to be, supplied  by  each grower was fixed at 95 per  cent  of  the sugarcane  grown by the grower.  Every sugarcane grower  and the  factory’  concerned  were required  to  enter  into  an agreement  to supply or purchase the quantity  of  sugarcane determined under clause 4. Export of sugarcane from reserved area  was prohibited.  The Sugarcane (Regulation of  Supply) Order, 1963 in so far as it related to matters provided  for in   the  Mysore  Sugarcane  (Munirabad)  Order,  1965   was repealed.   Thereafter, the Mysore Sugarcane (Regulation  of Supply)   Order,  1963  applied  to  the  India  Sugar   and Refineries  Ltd.  and the Mysore  Sugarcane  (Regulation  of Supply)  (Munirabad) Order, 1965 applied to the Salar  Jung. Sugar Mills Ltd. On  16  July, 1966 in exercise of the  powers  conferred  by section 3 of the Essential Commodities Act, 1955 the Central Government  made  the Sugarcane (Control)  Order,  1966  and repealed  the  Sugarcane (Control) Order, 1955.   Under  the Sugarcane (Control) Order, 1966 ’factory’ means any premises including  the precincts thereof in any part of which  sugar is  manufactured  by vacuum pan process, ’price’  means  the price  or the minimum price fixed by the Central  Government from  time to time delivered at the gate of the  factory  or sugarcane  purchasing  centre and reserved area’  means  any area where sugarcane is grown and reserved for a factory  in terms of the Order.  Clause 3 of the 1966 Sugarcane  Control Order  dealt  with minimum price of sugarcane fixed  by  the Central Government having regard to (a) cost of,  production of sugarcane, (b) the return to the grower from  alternative crops on the general trend of prices of agricultural  commo- dities, (c) availability of sugar to the consumer at a  fair price, (d) the price at which sugar produced from  sugarcane is  sold  by producers’ of sugar, and (e)  the  recovery  of sugar from- sugarcane.  Purchase and sale of sugarcane at  a price  lower than that fixed was prohibited.  The  price  of

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sugarcane became-payable 14 days from the date of  delivery. Additional  price  for sugarcane could also be  fixed  under clause 5. Under clause 6 of the Order the Central Government could reserve area where sugarcane is grown for the  factory having regard to the crushing capacity of the-, factory, the availability of sugarcane in the reserved area and the 235 need for production of sugar and also determine the quantity of sugarcane required by the factory for crushing during any year and fix the quantity to be supplied by a grower to  the factory.  The grower and the factory were required to  enter into  an  agreement  for supply or  purchase  of  sugarcane. Export of sugarcane from any reserved area was prohibited. In  exercise  of  the powers conferred by clause  6  of  the Sugarcane   (Control)  Order,  1966  the  Mysore   Sugarcane (Regulation  of  Distribution) (Munirabad) Order,  1966  was made  by  the  Government of  Mysore  repealing  the  Mysore Sugarcane  (Regulation of Supply) (Munirabad)  Order,  1965. The 1966 Sugarcane (Munirabad) Order was in relation to  the appellants  Salar  Jung Sugar Mills Ltd.  Clause  3  of  the Order dealt with the crushing capacity of the factory  being 1000 tons per day and the quantity of sugarcane required for the  factory during the year was determined to  be  1,50,000 tons.  The appellant’s factory was to secure the quantity of sugarcane  determined  under  clause  3(2)  from  the  areas specified in Schedule I being the reserved areas for  supply of  sugarcane to the factory.  The sugarcane growers in  the reserved  area were to supply 95 per cent of  the  sugarcane grown by them to the factory.  The sugarcane grower and  the factory were required to enter into an agreement for  supply and purchase of sugarcane. Counsel on behalf of the appellants contended that there was no  sale  and  purchase of sugarcane by reason  of  want  of mutual  assent and further that the entire  transaction  was only by operation of statutes, and at no stage there was any element  of freedom to buy or sell.  It was said that  under the  statutes these consequences emerged.  First, the  price was  fixed.  Secondly, the sugarcane grower was required  to deliver  sugarcane and the factory was required  to  receive supply only from the sugarcane grower in the reserved  area. Thirdly,  the  quantity of supply by the  sugarcane  grower, namely, 95 per cent of the produce was fixed.  Fourthly, the quantity  of sugarcane required by the factory was fixed  at 1,50,000  tons a year.  Fifthly, the grower in the  reserved area  could  not  export sugarcane to any  place  or  person outside  the area.  Sixthly, it was said that entering  into agreement between the grower and the factory for supply  and purchase of sugarcane was under the statute. Counsel  for the State on the other hand contended that  the transaction  was in essence and substance purchase and  sale and  there was mutual assent between the parties as  to  the transactions.  It was said that a grower after he had  grown sugarcane  at  the commencement of  the  cultivation  season might  bargain  for a price higher than the  minimum  price. Again, if the factory did not L500Sup.CI/72 236 agree to pay higher price the grower might not elect to grow sugarcane or even allow his land to lie fallow.  The factory might agree to pay a price higher than the minimum price  in order to provide sufficient inducement to growers for higher yield.  Strong reliance was placed by counsel for the  State on  the agreement entered into between the growers  and  the factory  as  decisive  of  purchase and  sale.   As  to  the agreement it was said on behalf of the State that to  ensure a well phased supply of sugarcane to the factory the  latter

