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PETITIONER: STATE OF PUNJAB & ORS.

       Vs.

RESPONDENT: DEWAN’S MODERN BREWERIES LTD.

DATE OF JUDGMENT16/03/1979

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. PATHAK, R.S.

CITATION:  1979 AIR 1158            1979 SCR  (3) 568  1979 SCC  (2) 210

ACT:      Punjab General  Sales Tax  Act 1948-Sales  effected  on permits prescribing  price, quantity  and the person to whom goods should be sold-Sales tax if could be levied-Tax levied retrospectively-Validity of-Concensuality  if lacking  where dealer did not know that tax was to be paid.

HEADNOTE:      The sales  tax authorities  levied tax  on the sales of liquor effected  by the  respondent who  was a wholesaler in that commodity. Impugning the levy, the respondent contended in the  High Court  that when it sold liquor against permits issued by  the authorities there was no volition because the price and the quantity of goods to be sold and the person to whom sold  were all fixed and therefore there was no sale in the eye  of law  which would attract tax. The Department, on the other  hand, contended  that even  when goods  were sold against a permit there was still an area of volition in that the parties could decide on the quality and brand of liquor, the quantity, whether in bulk or in instalments, the size of the package and so on, all of which showed that there was no restraint on the volition of the parties and therefore there was sale which attracted tax.      A single  judge of the High Court, following a decision of the  Division Bench  of the  same High  Court in Jagatjit Distilling and  Allied Industries  Ltd. v. The State [28 STC 709], quashed  the order  of assessment.  A  Division  Bench dismissed the appeal in limine. Allowing the State’s appeal ^      HELD: The transactions were sales exigible to tax. [571 G]      1. The decision of this Court in Vishnu Agencies (Pvt.) Ltd. v.  Commercial Tax  Officer, [1978] 2 SCR 433 justifies imposition of  sales tax on the sale of liquor on permits. A conspectus of  the provisions  of the  Punjab Excise Act and the  Rules   shows  that  there  is  an  area  of  agreement sufficient  enough  for  the  parties  to  bring,  by  their volition, the  impugned transactions  within  the  ambit  of sales. [570 G; 571 A]      Vishnu Agencies (P) Ltd. etc. v. Commercial Tax Officer JUDGMENT:

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    Jagatjit Distilling  and Allied  Industries Ltd. v. The State, 28 STC 709 overruled.      2(a) It is well settled that sales tax could be imposed retrospectively. Therefore, even though in this case the tax was levied  retrospectively by  a validation  ordinance, the respondent would  be deemed  to have  entered the  trade and carried it on the basis that it would be liable to pay sales tax. [571 D] 569 (b) Even  assuming that  the respondent carried on the trade thinking that  it would  not be liable to pay sales tax, the area of concensuality still left for the purpose of agreeing to  the   final  terms   of  the  transactions  between  the respondent and  its retail  dealers was quite sufficient for the application of the ratio of Vishnu Agencies. [571 F-G]

&      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2028 of 1974.      Appeal by  Special Leave  from the Order dated 6-9-1975 of the Punjab and Haryana High Court in L.P.A. No. 516/73.      Hardev Singh and R. S. Sodhi for the Appellants.      L. N.  Sinha, P.  P. Singh  and E.  C. Agarwala for the Respondent.      The Judgment of the Court was delivered by      UNTWALIA J.-The  respondent-company in  this appeal  by special leave  has a  Distillery and  Brewery at  Jammu.  It maintains wholesale depots at various places in the State of Punjab, the  main depot being at Ludhiana. As a whole-seller it supplied  Indian made foreign liquor to permit holders on the permits  issued by  the respective  Excise and  Taxation Officers, the  competent authorities under the Punjab Excise Act and  the Rules  framed thereunder.  Sales tax  under the Punjab General Sales Tax Act, 1948 was imposed in respect of the sales aforesaid by an order of assessment dated the 30th November, 1972.  The  respondent,  thereupon  filed  a  Writ Petition in  the High  Court for  the quashing  of the  said order and  to restrain  the appellants  from recovering  the amount of  Rs. 46,396.22 paise from the petitioner. The main ground of attack on the imposition of sales tax was that the alleged sales  were not  sales in  the eye  of  law  as  the respondent had  no volition  in the  distribution of  liquor which was  received from the manufacturing concern at Jammu. The prices  were fixed  by the competent authorities and the respondent had  to charge the fixed price from its retailers holding L-2,  L-4, L-5  and L-10  licences.  The  respondent company holds  L-1 licence  which is  meant  for  whole-sale dealers. The  State contested  the application  and  in  its counter asserted  that the  excise  trade  like  many  other trades, or  even more, had to be regulated and controlled by various Rules  and Regulations  and  in  spite  of  all  the restrictions placed thereby an area was still left where the whole-seller and  the retail  purchaser had  to arrive at an agreement by  their volition.  According to  the case of the appellants "the quality and brand of Foreign Liquor, lifting of the  specified quantity  in bulk liter or in instalments, the size of packages (i.e. Bottles, pints, or Nips) and mode of payment (cash or credit or part payment) and 570 the prices,  are  the  matters  which  are  decided  by  the petitioner and  his purchasers  and there  is no law or rule restricting the  volition or  liberty of  the petitioner  in this respect."