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might  enter into an agreement with the growers even  before they  would plant sugarcane.  The dates of delivery were  to be  agreed upon between the parties.  The growers  according to the State might ask for advance payment of price in  cash or  in  the  form of seedlings, fertilisers  and  the  like. Factories could ask for more than 95 per cent of the yield. At  all  relevant  times sugarcane was  declared  to  be  an essential  commodity.   The  various orders  were  made  for regulating  the supply of sugarcane to the factories  having regard  to  the  crushing  capacity  of  the  factory,   the availability  of  sugarcane  in the area and  the  need  for production   of  sugarcane.   This   co-ordination   between production and distribution of sugarcane on the one hand and production and distribution of sugar on the other hung toge- ther  as  complementary  to  each other  in  regard  to  the requirements of basic ingredient.  The carving out of  areas for production and distribution of sugarcane is necessary to preserve  continuity of supply and to prevent  shortage  and defective   distribution.   The  regulation  of  supply   of sugarcane  by fixing the minimum price is an application  of the   principle   of  utilitarianism  which   receives   the approbation and goodwill of both the grower and the  factory so  that  the grower is assured of an  economic  competitive return  and the factory is also assured of not being  scared by  soaring  and  fluctuating price  to  thwart  and  impede production and manufacture of sugar. Counsel  for the appellants extracted the famous  dictum  of Sir Henry Maine and submitted that the orders in the present case  were  retrograde step and the clock was  put  back  by reversing the historical evolution from status to  contract. What  was  emphasized by counsel for the appellants  was  as follows : The various Orders had the effect of bringing into existence  the  status  of  delivery  by  the  growers   and acceptance  by the factory of sugarcane as a result  of  the statutory  orders and there was no area of  bargain.   There was no element of will.  There was no aspect of assent.  The entire  transaction  was  nothing  but  a  regimentation  of pattern of automatic supply and acceptance.  The grower  was bound to deliver.  The factory was bound to accept.  Neither party could move out of the apron strings of the statutes. 237 This  Court  in State of Madras v. Gannon  Dunkerley  &  Co. (Madras)  Ltd.  [1959]  S.C.R.  379  in  dealing  with   the assessment  of  Gannon Dunkerley & Co. to sales tax  on  the value  of  the materials used in the execution  of  building contracts  within the taxable turnover of the  company  held that  the building contract was one entire  and  indivisible transaction and there was no separate individual sale of the building  materials comprised in the construction.   It  was said by this Court that in a building contract the agreement between the parties was that the contractor should construct the  building according to the specifications  contained  in the agreement ,and in consideration therefor receive payment as  provided  therein, and in such an  agreement  there  was ,neither  a  contract  to sell the  materials  used  in  the construction  nor did the property pass therein as  movable. The  reason  why counsel for the appellants  relied  on  the decision  in  Gannon Dunkerley & Co. was in support  of  the proposition  that the word ’sale’ occurring in Entry  54  in List II was to be interpreted in the sense in which the word ’sale’ is used in the Indian Sale of Goods Act.  This  Court in  Gannon  Dunkerley & Co. referred to the meaning  of  the word   ’sale’   in  various  treatises   like   Blackstone’s Commentary, Ben amin on Sale, Halsbury’s Laws of England and held  relying on the meaning given by Benjamin on Sale  that

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the  four elements required in a sale were; first, that  the parties  must  ’be competent to  contract;  secondly,  there should  be mutual assent; thirdly, property in the thing  is to  be transferred; and, fourthly, the price in money is  to be  paid.   Counsel for the appellants  contended  that  the element of mutual assent was lacking in the present cases. In   M/s New India Sugar Mills Ltd. v. The  Commissioner  of Sales Tax, Bihar [1963] Suppl. 2 S.C.R. 459 a question arose as  to  whether the despatches of sugar to the  Province  of Madras  by dealers in accordance with the directions  issued by the Controller under the Sugar and Sugar Products Control Order, 1946 was liable to be taxed as a sale.  This Court in the majority opinion held that the despatches of sugar under the directions of the Controller were not the result of  any contract  of sale because there was no offer by the  dealers to the State and no acceptance by the State.  The dealer was held  to  be compelled to carry out the  directions  of  the Controller  and  there was no volition.  Intimation  by  the State  of  its  requirement of sugar to  the  Controller  or communication of the allotment order to the dealer  assessee was  held not to amount to an offer.  The minority  view  in that  case  was that there was a sale of sugar  and  consent could  be  express  or implied and as long  as  the  parties carried on trade under controls at fixed price they must  be deemed  to  have agreed to such a price; there  must  be  an amplied  contract  with  an implied  offer  and  an  implied acceptance.   The  decision  of this Court in  the  case  of Gannon 238 Dunkerley  &  Co. (supra) was referred to in the  New  India Sugar Mills (supra) case for the meaning of the word ’sale). The majority view in the case of New India Sugar Mills  Ltd. was  on the reasoning that the prerequisite to a sale was  a contract  of sale which was to be had between  the  parties. The  Province  of Madras intimated its requirements  to  the Controller.   The Controller called upon  the  manufacturing units to supply sugar to the Province.  It was held that the Controller  did  not act as an a,-lent of  the  Province  to purchase  goods  but  that  he  acted  in  exercise  of  his statutory  authority.  Therefore, there was no offer by  the Province  to purchase sugar and there was no  acceptance  of offer by the manufacturer.  The ratio was that there was  no privity  between  the manufacturer and  the  Province.   The minority  view  in  that  case  was  that  there  might   be compulsion  in both buying and selling but a compelled  sale might  nevertheless  be a sale.  Hidayatullah,  J.  for  the minority  view  said  "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 was no sale because mutuality is lost on one account  or  another ? It was not said in the case  of  Tata Iron and Steel Co. Ltd. v. The State of Bihar [1958]  S.C.R. 1355  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 lax 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.  I am of opinion  that in these transactions there was a sale of sugar for a  price and the tax was payable".

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Could  a  company which supplied steel products  to  various persons in the State of Madras at the instance of the  Steel Controller  exercising  powers  under  the  Iron  and  Steel (Control)  of  Production and Distribution  Order,  1941  be assessed to sales tax oil those transactions.  This was  the question in.  Indian Steel & Wire Products Ltd. v. State  of Madras  [1968] 1 S.C.R. 479.  Clause 5 of the Order  in  the Madras  case stated that "no producer or  stockholder  shall dispose  of  or agree to dispose of or export  or  agree  to export  from  British  India any iron  or  steel  except  in accordance with the conditions contained or incorporated  in a  general  or  special written order  of  the  Controller". Clause 10-B of the Order stated that "the Controller may, by a written order require any person holding stock of iron and steel, acquired by 239 him  otherwise  than in accordance with  the  provisions  of Clause 4 to sell the whole or any part of the stock to  such person or class of persons and on such terms and  conditions as  may be specified in the Order".  Clause 4 of  the  Order dealt  with  acquisition and stated that  "no  person  shall acquire  or  agree  to  acquire any iron  or  steel  from  a producer or a stockholder except under the authority of  and in accordance with the conditions contained or  incorporated in  a general or special written order of  the  Controller". The  company  contended that the parties to whom  the  goods were  to  be supplied, the price which was to be  paid,  the manner in which goods were to be transported and the mode in which  payment  was to be made were all  determined  by  the Controller  and  therefore  the  transfers  were  not  sales because  of  compulsion and lack of  agreement.   Hegde,  J. speaking  for  the  Court referred to  the  observations  in Cheshire  and Fifoot Law of Contract (6th Ed.) at p. 22  and said "Law invariably imposed some restrictions on freedom of contract’  But due to change in political outlook and  as  a result  of economic compulsions, the freedom of contract  is now  being  confined  gradually  to  narrower  and  narrower limits.   It would be incorrect to contend that because  law imposes  some restrictions on freedom to contract, there  is no  contract  at  all.   So long as  mutual  assent  is  not completely  excluded  in  any  dealing,  in  law  it  is   a contract".   The transactions were held to be sales  because the date for supply of goods’, the time for payment and  the independent  arrangement between the parties  for  transport predicated the basis of mutual assent. The  Andhra  Pradesh  Sugarcane (Regulation  of  Supply  and Purchase)  Act, 1961 came up for consideration  before  this Court  in Andhra Sugars Ltd. & Anr. etc. v. State of  Andhra Pradesh & Ors. [1968] 1 S.C.R. 706.  A sugar factory had  to buy  sugarcane  from  canegrowers  in  conformity  with  the directions  of the Cane commissioner.  The State  Government by notification had power to tax purchases of sugarcane  for use,  consumption  or sale in a sugar  factory.   The  sugar factories challenged the validity of the Act empowering  the Government to tax purchases of sugarcane in those  instances because  the factories were compelled to buy cane  from  the sugarcane  growers  and  they  were  bound  to  enter   into agreements  in  prescribed terms and conditions and  to  buy sugarcane in conformity with instructions issued by the Cane Commissioner  under the Act and areas were declared  as  the factory  zone for supply of cane to a factory,  the  factory was  bound to purchase quantity of cane grown in  that  area and  offered  for sale as might be determined  by  the  Cane Commissioner,   the  cane  growers  were   prohibited   from supplying or selling cane to any factory or person otherwise

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than  in  accordance with the provisions  of  the  Schedule. This  Court  on reading the provisions of the  Act  and  the Rules  framed  thereunder  found that  a  cane-grower  in  a factory zone was 240 free  to sell or not to sell his sugarcane to  the  factory. The  contention  of  the factories was that  if  the  grower offered  to  sell  the  factory  was  bound  to  enter  into agreement  on prescribed terms and conditions and  therefore the  factories  were compelled by law to buy cane  from  the growers and the purchases were not made under agreements. Bachawat,  J.  speaking for the Court in the  Andhra  Sugars case  said  that the decision in the New India  Sugar  Mills Ltd.  was  not  to  be  treated  as  an  authority  for  the proposition  that  there can be no contract  of  sale  under compulsion of a statute.  The offer of a cane grower to sell was  a  free  consent  and the compulsion  of  law  was  not coercion  as  defined in section 15 of the  Indian  Contract Act, 1892.  The agreement in spite of the compulsion of  law was  said  to ’be neither void nor voidable.   A  canegrower made  an  offer  directly to  the  factories.   The  factory accepted  it.  The parties signed an agreement.   There  was privity of contract between the parties.  It was therefore a contract  of sale and purchase though the buyer was  obliged to give his assent under compulsion of a statute. In the case of Andhra Sugars Ltd. this Court referred to the whittling  down  of the laissez faire concept  in  a  social Welfare State by emphasising the public interest to  control unfair  competition and combination.  It was said "The  cane growers  scattered  in the villages had no  real  bargaining power.  The factory owners or their combines enjoyed a  near monopoly  of buying and could dictate their own  terms.   