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    Following a  Division Bench  decision of  the Punjab  & Haryana  High   Court  in  Jagatjit  Distilling  and  Allied Industries Ltd.  v. The  State(1) a  learned single Judge of that Court  allowed the  writ application  and  quashed  the assessment order.  A Letters  Patent appeal  from  the  said order was dismissed in limine. Hence this appeal.      This case,  in our  opinion, is  squarely covered  by a recent decision  of this Court delivered by a Bench of seven Judges in M/s Vishnu Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer and others etc.(2) The High Court in the case of Jagatjit Distilling  and Allied  Industries Ltd. (supra) had mainly relied  upon two decisions of this Court to hold that the transactions  in that  case were  not  sales.  The  said decisions are M/s New India Sugar Mills Ltd. v. Commissioner of Sales  Tax,  Bihar(3)  and  Chittar  Mal  Narain  Das  v. Commissioner of  Sales Tax  U.P.(4). In  the case  of Vishnu Agencies (supra) the former case was considered in paragraph 36 to  39 of  A.I.R. volume at pages 463-464 and it was held that the  view expressed  in the  majority judgment  was not good law  and the one contained in the minority judgment was approved.  Chittar   Mal’s  case   was  also  considered  in paragraph 44-45  at page 467 and it was distinguished on the ground that  the said decision "can be justified only on the view that  clause 3 of the Wheat Procurement Order envisages compulsory acquisition of wheat by the State Government from the licensed dealer." But then the criticism in that case of the Full  Bench decision  of the  Allahabad  High  Court  in Commr. Sales-tax, U.P. v. Ram Bilas Ram Gopal(5) "which held while construing  cl. 3 that so long as there was freedom to bargain in some areas the transaction could amount to a sale though effected  under compulsion  of  a  Statute"  was  not endorsed. It  is,  therefore,  plain  that  to  that  extent Chittar Mal’s case is also not good law. The decision of the High Court in Jagatjit’s case is no longer good law.      We have examined the various relevant provisions of the Punjab Excise  Act and  the Rules framed thereunder. We find that an  area of agreement sufficient enough for the parties to cover  by their  volition to  bring the  transactions  in question within  the ambit  of sales  was left in the field. Broadly speaking the stand taken on behalf of the 571 appellants in  their counter  was correct,  except  that  in regard to  the fixation  of price we assume in favour of the respondent-company that the price had been fixed, as usually it is  so in  the excise trade. Even so the decision of this Court in  Vishnu Agencies  (supra)  and  the  various  other previous decisions  reviewed therein  justifies in  law  the imposition of sales tax by the impugned order in question.      Mr. Lal Narayan Sinha tried to distinguish the decision in Vishnu  Agencies (supra)  by pointing  out that sales-tax for the period in question was imposed by the Punjab General Sales Tax  (Amendment and  Validation) Ordinance, 1972 which was  promulgated   on   the   15th   November,   1972   with retrospective  effect.   The   respondent-company,   counsel submitted, cannot be said to have entered into the trade and carried it on during this period by a volition as it did not know that sales-tax would be chargeable for this period and, therefore, it had not realised sales-tax from its customers. He drew  our attention  to paragraph  33 of  the judgment of this Court  in Vishnu  Agencies at  page 461. In our opinion the argument of the learned counsel is not sound and for two reasons. Firstly, it is well settled and it was not disputed that sales-tax  could be imposed retrospectively. That being so the respondent-company will be deemed to have entered the trade and carried it on the basis that it would be liable to

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pay sales-tax.  Secondly, even  assuming it was not so, what has been  pointed out  in the  begining of paragraph 33 as a primary fact  of  willingness  to  trade  in  the  commodity strictly on  the terms  of Control Orders is only one of the reasons which  led to the decision that an area of agreement between the  parties was  left to  their consensus.  In  our opinion such  a part of the area as the one hinted at is not very important and does not form the whole and sole basis of the conclusions  arrived at  in the case of Vishnu Agencies. Even assuming  in favour  of the  respondent-company that it did not  carry on the trade thinking that it would be liable to pay  sales-tax, the  area of  consensuality still left in the field  for the purpose of agreeing to the final terms of the transactions  between the company and its retail dealers was quite  sufficient for  the application  of the  ratio of Vishnu Agencies. Having considered all that was submitted on behalf of  the respondent-company  we find  that there is no escape  from   the  conclusion   in  this   case  that   the transactions in question were sales exigible to sales-tax.      For the reasons stated above, we allow this appeal with costs in this Court only. The judgment and order of the High Court are set aside. P.B.R.                                       Appeal allowed. 572