In this unequal contest between the canegrowers and the factory owners,  the  law stepped in. and compelled the  factory  to enter  into  contracts of purchase of cane  offered  by  the canegrowers on prescribed terms and conditions". The  Colliery  Control  Order, 1945  empowered  the  Central Government  to  fix  price at which coal might  be  sold  by colliery  owners.  The colliery owners were prohibited  from selling  or agreeing to sell or offering to sell coal  at  a price different from the price fixed in that behalf.   Where a  colliery  owner signified to the Deputy  Coal  Controller (Distribution) in writing his willingness to sell direct  to consumers and an allotment was made by the Deputy Controller to  a  consumer  for such direct sale, the coal  was  to  be delivered to the consumer at the price fixed under clause  4 of  the  Order.  The Central Government  was  authorised  to issue from time to time such directions as it thought fit to any colliery owner regulating the disposal of his stocks  of coal  or  of  the expected output of coal  in  the  colliery during any period including directions as to the grade, size and quantity of coal which might be disposed of and  persons or  class or description of persons to whom coal  should  or should not be disposed of.  The order 241 further  provided that no person shall acquire  or  purchase any coal from a colliery, and no colliery owner or his agent shall  despatch or agree to despatch or transport  any  coal from  the  colliery  except  under  the  authority  and   in accordance  with  the conditions contained in a  general  or special authority of the Central Government. The Colliery Coal Control Order 1945 came up for  considera- tion  in  State  of Rajasthan & Anr. v.  M/s.   Karam  Chand Thappar & Bros.  Ltd. [1969] 1 S.C.R. 861.  Under a contract with  Equitable Coal Company, Karam Chand Thappar and  Bros.

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Ltd. acquired the monopoly right to supply coal on behalf of the  collieries  in Rajasthan and sold as the agent  of  the Equitable  Coal  Company.   Karam Chand  Thappar  and  Bros. entered  into  an agreement with the State of  Rajasthan  to supply  coal  to  the  Rajasthan  Government.   The  company contended that the supply of coal to the State of  Rajasthan did not constitute sale as the supply was controlled by  the Colliery Control Order, 1945 and even if there was a sale it would  be inter-State sale.  It was held that  the  Colliery Control  Order super-imposed upon the agreement between  the parties the rate fixed and the elements necessary to  render turnover  from  sale of goods liable to sales  tax,  namely, competency of parties, mutual assent of the parties, passing of  property  in  the goods supplied to  the  purchaser  and payment  or promise of payment of price were present in  the transaction.  In the Rajasthan case it was noticed that when the goods supply of which is controlled by statutory  orders are delivered pursuant to contract of sale the principle  of die decision in the case of New, India Sugar Mills Ltd.  has no  application.   Shah, J. speaking for the  Court  in  the Rajasthan  case  said that there was an  agreement  of  sale between  the parties competent to contract and in  pursuance of  the  agreement of sale property in  the  goods  supplied passed  to the purchaser for price.agreed to be  paid.   The transaction was, therefore, one of sale of goods within  the meaning of the Rajasthan Sales Tax Act. The  U.P. Wheat Procurement (Levy) Order, 1959 was made  for maintaining   and   securing  equitable   distribution   and availability  of wheat at fair prices.  By clause 3  (1)  of the  Order  ’every licensed dealer shall sell to  the  State Government at the controlled prices 50 per cent of the wheat held  in  stock by him at the commencement of  this  Order’. Again by clause 3(2) licensed dealer ’is directed to sell to the  State Government 50 per cent of wheat purchased by  him every  day with the date of the commencement of  this  Order and  until  such  time as  the  State  Government  otherwise directs’.  The Order enjoins the licensed dealer to  deliver the  quantities  specified in sub-clause (1 )  of  clause  3 either  to the Controller c. to such other person as may  be authorised by the Controller to take delivery on his behalf. The Enforcement 242 Officer  had  power  to  find out  whether  the  dealer  was carrying  out  the obligation.  The U.P.  Wheat  Procurement Order  was  challenged in M/s.  Chitter Mal  Narain  Das  v. Commissioner of Sales Tax [1971] 1 S.C.R. 671 on the  ground that  there was no contract between the licensed dealer  and the  State  pursuant  to which goods were  sold  within  the meaning  of  the U.P. Sales Tax Act.  It was held  that  the obligation  to  deliver wheat arose out of the  statute  and there was no volition of the licensed dealer.  The source of the  obligations to deliver the goods and pay for  them  was said to be not in consensus ’but in the statutory order.  It was  said  that the order did not ’envisage  any  consensual agreement’  and it did ’not require the State to enter  into even  an informal agreement’.  It was said ’On the  date  of the commencement of the U.P. Wheat Procurement (Levy) Order, upon the licensed dealer was imposed a liability to  deliver half  the  quantity  of wheat on hand, and he  had  also  to supply  to the State Governmeat 50 per cent of the  quantity of  wheat procured or purchased by him every  day  beginning with the date of commencement of the Order.  If he failed to carry out the obligation he was liable to be penalised.   To ensure that he carried out his obligation his premises  were liable  to be searched and his property  sequestered  (sic.)

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The Order ignored the volition of the dealer’. The meaning of the word ’compulsory sale’ came up for consi- deration  in three English decisions.  These  are  Newcastle Breweries  Ltd.  v. Inland Revenue  Commissioner  [1927]  96 L.J.K.B.  735 and also reported in 43 T.L.R.  476,  Kirkness (Inspector  of Taxes) v. John Hudson & Co. Ltd. [1955]  A.C. 696 and Ridge Nominees Ltd. v. Inland Revenue  Commissioners [1962] Ch. 376. In Newcastle Breweries Ltd. (supra) the question was whether a  sum awarded to the company by way of compensation  for  a quantity  of rum requisitioned by the Admirality  under  the Defence  of the Realm Regulations was a profit arising  from its  trade or business.  The company contended that  it  was not,  because  the compensation represented  the  compulsory taking by the Crown of a part of the capital of the company, and,  therefore, the compensation was not a profit from  the business.   It was held by Rowlatt, J., the Court of  Appeal and the House of Lords that the cost of the rum was  treated as  an  outgoing  of the business and if raw  rum  had  been voluntarily sold the price would have come into  computation of profits and the circumstance that the sale was compulsory made no difference. In  the case of John Hudson & Co. Ltd. the wagons  owned  by the company were on 1 January, 1948 under requisition by the Minister of Transport under the powers contained in Regula- 243 tion  53 of the Defence Regulations 1939.  On the  same  day the  property  in  these wagons was vested  in  the  British Transport  Corporation  by  virtue  of  section  29  of  the Transport  Act,  1947.   Section 30  of  the  Transport  Act provided  compensation  to  the owner of  the  wagons.   The amount  of  compensation determined in accordance  with  the provisions  of  the Transport Act was  substantially  higher than the. written down value of the wagons for the  purposes of  income-,tax  allowances in respect of wear and  tear  as appearing  in  the  company’s  books.   On  these  facts   a balancing charge under section 17 of the English Income  Tax Act,  1945 was made on the company.  The amount  represented the excess of the original cost over the written down value. The  company  appealed against the balancing charge  to  the Commissioners for the special purposes of the Income-tax Act who determined the question in favour of the Crown.  Upjohn, J.  reversed their determination.  The Court of  Appeal  and the House of Lords upheld his decision. The  decisions in the case of John Hudson & Co. Ltd.  turned on the meaning of the provisions of sction 17 of the English Income-tax Act, 1945 as to whether the company’s wagons were sold within the meaning of that section.  Viscount  Simonds, L.C.  said that the wagons were not sold and it would  be  a rave  misuse of language to say that they were sold.   Under the English Lands Clauses Consolidation Act, 1845 central or local authorities have powers of compulsory acquisition  and these   powers  are  commonly  referred  to  as  powers   of compulsory   purchase  and  the  transaction  is   sometimes referred  to  as a compulsory sale.  The word sale’  in  the English  Income-tax  Act  without some context  to  aid  the inclusion of compulsory sale within the meaning of the  word ’sale’  in  the  Income-tax Act was hold  not  to  apply  to include a case of compulsory acquisition.  The operation  of the Transport Act in that case was held to be different from that  of the Lands Clauses Consolidation Act, 1845,  because the  Transport Act did not have the elements which  in  some degree  assimilate a compulsory sale to a sale  simpliciter. These  compulsory  sales  under the  English  Lands  Clauses Consolidation  Act  place  the  parties  in  a  position  to

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negotiate  and  apart from the power of  compulsion  in  the background they were like an ordinary vendor and purchaser. The consensus between vendor and purchaser which is involved in  the  natural  meaning of the word  ’sale’  came  up  for consideration in the recent decision of the Court of  Appeal in the case of Ridge Nominees Ltd.  Ridge Securities made an offer  to purchase from the stockholders of another  company Gresham  the whole of the stock of that company.  The  offer was  conditional upon acceptance before a certain  date.   A document  of transfer of 440 shares in Gresham was  made  by Mrs. Rita Bell in consideration of 244 pound  891  paid  by Ridge.  The question  was  whether  the document was properly described as a conveyance or  transfer on  sale of any property within the meaning of  the  English Stamp Act, 1891.  Section 209 of the English Companies  Act, 1948 conferred power on an agent to execute an instrument of transfer  on a dissenting shareholder’s behalf.   The  offer made by Ridge Company to purchase shares in Gresham  company was  conditional upon acceptance by the holders of not  less than 90 per cent of the issued capital of Gresham.  In fact, more  than 90 per cent in value did accept the offer.   Mrs. Rita  Bell  was  one of those who did not think  it  fit  to accept  it.   Thereupon  Ridge Company  invoked  powers  and provisions of section 209 of the English Companies Act.  The transfer of the shares of Mrs. Bell was not executed by  her but  pursuant  to  the powers given by section  209  of  the English Companies Act by some one on her behalf.  Mrs.  Bell was  not  an assenting but a  dissenting  shareholder.   Her shares were transferred by virtue of the powers given to the transferee  company by the Act.  It is in that context  that the question was whether the conveyance or transfer was sale of any property.  The contention was that there could not be a  sale because the essential element of mutual  assent  was absent.   The Court of Appeal held that the instrument  must be regarded as a transfer of sale.  Lord Evershed, M.R. said that  by the machinery created by the Companies Act and  the statutory authority given by the Act to the agent to execute transfer on Mrs. Bell’s behalf ’it has in truth brought into being  that  which  ex facie in all  its  essential  charac- teristics and effect is, and becomes, a transfer on sale  of Mrs.  Bell’s stock.  Danckwerts, L.J. in the same case  said about  the transfer of shares.  "It seems to me that a  sale may  not always require the consensual element mentioned  in Benjamin  on  Sale.  8th ed. p. 2, and that  there  may,  in truth, be a compulsory sale of property with which the owner is  compelled  to part for a price against  his  will.   The effect  of  the statute in such a case is to  say  that  the absence of the transferor’s consent does not matter and  the sale is to proceed without it". These  decisions establish that statutory orders  regulating the  supply  and distribution of goods by  and  between  the parties  under Control Orders in a State do  not  absolutely impinge on the freedom to enter into contract.   Legislative measures or statutory provisions fixing the price, delivery, supply,  restricting areas for transactions are  all  within the realm of planning economic needs ensuring production and distribution of essential commodities and basic  necessities of community.  The recent trends in these legal rules delmit the  variety  of  structure  of  rights  and  duties   which individuals  may create by such acts and transactions.   The complexity   of   modern  activities  and   the   consequent difficulty of 245 providing  for  every eventuality have  shaken  fervour  for

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freedom  of  contract  as there was  during  the  nineteenth century.    The  economic  environment  has  changed.    The individual  freedom  is  to  be  reconciled  with   adequate performance  by the Government of its functions in a  highly organised  society.   Delimiting areas for  transactions  or parties  or denoting price for transactions are  all  within the  area  of individual freedom of contract  with.  limited choice  by  reason  of ensuring the greatest  good  for  the greatest  number by achieving proper supply at  standard  or fair  price to eliminate the evils of hoarding and  scarcity on the one band and availability on the other. In  the present case, the parties are certain.  The  parties are defined, namely, that the sugarcane grower is delivering and  supplying and the factory is accepting the goods.   The property in the goods is transferred from the grower to  the factory.  The transaction is not a gift nor an exchange  nor a hypothecation nor a loan.  There is consideration for  the transfer.   Counsel for the appellants contended that  there was  no  mutual  assent because the  price  was  fixed,  the quantity for supply and delivery was determined, the parties had  no choice to go to strangers or outsiders in  the  open market.  In Benjamin on Sale, 8th Ed. at page 68 the law  as to mutual assent is stated as this.  "The assent need not as a  general  rule be express.  It may be implied  from  their language or from their conduct; may be signified by a nod or a  gesture, or may even be inferred from silence in  certain cases;  as  if a customer takes up wares off  a  tradesman’s counter  and carried them away and nothing is said on  other side,  the  law  presumes  an  agreement  of  sale  for  the reasonable worth of the goods.  But the assent must in order to  constitute a valid contract, be mutual and  intended  to bind  both sides.  It must also co-exist on the same  moment of  time".  The assent must be mutual and bind  both  sides. The proposal by one man must be accepted by another and this acceptance  must  be  unconditional.   The  assent  must  be communicated  to  the other party or some act must  be  done which the other party has expressly or impliedly offered  to treat as a communication.  Judged by these standards in  the forefront  exists the agreement between the parties  in  the present  case.   The statutory orders  required  parties  to enter  into agreement.  The parties did in fact  enter  into agreements.  The agreement contains intrinsic evidence  that the growers agreed to sell and the factory to buy goods. Counsel  for the appellants contended that mutual assent  in the  present case would not be free but compulsory  and  the parties  would  have no choice in the matter  and  therefore there would be no sale.  The most common place  illustration of  supply and acceptance of goods resulting in  sale  under the present conditions. 246 is  furnished  by  the present system of  sale  of  rationed goods.  There are ration shops in particular areas.   Ration cards are distributed to residents in that area.  The owners of  these  cards are required to go to the  particular  shop mentioned  in  the  card for supply  of  rationed  articles. Price  is also regulated by the Rationing Order.   Therefore the  parties,  the  price,  the shop,  the  supply  and  the acceptance of goods in accordance with the provisions of the Rationing  Order  are all regulated.  When  one  presents  a ration  card  to the shop and the shop  owner  delivers  the rationed articles and the holder of the ration card  accepts them  and  pays  the price, there is  indisputably  a  sale. Counsel  for the appellants said that choice was  left  with the ration card holder to co to the shop or not to go  there at  all  but the parties had no choice in the  present  case

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whether the factory would or would not enter into agreement. In the present case both the factory and the sugarcane rower have  some choice in the matter.  The factory owner and  the grower  might not have occasion to enter into agreements  at all.   The factory may be closed.  The grower may  not  grow sugarcane.   The  rower  might not tender  the  goods.   The factory owners might not accept delivery.  The choice of the parties is there as in ordinary sales.  The position of  the factory owner vis-a-vis the sugarcane grower is either  that factory  will  be shut and closed down or the  factory  will have to be kept running and for that supply will have to  be taken from the sugarcane growers.  This may be comparable to undertaking  a journey by rail or air with no choice  as  to the medium. The  agreement between the factory owner and  the  sugarcane ,,rower furnishes the guide to ascertain the real  character of  the  transaction  between the parties.   These  are  the features.  The factory agrees to buy.  The grower agrees  to sell.  It is true that 95 per cent of the sugarcane will  be sold.  The parties have the choice to increase the  quantity above  95 per cent.  The quantity to he brought and sold  is cultivated or to be cultivated by the grower.  The  delivery is to be at the factory.  Delivery will be in such lots,  on such  dates and at such time as shall be agreed  upon.   The mode of delivery may also be within the scope of  agreement. The  price  will be the controlled price.   The  grower  can bargain for higher price.  The sugarcane grower can ask  for payment in advance.  Payment may be in cash or in kind.  The sugarcane will be accepted after inspection.  There is scope for  rejection of goods.  Various columns in  the  agreement indicate  the villages where sugarcane is to be  cultivated, the  names of the varieties of sugarcane to  be  cultivated. The  last two columns are estimated quantity offered  to  be delivered  and the period of delivery.  All  these  features indicate,  with  unerring  accuracy  that  there  is  offer, inspection, and appropriation of goods to the con- 247 tract.   The  goods will be accepted by  the  factory  after inspections and price will be paid on delivery.  The  mutual assent is not only implicit but is also explicit. Another  feature  in the agreements in the present  case  is that  the goods are unascertained.  The agreements speak  of inspection  of  goods.   Inspection  and  appropriation   of unascertained  goods  indicates  not  only  freedom  in  the formation   but  also  in  the  performance  Of   contracts. Unascertained   goods   are  distinct   from   specific   or ascertained  goods  in the sense that future  goods  include goods not yet in existence or goods in existence but not yet acquired by the seller.  It is safe to say that future goods for  purposes of passing of property can never be  specific. Future  goods if and when sufficiently identified  might  be specific goods.  Unascertained goods are not defined by  the Sale of Goods Act but they fall into three main  categories. First, goods to be manufactured or grown by the seller which are  necessarily future goods.  Second, generic  goods.  for example,  100 tons of sugarcane or the like which must  also be  future  goods where the seller does not  own  sufficient goods  of the description in question to appropriate to  the contract.   The third category is an unidentified part of  a specific whole, for example 1000 tons of sugarcane out of  a particular  lot of 5000 tons of sugarcane.  In  the  present case, sugarcane was to be grown by the grower.  Delivery was to  be made thereafter.  The goods were to be inspected  and then paid for.  Therefore, in the present case, it would  be a  sale  of unascertained goods.  Under section  23  of  the

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Indian Sale of Goods Act when there is a contract of sale of unascertained goods no property in the goods is  transferred to  the  buyer unless and until the goods  are  ascertained. Then again. under section 23 of the Indian Sale of Goods Act where  there is a contract for the sale of unascertained  or future   goods  by  description  when  the  goods  of   that description  and in a deliverable state are  unconditionally appropriated to the contract, either by the seller with  the assent  of the seller, the property in the  goods  thereupon passes to the buyer.  It is this unconditional appropriation which  will pass the property.  Again, under section  23  of the  Indian Sale of Goods Act where the seller delivers  the goods  to the buyer or to a carrier or other bailee for  the purpose  of transmission to the buyer and does  not  reserve the  right of disposal he is deemed to have  unconditionally appropriated  the goods to the contract.  Therefore, in  the present   case   the  goods  were  to  be   ascertained   by identification,   delivery,  inspection  and   unconditional appropriation. These  foregoing features indicate that the  transaction  in the present case constituted sale within the meaning of sale in section 2(t) of the Mysore Sales Tax Act, 1957.  Sale  is defined in section 2(t) as follows 248               "sale’ with all its grammatical variations and               cognate  expressions means every  transfer  of               the 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,   but   does  not   include   a               mortgage, hypothecation, charge or pledge". The  Control  Orders  are to be kept in  the  forefront  for appreciating  the  true character of  transactions.   It  is apparent  that  the  area is restricted.   The  parties  are determined  by the order.  The minimum price is fixed.   The minimum  quantity  of  supply  is  also  regulated.    These features   do   not  complete  the  picture.’   The   entire transaction  indicates  that the parties agree  to  buy  and sell.   The  parties  choose the  terms  of  delivery.   The parties  have  choice with regard to obtaining supply  of  a quantity higher than 95 per cent of the yield.  The  parties can  stipulate  for a price higher than  the  minimum.   The parties can have terms for payment in advance as well as  in cash.   A grower may not cultivate and there may not be  any yield.  A factory may be closed or wound up and may not  buy sugarcane.   A  factory can reject goods  after  inspection. The  combination  of all these features indicates  that  the parties  entered into agreement with mutual assent and  with volition  for transfer of goods in consideration  of  price. Transactions  of  purchase  and sale  may  be  regulated  by schemes  and may be liable to restrictions as to the  manner or mode of sale.  Such restrictions may become necessary  by reason of co-ordination between production and  distribution in  planning the economy of the country.  The contention  of the  appellants  fails.  The transactions  amount  to  sales within the meaning of the Mysore Sales Tax Act. The  second contention on behalf of the appellants was  that the  factories  were not dealers within the meaning  of  the Mysore Sales tax Act.  Dealer is defined in section 2(k)  of the Mysore Sales Tax Act of 1957 as follows :- "  ’Dealer" means any person who carries on the business  of buying,  selling, supplying or distributing goods,  directly or  otherwise, whether for cash or for deferred  payment  or for commission remuneration or other valuable  consideration and includes :-

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             (i)  ............................               (ii) ............................               (iii)............................               (iv) ............................               (v)  a person who sells goods produced by  him               by manufacture or otherwise". 249 It  was  contended that the factory was  a  manufacturer  of sugar  and  paid  excise  duty  on  sugar  to  the   Central Government and sugar was item 34 of the Second Schedule  and therefore  no  tax  was  payable  by  a  dealer  who  is   a manufacturer  of sugar.  The purchase of sugarcane was  said to  be  for  manufacture  of sugar and  not  for  resale  of sugarcane  and  therefore  the tax which is  levied  on  the dealer  will not fall on the appellants on the  purchase  of sugarcane.   The High Court held relying on the decision  of this  Court  in State of Andhra Pradesh v.  Abdul  Bakshi  & Bros.  A.I.R. 1965 S.C. 531 that if a person carries on  the business  of  buying  or  selling  a  commodity  it  is  not necessary that he should sell the same commodity to become a dealer.   The  commodity  may  be  converted  into   another saleable commodity or it may be used as an ingredient in the manufacture of a commodity.  Therefore, the factories  which bought  sugarcane could be said to carry on the business  of buying  and selling sugarcane and the factories  are  dealer within the meaning of the Mysore Sales Tax Act. The  third contention on behalf of the appellants  was  that the levy of 15 per cent purchase tax on the sugarcane on the appellants   was   in  violation  of  Article  14   of   the Constitution  inasmuch  as  the  rates  were  different   in different  States.   It is an indisputable  feature  in  the present  appeals that all the factories in Mysore have  been treated  equally.  Different rates in different  States  are explicable on various grounds.  The quantity available,  the conditions  of agriculturists, the number of factories  will all  have distinctive features.  Therefore, there can be  no infraction of Article 14 of the Constitution. It  was  also said on behalf of the appellants that  tax  on purchase  of  sugarcane  could  not  be  collected  by   the appellants  as tax.  The High Court relying on the  decision in Tata Iron & Steel Company v. State of Bihar [1958] S.C.R. 1355  said  that the mere circumstances that  the  appellant could  not  collect  from the purchasers of  the  sugar  the amount  the factories had paid as purchase tax on  sugarcane would not alter the nature or quality of tax.  This Court in the  case  of  Tata Iron and Steel  Company  said  ’This  is further  made clear by the fact that the  registered  dealer need not, if he so pleases or chooses, collect the tax  from the  purchaser and sometimes by reason of  competition  with other  registered dealers he may find it profitable to  sell his  goods  and  to retain his old  customers  even  at  the sacrifice  of the sales tax.  This also makes it clear  that the  sales tax need not be passed on to the  purchasers  and this  fact does not alter the real nature of the tax  which, by  the  express  provisions of the law, is  cast  upon  the seller’.   It therefore follows that the  appellants  cannot impeach the imposition or 250 levy of sale tax on the ground that the appellants could not collect  from the purchasers of sugar the purchase tax  paid by the appellants on purchase of sugarcane. Another  contention was raised on behalf of  the  appellants that the authorities had not taken into account the  varying rates  of tax on purchase of sugarcane levied  by  different States  while computing the cost of production of  sugar  in

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different  States  and fixing different  selling  prices  of sugar.   The  High  Court rightly  did  not  entertain  this contention  because there were no materials to  support  the contention. For  these reasons, the appeals fail and are dismissed  with costs.  There will be one set of hearing fees. G.C.                        Appeals dismissed. 251